If this is the ‘big one’ that everyone’s talking about, the miners have a long way to go to the downside (not advice, not a recommendation).
When there’s a viable, bearish (or bullish) divergence, then price action has the potential to go much farther and the move last much longer than anyone would expect.
Junior Miners GDXJ (as well as GDX), have posted a bearish MACD divergence on the weekly time frame … very significant.
That divergence is shown below:
Junior Miners GDXJ, Weekly Candle
Price action goes one way (i.e., up) while MACD goes the other … down.
Other posts have already covered details of the current set-up, now reversal, links here and here.
Not covered yet, is the apparent repeating trendline and potential trading channel.
That is shown on the daily close chart of GDXJ, below:
Junior Miners GDXJ, Daily Close
At the minimum, on the right side of the chart we have a down trendline. An upside break of this line would negate any short positions … (not advice, not a recommendation).
The compressed chart of GDXJ (below), shows the potential.
As of this post (12:57 p.m., EST) GDXJ, continues to move decisively lower. Gold (GLD) and silver (SLV) have reversed to the downside.
Gold’s reversal potential has been discussed previously here, and here.
No one expects a significant reversal in gold …. no one.
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 last update on the Junior Gold Miners GDXJ, said they were hanging by a thread.
That update even included a forecast which turned out to be wrong and right at the same time (not advice, not a recommendation).
The miners have reversed … it just did not happen the next day as shown on the forecast chart.
The decisive rejection of the resistance (and test) level happened four days later.
Today, continued a slight retrace of that down-move as shown on the daily close chart below.
Junior Miners GDXJ, Daily Close
The attempt to push above known resistance (blue line) has failed. Price action had a false breakout (Wyckoff Up-Thrust), then a test and subsequent failure of that test.
The zoom of the reversal area shows more detail.
Last Friday’s session closed higher as did today … however today’s volume (i.e., commitment) was down – 49.4% when compared to the prior session.
The buyers are pulling back … price action is drifting higher.
On a weekly basis, we still have a bearish MACD divergence (not shown). Probabilities at this point indicate lower prices ahead (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 prior analysis of biotech SPBIO, had expectations for price action to rise into the 6,400 area: the location of the 200-Day Moving Average.
It did that, and more …
Back in late April, SPBIO, was in a Fibonacci time sequence. Shown below, that time structure may still be intact.
But First … The List
Note: This is not “The List“, as has been compiled (still on-going), covering the horrors of this sector but rather a list of reasons why SPBIO, is likely to head lower from here.
Here it is, not in any particular order:
Price action has reached a Fibonacci 76.4%, level
From the March 24th low, price action has retraced upward in an ‘a-b-c’ corrective move, with wave ‘a’ distance equal to wave ‘c’. Note: Equal distance ‘a’ and ‘c’, on a print basis.
At the last session, as the action pushed to a new daily high, there was ‘evidence of a struggle’ during the session to either reverse lower or move higher. Action was undecided and closed slightly below the open.
Looking at the first chart below, the daily close for the past three-years has the trend decidedly down; this sector is the weakest of all the major indices.
On the chart below, there’s a series of lower highs, lower lows that have oscillated into a massive bearish wedge.
Yesterday (Wednesday) was a Fibonacci 34 days (-1), from the print lows set on March 24th. That day was also a Fibonacci 34 days (+1), from the closing low set on March 22nd. We’re still posting a Fibonacci Time correlation.
From the highs set on February 2nd, to the lows on March 24th and then to the highs set yesterday May 10th, is symmetrical; separated by a Fibonacci 8-weeks lower and then Fibonacci 8-weeks higher.
Fundamentally, this sector is a disaster. None of the top ten equities have a P/E. All are losing money.
No P/E and operating at a loss; interest rates rising, credit standards being tightened. How are these outfits going to secure more Venture Capital (or any additional funding via stock/debt) in that environment; implosion is dead-ahead (not advice, not a recommendation).
Bank failures continue … at some point (as with the rest of us) one of these banks may be the line of credit for company payroll. Not all banks went bust in The Great Depression but just enough to halt payroll for some key industries. That event helped topple the economy.
The list goes on but that’s enough to make the point.
Now, on to the charts.
Biotech SPBIO, Daily Close
Moving closer in, to show the Fibonacci retrace, the Fibonacci time and the ‘a-b-c’ structure.
As of this post (12:25 p.m., EST) price action continues its downside reversal.
Because the retrace level (76.4%) is the highest noted by Fibonacci, we can expect some amount of upward testing if there’s going to be a sustained downside.
Anything can happen. However, with the above list compiled for both technical and fundamental conditions, probabilities point lower (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.
We’re not in Kansas anymore and to expect things to operate ‘normally’, is a strategic error (not advice, not a recommendation).
The last update on Nat-Gas, specifically the futures, warned of new lows before a significant reversal:
“The Nat-Gas futures contract for May (NGK23), needs to post above 2.383 soon (in the next day or so), or the contract is at risk of pressing to new lows.”
Well, we’ve moved on from the May contract to the June contract and that contract indeed posted a new low this past Friday, the 5th.
Just Because …
Just because nat-gas is down, does not mean that it has to go up. That type of thinking is another error, typically called a ‘mind trap‘.
A better way to think about the situation, is to figure on a ‘disruption’ of some type, resulting in either a destruction of supply or excess demand over the usual conditions for the season (weather) at hand.
So, let’s see if the charts agree with that premise from a Wyckoff analysis standpoint.
Nat-Gas UNG, Weekly
Each significant downward thrust is becoming shorter in net distance traveled.
The horizontal blue lines tell the story. We’re nearing the end of the down move (not advice, not a recommendation).
Now, on to the daily. Price action penetrated support and has reversed … it’s in Wyckoff ‘spring’ position.
Natural Gas, UNG Daily
Of course, what happens next is the question.
Just as this post said we’d revisit it towards the summertime, showing there’s no Fed ‘pivot’, we can also propose there’s likely to be a severe disruption in the supply of nat-gas (not advice, not a recommendation).
Housekeeping & The Junior Miners, GDXJ
The expected lower open in the GDXJ did not happen.
So far, it’s been a narrow range day (as of 10:47 a.m., EST).
Price action is oscillating around unchanged and there appears to be no urgency to move either direction.
Standing on the sidelines for now (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.
If we’re at the downside pivot for gold and the miners, there’s only one right answer for the next market session.
That answer is:
Lower open, lower high, lower close.
Not advice, not a recommendation.
However, it is an assessment of where we are in the market cycle for gold and the miners.
The focus is on the Juniors GDXJ, as they are the weakest of both gold GLD, and the Seniors GDX.
If GDXJ, does not open lower, there’s something else happening; that would mean the downside reversal potential is in question and/or it could morph into more testing at the Axis Line, previously discussed.
Here’s a close-up of the sector.
Junior Miners GDXJ, Daily
Volume bar No. 1, corresponded with a solid up move for that session; shown as Price Bar No. 1.
Volume Bar No. 2, is where it gets interesting.
Specifically, higher volume, more narrow range (net distance) and a close well off the high.
Wyckoff called this: ‘effort vs. reward’.
Lots of effort (volume) with less reward (distance) than the previous move.
The next session confirmed that assessment by opening gap-down and then spending the entire day attempting to close higher … which did not happen.
That day (last Friday) may have been short covering. If so, we’re about to find out.
Junior Miners, GDXJ, Daily (forecast)
If we’re in a reversal (a big if), then we’ll get some variation of the price bar (black arrow) as shown (not advice, not a recommendation).
For the bearish option to remain intact, GDXJ needs to open lower and close lower for the day.
However, it does not need to post a new daily low, although that would help the case for more downside.
Anything other than what’s just described, would indicate a more complex price action environment.
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.
Nearly everyone expects gold to go higher; much higher.
You want ‘clicks’ on your website? Then talk about how gold’s going to the moon.
It’s an easy grift. Everybody’s doing it.
However, gold’s truth is in the price action, not the grift.
We’re going to look at that truth and more specifically, what gold’s (GLD) volume is telling us.
With full understanding that anything can happen, gold could go higher, there’s a case for a significant downside reversal (not advice, not a recommendation).
Gold GLD, Weekly
In Wyckoff analysis terms, volume is the energy behind the move. It’s the commitment … or lack thereof.
Last week’s volume is far below the prior spike high set during the ‘invasion’.
It’s down over 56% from the ‘invasion’ spike and down 26% from the most recent spike.
Demand, commitment and thrust energy, are backing away from the gold market.
Moving down to the daily, we see the net distance traveled with each significant thrust is shorter than the last.
Gold GLD, Daily Close
Wyckoff wrote about this observation a century ago when discussing how to spot the end (or absorption phase) of a move.
He called it ‘shortening of the thrust’.
So, there it is. The weekly chart shows each major volume spike is less than the last.
The daily close has net distance traveled less than the last.
Add in the mining sector’s GDXJ, posting its most recent peak four weeks ago (week ended April 10th).
Last week’s action in the Junior’s appeared to be an act of desperation by the bulls.
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.
Does the mining sector forecast the actual direction of precious metals; specifically, gold?
When looking over the past year, the short answer is yes.
We’ll look at the daily chart of the Junior Mining Sector GDXJ, below and show that each peak and reversal in gold, was preceded by a reversal in the mining sector (not advice, not a recommendation).
Junior Mining Sector GDXJ, Daily
Each ‘black arrow’ shown on the chart of GDXJ, is a peak or bottom and significant reversal in gold (GLD).
Over the past year, GDXJ reached its peak or bottom several days or several weeks before the actual metal.
The right-most arrow is blue … because we don’t know what’s going to happen next.
Pulling to a longer time frame (still using the daily), we see the GDXJ on a closing basis, is oscillating about an axis line that’s been in effect for three years.
Junior Mining Sector GDXJ, Daily Close
Until proven otherwise, we’re still in a test of the ‘Up-Thrust’.
Price action could somehow power its way higher (with higher gold prices) and move into some kind of bull move.
Or, as the chart implies, we’re at a potential inflection point with probabilities equally weighted but suggesting a slight hint to the downside.
Futures Market
Gold futures, GCM23, as of this post (10:25 p.m., EST), are drifting higher and curretly trading up about +0.05%.
Funny things tend to happen overnight in the futures markets. We’ll see if the upward bias holds to the next open or if downside pressure becomes apparent.
From a news standpoint, we have the employment report(s) before the open at 8:30 a.m.; the Fed speaks at 1:00 p.m.
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.
For the mining sector we’re about to find out if it’s bulls or bears.
With today’s overall (S&P, Dow, QQQ, etc.) down market and the press screaming in hysterical panic at the start of the day, you’d think the market had collapsed 50% or more.
The last update (over the weekend) had this to say about the S&P (emphasis added):
“So, here we are: The market (SPY) has rallied over the past week, giving the illusion that all is well.
However, it too is now in up-thrust (reversal) position.“
So, the SPY declines by just over 1%, everyone loses their head and starts talking about CBDC.
Moving on to the ‘knee-jerk’ sector for the day, let’s look at the miners and specifically GDXJ.
Junior Miners GDXJ, Daily Close
Admittedly, the prior update was unsure whether or not this sector had its up-thrust reversal ‘test’.
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.
Gold’s reversal or potential for reversal, has already been covered here, here and here.
We’re going to focus on the Junior Miners GDXJ but start first, with an updated chart of gold (GLD).
Gold GLD, Weekly Close
This is how it looked back on April 15th.
As of the close yesterday, we have this:
It’s arguable GLD, is now below the resistance line (completing the Spring-to-Up-Thrust) but that’s not the most important part from a trading standpoint.
When looking at the Junior Mining Index GDXJ, there’s an ominous pattern.
Junior Miners GDXJ, Weekly Close
Each extreme peak over the last three-years has been labeled; the Derecho of 2020, the so-called Ukraine ‘invasion’, and now, the banking crisis.
Note: The SVB bank failure was on March 10th. There was a ‘knee-jerk’ reaction by the public into gold and related components … that peak appears to have stalled at the location shown.
What’s going on is obvious; it’s a bear market.
Each major peak, lower than the last.
Now, the interesting part.
The Junior Miners are in Wycoff Up-Thrust condition.
In this case, price action’s solidly below the resistance line.
Looking at the daily (not shown), there may have been a ‘test’ of resistance this past week for a move higher; if so, it failed and GDXJ closed slightly lower.
Summary & Positioning
So, here we are: The market (SPY) has rallied over the past week, giving the illusion that all is well.
However, it too is now in up-thrust (reversal) position.
For my business accounts, it looks like being short the miners at this juncture is lower risk than being short biotech (not advice, not a recommendation).
Typical short vehicles that could be used (not a recommendation) are DUST and JDST.
As always, anything can happen. If the markets ‘implode’, they might be closed for any number of days or weeks.
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.
