Nov 15, 2012

Whew, another day where Mr. Market shows us his strong hand.

Stocks continued to sell off today putting tremendous pressure on the metals miners. I honestly have no idea what is driving this tremendous selloff again today, but I can assure you, whatever it is, it's completely irrational. The talk of fiscal cliffs and US downgrades have made stocks a risk and year end liquidations have been creating selling pressure. In the meantime, the metals themselves have shown tremendous strength amidst all of the madness in equities.

Normally Metals and the miners trade fairly parallel. In other words, when gold goes up, so do the gold miners. There are only a few exceptions when this has not happened before. The last time was in 2008 when the country entered a recession. The spread was also very extreme this past summer when miners launched out of their bottom. So, where do we stand now? At nearly the same extreme spread.

I believe that the miners, which were already grossly undervalued, are now extremely drastically undervalued. Gold prices have gone higher while the miners have gotten crushed. Remember what I said about the rubber band? These miners will snap back with a vengeance. Also remember what I said yesterday about weak hands being pushed out and smart money entering at these discount prices? Soros didn't get his BILLIONS from being a weak hand in the market. He was a buyer today, and so was I.

Soros Adds to Gold Miner ETF Positions, Raises GLD Stake

The November filing indicates Soros has more than doubled his GDX stake to 2.32 million shares and now holds a sizable chunk of call options on the ETF as well. 

Here's a look at the $HUI. There's a fairly large channel that we've been oscillating in and out of. Perhaps this irrational selling will be countered with enough buying to catapult the price back into the range. The bullish MA cross leads me to believe this could be the case. The only problem.. is when. As you can see, we broke below this range before. We tested it on 3 different occasion and were unable to break back through it. After one more dip.. the next push went back into the range. WD Gann says that past resistance, one broken, should become support. Now is time for that test.. but not without a little pressure to scare you out first.

Equities continued to sell off today as well. Today's candle ended as the form of a spinning top. These mean indecision and can often signal the day of a turn. Also, since today's candle had a much narrower range, it makes it much easier to form a swing low tomorrow. Will we get it?

Take note of the indicators. RSI is VERY near bottoming, and MACD is also very near bottoming.

SPY also appeared on the top of the BOW list again today. This makes a total of $1.032 Billion dollars of buying on weakness over the last two weeks.

Money Flows: Buying on Weakness

DAILY				TOTAL MONEY FLOW				BLOCK TRADES
Company	Price	Chg	% Chg	1-wk % chg	Money Flow	Tick Up	Tick Down	Up/Down Ratio	Money Flow	Tick Up	Tick Down	Up/Down Ratio
SPDR S&P 500 (SPY)	$135.70	-0.23	-0.17	-1.78	$137.72	$2,434.96	$2,297.25	1.06	$28.73	$159.44	$130.71	1.22
iShr iBxxHYCorp (HYG)	90.67	-0.04	-0.04	-0.79	47.08	122.63	75.56	1.62	38.23	58.43	20.20	2.89

For tomorrow, if we can close above today's highs, we'll have a swing low and most likely a bottom.


Gold had a decent day considering. It dipped down, but found solid support on the 38% fibo. We also formed a hammer candle for the day.

Almost identical story for silver. Take note on how the MACD histogram was a great indicator of the trend change by giving us a divergence.

Aaaand as usual, the dollar holds us in suspense. It's just being stubborn and refuses to roll over. We've now entered the timing band for a daily cycle low. Once we cleanly break outside of the lower side of the trendline, technical traders will begin to sell and help to push price further into the low.

Until the dollar gives up the fight, equities may continue to tumble. This is a perfect opportunity for big players to make the little guys scream.. and indeed they are. You can bet that the big boys are scooping up everything the little guys are selling.. and plan to ride to the top with a fat rich smile on their face.