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.
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.
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’.
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’.
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.
That does not look like much but it’s a 20% decline.
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.
Founded by William Boyce Thompson in 1916, Newmont (NEM) was around over a century ago during Livermore and Wyckoff’s day.
Thompson is center in the photo with President, Warren G. Harding at left.
Wyckoff and Thompson were interconnected.
In Wyckoff’s autobiography, he writes about working for Thompson’s firm (Thompson, Towle & Co.) in 1910.
During that time, he describes no fewer than two stock ‘manipulation’ schemes; one by renowned James R. Keene and the other by Thompson himself during a deal-gone-bad with the Guggenheims.
Also in 1910, Wyckoff published his seminal work: Studies In Tape Reading. If there’s any one book to read concerning how markets work, ‘Studies ..’ is that book.
Wyckoff had first-hand exposure into market operations by the wealthy and super wealthy. More importantly, he saw how those transactions showed themselves on the tape.
Last check, a first edition ‘Studies’ went for around $3,500. A quick search as of this post, turns up nothing currently available.
For those who complain ‘it’s rigged’, to that we can say, ‘it’s always been rigged’.
Determine what those ‘rigging’, are trying to accomplish and you may have a trade.
Now, to the market at hand: Newmont Mining.
It’s the key; the largest cap equity in the Senior Mining Index (GDX).
The daily chart:
For those who have been with this site for a while, you may instantly see the set-up: Spring to Up-Thrust.
The marked-up chart makes it clear.
Moving in a little closer for additional clues:
We can see from the volume itself, there were a huge number of transactions this past Friday.
NEM penetrated long established resistance.
In so doing, it set off a massive number of orders: Buy orders, sell orders, sell-short.
Senior Mining Index: GDX
The other part of the story and the one that weights it to the bears:
While NEM, is at multi-month highs, senior miners GDX, is nowhere near its highs.
Daily chart, GDX:
What does that mean?
It means the market is ‘thinning-out’
The professionals and maybe some investors alike, are abandoning the non-performing lesser cap equities; pouring funds into the last man standing NEM, in hopes that it will keep moving higher.
It’s desperation and signals market weakness.
As always, anything can happen and bulls may somehow take control.
However, from the charts themselves, hyper-stretched major indices coupled with insiders bailing out the most in history, uneducated ‘retail’ willingly stepping up to hold the bag, it does not look good for any bulls … gold or otherwise.
We could find ourselves in a situation similar to the oil market in mid-2014 where it spontaneously deflated for eighteen months … nary a blip higher all the way down.
With that, we’re maintaining short via DUST (not advice, not a recommendation).