Wednesday, July 12, 2017

Gold Stocks Possibly Completing Major Basing Pattern 7-12-17

Click on Chart to Enlarge

The chart above is GDX which is the major gold miners ETF.  I will provide here a brief summary of some key factors for analysis but without taking time for further charts.

1.  Commercial traders are the most net long (actually least net short) at any time since near the lows of the gold bear market and at prior lows of legs down in the bear market.  This suggest the potential of a bottom here in prices in a continuing bull market in gold.

2.  The June/July time frame is the annual/seasonal low point for gold historically, and then some of the strongest seasonal move historically is the late summer.  So from this standpoint, it makes sense to look for a low here.

3.  Since early 2016, the CRB/SP500 ratio has been at the lowest point on the chart since 1995.  The prior major trough was in early 1999, after which a major commodity bull market ensued.  So the valuation of commodities to stocks is historically low, and on a longer term basis, could argue for a commodity bull market to be in the works.

4.  I have placed a pattern labeling scheme on the chart of GDX above, which in this labeling scheme, would be the maximum complexity pattern for a correction which can occur in Elliott Wave terms.  Another interpretation that is still bullish would allow for some further decline but without breaking the December low.  On this note, a contracting triangle in wave theory would be common at the end of a complex move as the selling loses steam and a base is formed for a new move.

5.  The bullish engulfing pattern on Monday occurred right at horizontal support and this is a classis bottom reversal candlestick.  This does not suggest the length of any rally, but is further confirmation that a bottom of some degree cold well have occurred on Monday.

I entered long on Tuesday on NUGT which is the 3x gold miners ETF.

The stop is below Monday's low, and I plan a stop movement technique using a moving average channel if prices rise.

Out of individual gold stocks, I really like the pattern on ABX best.


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