When a profitable position begins to erode, the questions begin.
Is it just a correction or a full-blown reversal; how do you know?
Of course, nothing is ever known for absolute sure.
However, in the case of the current trade DUST-21-01, which is a short position on GDX (not advice not a recommendation), the market’s exhibiting what looks like terminal (reversal) behavior.
Of all the thirty-one equities in the Senior Miners GDX, only one is above its mid-November highs: Newmont Mining.
Newmont, NEM
With Newmont getting all the attention, the view is the entire market is ‘thinning-out’.
In addition, price action in Newmont tends to suggest it’s exhibiting terminal behavior.
Daily chart below.
It looks like NEM has just ‘thrown-over’ its wedge pattern. Typically, the last gasp before reversal.
Zooming-in
Summary
With markets reaching new all-time highs yet again, the gold miners are showing they’re not invited to the party.
From a Wyckoff standpoint and for bear markets, the focus is on the laggards … not the ones at the top (not advice, not a recommendation).
Unless the dynamic of GDX changes, and others in the index push past their mid-November highs, this market continues to look ready for reversal.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
** To verify the completion, we’ll need a daily reversal (today) as well as a new daily GDX low in the following session(s); not advice, not a recommendation.
Summary:
From the trade model, the ‘first correction’ may be completing during this session.
If that’s the case and gold bulls are trapped yet again, this time around, price action’s not likely to be so tenuous.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Newmont continued to edge higher and posted a 1.09% gain for the session.
The rest of the sector, GDX barely moved at 0.10% gain.
The discrepancy suggests the market continues to thin-out; funds exit the lower caps and are funneled into the only equity that’s above its mid-November highs; NEM.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
From Reminiscences of a Stock Operator, ‘Turkey’, aka Mr. Partridge, was much older than the rest.
The rumor in the broker’s office was that he was rich.
Even so, he was not contributing to heavy commissions (i.e. day and swing trading) as far as Livermore could tell.
The other thing was, that he never offered advice.
If a stock tip worked out, he would thank the tipster … if not, you never knew if he took a position or not.
Losing The Position & Psychological Impact
Turkey’s ‘losing the position’ remarks impacted Livermore the most. He recognized that Partridge wasn’t some old duffer; he was an astute speculator.
Losing the position: Not the same as holding a loser.
Maintaining a profitable position during a correction while at the same time, recognizing a big move could be in the works, requires (mental) strength; let the market itself say when to get in and out.
This link has Prechter’s ‘missing out’ story on big gains.
Continuing on with Turkey.
In the book, he said he ‘paid a high price for his tuition’ and does not want to incur a second fee.
Attempting to ‘play’ the market in and out then repeat, by definition, leaves one out of the big move.
It’s not the move itself; it’s the recognition that fiddling with the position and losing it, has resulted in a lost opportunity that will never come back.
The psychological damage is immense.
It’s worse than taking major loss. Watching a move take off without you when you had planned for months (or years) for the set-up, may have left no way to recover.
Which brings us to the market at hand.
Gold (GLD):
This site is not advice, and it does not make market ‘calls’.
Presented here, are posts documenting how Wyckoff analysis is being used to spot market set-ups.
Those set-ups have shown themselves over time to be potentially profitable (not advice, not a recommendation).
The weekly chart of gold (GLD) shows the up-thrust that was months in the making.
We’re going to invert the chart and so, the ‘up-thrust’ now becomes a ‘spring’.
Note:
Back in the day, when I wasted time posting on SeekingAlpha, I would get numerous complaints about ‘inverting the chart’.
They wanted it spoon-fed and did not have the mental plasticity to look at situations from the opposite perspective.
The ‘inverting the chart’ came from none other than Dr. Elder, himself … discussed in Trading For A Living or Come Into My Trading Room if memory serves.
The main interest on the ‘Alpha’ site seems to be pontificating about how sharp your pencil is; how close you can come to guess what earnings (or some other meaningless fundamental) will be at the next release.
I have not been back in years … they’re probably out there still arguing … only this time, the banter may be about which “masks” are most effective. 🙂
But I digress.
Months To ‘Spring’, Weeks To ‘Test’:
The inverted chart of GLD shows it took months for price action to penetrate support and create a spring condition.
Since then, we’ve had a move higher and now lower coming back near support.
Is this a test or a failure of the move?
It was a short week. However, it may still provide actionable data. For example, range of GLD, GDX and NEM, all narrowed. Volume contracted as well.
The inference is, thrust energy is weakening and thus weights the probabilities to a ‘test’ and not a ‘failure’.
Deflation Pivot:
Interestingly, we’re starting the see the consumer has finally reached the limit of their spending. Price are staring to edge lower as reported here and here by Economic Ninja.
Another data point, a bit esoteric, is ammunition. Pices are starting to taper off as well. Most notable is 22-LR.
A couple of months ago, 22-LR was about 0.10 per round (bullet). Looking at this site, we see the cheapest price has dropped to .080/round.
That does not look like much but it’s a 20% decline.
Summary:
Everyone has their own time frame and market approach.
Taking a cue from Turkey, referenced above, I would rather sit through a correction, incur the erosion of profit than exit and ‘click my heels’ as Prechter puts it; then watch the original position move for a huge gain without me aboard (not advice, not a recommendation).
We’re likely to find out very soon if this is a major pivot lower or if somehow, gold (GLD) bulls gain control and drive prices higher.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Newmont (NEM) will be analyzed over the weekend. For now, we’ll use GDX, leveraged inverse fund DUST.
GDX, Inverse DUST (4-Hour)
The first two trade points are clear. The ‘set-up’ and the ‘gut check’.
Whether or not we’re completing the first correction won’t be known until price action at least makes a new daily high, above today’s DUST: 20.45.
The zoom chart below, helps show DUST, is penetrating support … now in spring position.
Obviously, stating the first correction as ‘complete’ was premature.
However, if we are going to see a continued downtrend in GDX and uptrend in DUST, the chart above looks like today’s action is a good area for pivot/reversal.
With today’s screaming 40-year inflation news (first link, above) all gold could do (as of this post) in the futures market, was a meagre 0.43% blip higher.
Stay Tuned
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
That’s the training given by the late David Wies years ago concerning springs and up-thrusts.
His inference, if the volume contracts on the pull-back, the set-up has been tested; resumption of the reversal (up or down) is now expected to continue in earnest.
More analysis to follow but that’s where Newmont looks to be at this juncture.
Both gold (GLD), Newmont (NEM), and the miners (GDX), are at the danger point.
At this juncture, price action distance to trade failure or continued sucess is quite small (not advice, not a recommendation).
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
It’s not always what’s happening; it’s also what’s not happening.
‘The curious incident of the dog in the night-time’ … the dog did not bark and so indicated, it knew the killer.
In Steven Van Metre’s Sunday night update (time stamp 5:55), he highlighted that small caps, IWM, (Russell 2000) tracking fund is in a ‘crash pattern’.
We’re going to look at the small caps and see what’s there and what’s not.
Russell 2000 (IWM):
Weekly Chart of IWM
The up-thrust is clear … we can see that.
However, the question is, what’s not happened with this (potential) set-up?
Moving to the daily chart, it shows the up-thrust has not been tested.
There’s no rule that says it has to be.
However, price action shows a spring set-up and retrace in process (below). We also have a Fibonacci target that looks like it might work out.
Moving closer in on the daily.
A retrace to the 62% level, would (could) act as the test of the up-thrust shown on the weekly chart.
That move if it takes place, would create its own up-thrust of the resistance area (below the 62%, level).
On top of that, we may have financial media helping out by getting participants on the wrong side; if so, they’re likely to foment news stories of continued ‘recovery’ or ‘inflation’ moderating … or some such non-sense.
The Media’s Role
In fact, if we get a retrace and the press does not jump on board … I’d be wary of the set-up (not advice, not a recommendation).
Remember what a good job they did with gold … $3,000/oz, is “imminent”, right?
Gold Down, Market Up?
Is that possible?
For starters, the question is what’s called a ‘mind-trap’. A certain way of thinking that causes one to get boxed-in.
The dollar continues its rally and gold appears to still be inversely correlated. We’ll stay with that as the main indicator of GDX downside potential.
Yesterday, it was thought the up-side correction in GDX, was complete … and that may still hold true. Today’s action looks like a minor test (thus far) of that correction.
Note, at this juncture, heavy-hitter, NEM, has posted out-side-down from yesterday’s price bar … hinting that it’s ready to continue lower.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Having been on the wrong side of major moves numerous times, I have first-hand experience on what’s likely to happen next.
If the bulls are trapped for a second time, those in control, the bears, are going to put the screws to those on the wrong side (not advice, not a recommendation).
It could be a straightforward downward thrust or a slow capital draining grind.
We won’t know how bad it’s going to be (for them) until it’s over; Keeping in mind at all times, anything can happen.
“Price action permitting, we’ll discuss how this first correction may be a brief one as opposed to a drawn-out choppy affair.”
Price action in GDX, has posted a new daily low (below last Friday’s low); a potential indication we could be starting the next leg lower.
The basis of that assessment is from a technical discussion published by Robert Prechter, Jr., in the early 2000s (’02, ’03, if memory serves) as ‘the rule of alternation’.
Basically, what happened last time, won’t happen this time.
Senior Miners, GDX
The daily chart shows the eight-day up-thrust, along with current action.
The mark-up makes it clear
It was eight days above resistance battling it out between bulls and bears.
Now, we’ve had one day above resistance (level posted on, 12/7) followed by a new daily low.
Correction Complete ?
The following (DUST-21-01), is the trade sequence currently being used.
Based on the above analysis, we’re going to tentatively call ‘The first correction’ as complete (not advice, not a recommendation).
Next up in the trade sequence, is identification of a trend or trends … if any.
For now, we have the potential channel shown below.
Now comes the part most traders/speculators find difficult; That is, wait.
As Livermore said in Reminiscences, (paraphrasing): ‘It wasn’t the thinking that made me money … it was the waiting’ (not advice, not a recommendation).
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
The Danger Point® 