The second headline is how metals are dropping.. while the dollar is dropping. Many are scratching their heads over this. The dollar is feeling incredible selling pressure from it's intermediate and yearly cycle decline.. therefore, the selloff. The metals are feeling pressure from their daily cycle decline. Once this DCL is in for metals.. lookout for a quick reversal. Remember the dollar has dropped significantly..
In my last update, I mentioned an alternate scenario where the dollar topped in it's new daily cycle.. on day 1. This is incredibly rare, and in my opinion, incredibly bearish. I went back and counted until I got tired, and I couldn't find a daily cycle that topped on day 1 of a new daily cycle.
The dollar bottomed, formed a swing low, then immediately reversed and began trending down. It has since formed a swing high. Confusing, I know.
Long term view..
Gold is now in it's timing band to print a low at Day 20. On the last update, gold had just broken it's daily cycle trendline. Since then, we have continued our downtrend seeking a low.
Today's action saw gold with a big downside. It's currently consolidated it's upmove back down to the 61.8% fibo. Today also created a Bollinger Band crash. These two technicals could give us a rebound over the next few days.. which could also end up printing the swing low needed to confirm a DCL.
Silver broke through it's Daily Cycle Trendline today for the first time. For this reason, our DCL may NOT be here yet. Silver has not consolidated as much as gold and may need another day or two to finally bottom. However, silver has also been leading the metals and could very well print it's low and reverse before gold does.
I took a longer look at GDX and redrew our trend channel from the last charts that I posted. This one seems to make more sense in my eyes. It appears that we're currently walking the underside of the 200 DMA. Enough pushes, and it will finally punch through.
I believe today's action in GDX may have set us up just for the push we need to reclaim the 200 DMA and turn this picture back into one that is bullish. Price gap'd way down at the open today and then recovered. This created a Bollinger Band crash. Take a look at the highlighted areas below at recent BB crashes. These were all followed by several days of buying pushing price higher.. some as much as $4. You can trace this back quite a while and it is quite a reliable indicator for buying (selling on the tops as well). A move towards $50 would really turn this train wreck around.
This a.m., I added to my Mar 13' GDX calls to dollar cost average my expense.
With that being said about GDX, there's still an opportunity that it falls for another day or two with gold. What I thought was a new daily cycle was never confirmed because it didn't get up over the daily cycle trendline. For this reason, our previous 15 day daily cycle has now stretched out to 26 days and could now be searching out it's low. If this is so, and we're already in a BB crash.. expect a very strong snap back once it all clears.
Stocks began to consolidate over the last couple of days. In the chart below, I point out the signifigance of support and resistance. The 200 DMA was resistance once price fell below it, then buying pressure pushed it above. It was then able to use that level as support. The LONG wick on the candle bouncing off of the 200 DMA is a big indicator of buying.
Will the same be true for the 50 DMA? We're currently seeing it being used as overhead resistance. Again, this is easily spotted by the LONG selling wick on the candle that touched the 50 DMA.
Longer term.. perhaps stocks need to come back and retest the 200 DMA and consolidate some of this big move from the bottom. Then again, maybe not... and the price will runaway going higher for a few more days, before printing a swing high and beginning a descent into it's first DCL of this new Intermediate cycle.
Over the next few days, I will be looking to find an entry into SLV call options. I want to see a firm DCL formed and then confirmed by a swing low. It would be risky to buy now without any confirmation that a bottom is in. However, it would be possible to risk a SMALL amount on a short term play in the Bollinger Band crash in metals. Also, as mentioned above, I added more to my GDX position to DCA.
Good luck to all as we search out our DCL in metals.
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