I’m satisfied with gold’s proximity to its gap that I have re-entered my DUST position and a short GLD position. I’ve got tight stops on these, though, and if GLD gets past $115, I’m out. The front month for gold is below, with its gap circled.
by Avi Gilburt, ElliottWaveTrader.net
First published Sat Jan 7 for members of ElliottWaveTrader.net: This past week saw a very nice move higher in the GDX and gold, but silver has seriously lagged, which does dampen any outright bullishness at this time. But, let’s review where we stand overall.
Several weeks ago, as the GDX broke down below its .618 retracement, many were throwing in the bullish towel, and everyone seemed to adopt the “clear” heads and shoulders pattern presenting on the daily chart, while pointing to target levels below the January 2016 low. But, it just seemed too obvious to me, and it seemed like the market was setting everyone up.
In November, well before we broke the .618 retracement and well before we broke the neckline of the seeming heads and shoulders pattern, I wrote the following:
In our Trading Room at Elliottwavetrader.net and in my live video sessions with our members, I have noted several times over the past weeks that the perfect bottoming set up would begin as the market recognizes a heads and shoulders pattern setting up in the GDX. And, many this past week were pointing to this “perfect” pattern, which they view as setting us up for new lows in the complex. In fact, it could be “too perfect” since the entire market seems to now be hyper-focused on how it is going to take us to lower lows.
I’ve been accumulating DUST every day for the past four days. It’s showing a small profit at this point, and if miners break down the way I hope, this could be a great position. The gold bugs index, shown below, is slipping beneath the lower portion of its topping pattern. Nothing definitive yet, but we’re moving in the right direction.
I’m very pleased with the breakdown in crude oil and in Mexico (EWW), both of which I’ve written about quite a lot lately. One trade that hasn’t blossomed yet is my DUST (triple-short on precious metals miners) long, but I’m keeping the faith. Looking at the big picture of, say, NUGT, this seems quite bearish. It might get a little more strength, sure, but I think in the end it’ll work out.
Many of you know that yesterday morning I had two small positions in GDX and GDXJ on the short side. They got instantly stopped out due to an explosive gold rally.
However, in the middle of the day, when gold was up nearly $19/ounce, I did a Slope Plus post called How to Handle Miners in which I stated the obvious (that the miners short was stopped out) but also the not-so-obvious, which is that I thought the big rally was countertrend and should be faded. Thus, I bought DUST, the triple-bearish-on-miners ETF.
Well, given the action so far, it looks like the gold rally is at least partly reversing, which is good. The next big question is how it handles that gap (green tint). Does it fill it and strengthen or does it slip below and resume its bearish ways?
I guess gold got tired of bitcoin having all the gains, as it busted above its small basing pattern and is resuming its rally (I’ve got small short positions in GDX and GDXJ which I suspect will be stopped out instantly at the open Thursday). I’ve pointed out the gap which I’ve mentioned before as a possible target for gold’s recovery. (I’m typing this about midnight EST).