The 3-Day chart of GDX inverse fund DUST above, has the vertical range compressed to better show the support/resistance boundary.
The boundary is shown close-up in the version below:
Coming back to test a boundary as shown is normal market behavior … there’s nothing (yet) that would indicate the direction of ETF GDX is changing its main direction from down to up … with DUST moving correspondingly lower (not advice, not a recommendation).
However, we’re potentially at another danger point where price action can go either way.
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 may go down as the biggest strategic ‘stacking’ blunder ever:
The consumer’s maxed-out, food supply chain’s being systematically destroyed and now, gold’s set to down-draft nearly 20% … just for starters.
For those still thinking it’s all about inflation, how about this personal anecdote (skip to Analysis, Gold (GLD), if not interested).
A recent trip to the local Ford dealer to obtain an engine part, specifically, a “Camshaft Synchronizer”, i.e., what used to be called a ‘distributor’, a very common part, resulted in this conversation.
Ford: ‘Ok, part number F8DZ-12A362-AA.
Don’t have it. It’s on back-order. We’ve got an order for 347 units, with no ETA‘.
This part’s used on V-6 production engines going back decades. It happens to be a weak point in the design. When it goes out, the engine quits.
With literally millions of these engines on the road, how can there be no repair parts available?
None of the retail dealers in town had one either; not AutoZone, not O’Reilly’s, nobody.
Another Ford dealer located 50-miles away, had one unit and so the order was able to be filled.
If your car/truck is dead-in-the-water, how much would you be willing to pay to get it back on the road?
Imagine if there’s some gearhead Bubba out there who’s stockpiled a thousand of these things … how much could he charge for them?
Now, that’s what I call ‘Stacking’. 🙂
Controlled demolition of the supply chain: Not inflation.
Which brings us back to gold (GLD).
Analysis, Gold (GLD)
Weekly chart of GLD below and then inverted.
Inverted with projection.
Old Time Projection Method: The P&F Chart
Since it was Wyckoff analysis that helped us plan and spot the gold reversal, we’ll use a method equally as old to project where GLD could go (not advice, not a recommendation).
The P&F Chart.
Using the two methods above, we’ve got a combined projection in the range from GLD: 119 – 140; a decline in the vicinity of: -16.50%, to -28.96%
Is anyone even remotely prepared for this?
There’s been no wedge breakout … yet. So, the projection’s a little ahead of itself.
What we do have, is a miner’s market that doesn’t look like it’s waiting around for gold.
For the miners, other factors could be coming into play; not the least of which is massive corporate stupidity.
If you can’t draw your trade system on one side of a paper napkin, it’s too complicated.
Just to be clear, ‘simple’, does not mean ‘easy’.
What’s presented on this site and essentially in real time, is a particular method of approaching and trading the market (not advice, not a recommendation) using a culmination of research and education (i.e. losses) that span the course of over thirty years …’thirty-five’, to be exact. 🙂
That culmination has resulted in the following ‘system’.
Being from the engineering field, it’s probably no accident that system takes the form of a ‘checklist’.
However, make no mistake. The checklist is about as far as engineering can go. The rest (reading price action) is mostly art and intuition.
The ‘test’ or ‘gut-check’
The first ‘correction’
Continuation or Failure
Post trade evaluation
Let’s take a look at how that system’s applied to the current (open) trade: DUST-21-01.
Since we’re short the Senior Miners GDX (not advice, not a recommendation), we’re going to use the daily chart but invert it (to approximate DUST) as shown below:
Marking up the chart with the above ‘checklist’ reveals the following:
As this post is being created, GDX is collapsing through support levels while DUST screams higher.
In the past two days, unless price action was monitored minute by minute, there was no time to get aboard comfortably (i.e., with low risk).
This plays directly into “Turkey’s” admonition a century ago about ‘not losing your position’.
The First Correction: Complete
With that under our belts, it’s time to get to work identifying trendlines, channels or potential traps for either the bulls or bears.
As a starting point, the daily chart of GDX is compressed and marked up with past trendlines and a potential line (magenta).
This series of trendlines is rising (using inverse fund DUST) at approximately +725%, annualized.
We can also see from the zoom area; price action can go sideways for some time before contacting the trend to either verify or negate.
Using DUST as the proxy, that sideways action can be as long as fifteen trading days. Just long enough to discourage the late comers; bulls and bears alike.
With mixed signals, confusion in the economy and markets, one has to wonder if anybody’s noticed the Fibonacci sequence in Senior Miners, GDX?
As soon as such things get ‘figured out’, time correlations diffuse and evaporate; just long enough to throw off attention and re-emerge at some distant date.
However, as yesterday’s update inferred, along with a compelling trading channel, it begs the question; is this juggernaut so big that even if it’s ‘discovered’, it won’t make a difference?
Of course, the market itself is the final arbiter.
However, the coming week may prove to be interesting. If the time correlation remains intact, expectations (shown below) are for GDX to pivot lower early in the week.
Senior Miners: GDX
We’ll start with the un-market daily chart of GDX and then invert (to approximate DUST) for the subsequent analysis.
The first Fibonacci sequence, ‘Day 1 – Day 34’, defines the channel width (shown in thisupdate) and the subsequent retrace to the December 15th, apex/reversal; Day 55.
The next chart shows that embedded within the sequence above, is another sequence; from the November 16th low, (inverted chart) to the same December 15th, top.
Putting both together, we have the following.
However, that’s not all.
The time to retrace from December 15th to Friday’s close is/was 12-days … just one day short of a Fibonacci 13.
Is the market going to ‘blip’ this Monday, print a new low (on the inverted) just to make it absolutely perfect or is the whole set-up going to fall apart?
Either one can happen.
However, the most likely outcome at this point, is the market pivots straightaway or hesitates for several days; just long enough for both sides (bulls/bears) to start scratching their heads.
We’re still short this sector, identified as trade number DUST-21-01, (not advice not a recommendation) but the actual position size has been reduced.
‘Reduced’ is not the same as ‘closed’.
The reduction in size, which was about 8.8%, of the total position, was entirely the result of maintaining margin requirements.
If the trade falls apart, obviously the correct action would be to close.
However, if GDX pivots to the downside (as expected), there may be a window of time allowing position size to be increased back to the original or more if the market allows (not advice, not a recommendation).
Gold (GLD): Testing The Up-Thrust
Next up, scheduled for tomorrow and depending on price action, we’ll discuss how the upward retrace in GLD, may actually be a test of the mid-November up-thrust.