Saturday, October 20, 2012


Large concentrated amounts of volume will appear during the intial stages of an uptrend, which is a telling sign of forthcoming strength. It is a direct result of INSTITUTIONS that accumulate massive long positions at the start of a major move. But as time 'takes a toll' on the maturation of the bullish advance, its trend grows weaker on diminishing amounts of volume even when the stock is making new price highs. The interpretation is that investors are losing interest, and a top is near.

Likewise, in the case of a downtrend, new price lows on declining volume indicates that buyers are ‘eating up’ the supply, and the trend is ready to reverse. There are even occasions where the reversal transpires as a ‘volume spike’, but you see very little price movement.  The message is that the extremity of selling pressure within the move lower has reached a point of exhaustion.

Based on the corresponding characteristics exhibiting in both Gold and the Miners, there is overwhelming evidence that supports their current down trending structure to be coming to an end. Let me explain.
The yellow metal has now entered the accumulation phase, where big firms initiate a ‘scale in’ approach to purchase blocks of millions of shares over a designated time frame. Since legally they cannot buy the entire shares float all at once, this strategy is widely used and seemingly more appropriate. Furthermore, the lack of selling participation associated with Gold’s most recent price decline, on top of the new money inflow, suggests that buying is in effect.
If this methodology happens to 'stretch' the actual turning point as sometimes is the case, my guess is that by the next 5- 8 trading days a bottom should present itself. Rarely do you see a correction last more than three, three and half weeks especially in the birth of a major uptrend.

Particularly when an index is so closely linked to the metal it tracks, yet is sensitive to the price performance of the overall market, its true direction can be skewed by such 'pulling' forces. Despite a 200 point drop in the DOW JONES Average on Friday (a mild re-enactment of the 25th year anniversary of Black Monday), and gold moving lower- the GDX actually closed positive on rather large ‘spike volume.’ This is a clear case of Investors that have seemingly found attractive valuations at current levels for reasons obvious - they are expecting a bottom.  

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Saturday, October 13, 2012


The integrity of a particular resistance level at which prices breakout from is only called into question if the subsequent retest lacks the ability to ‘hold’ above the breakout point. Failure to do so would be a sign of trouble that requires more effort among buyers to ‘absorb’ the oversupply of shares at hand. However, the fact that market fluctuations can be irrational at times; there are cases when the breakout level is not necessarily the fulcrum point. Instead prices have room to ‘give’ but still remain above the general stopping area. This can be equally as valid so long as there comes a period of consolidation 'above' where buyers can defend the newly established higher level of support .

For this technical reason one might objectively identify as their being a potential bullish case in stocks right now. And should this analysis be applied to the basis that 'the fundamentals always find a way to fulfill the technicals,' then it gives even more reason to ‘dig’ into what might be the primary driver.

For starters, price action during the month of September was largely ignited by investors’ response to the stimulus measures of our Federal Reserve. Not only was there a great deal of ‘front running’ the announcement of QE3, but as it turns out, the actual announcement was a ‘sell on the news’ type of event.

Since the market has not ‘taken off’ as it seemingly should by now, there is somewhat of a dismissive approach among investors- as if money printing this time around may not ‘work’. Historical evidence would prove that monetary stimulus during the latter stages of a bull market cycle has less desirable effects, but for reasons explained in the premium newsletter- I believe there is STILL enough 'kick' in this market to accomodate a year-end/election rally prior to a major TOP.

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Saturday, October 6, 2012


If ever an up-trending market is without a health restoring correction process, investors seemingly have leaned too far to the side of one bias. Generally the result is an ‘approaching top’. This might be the case now since Gold is contained within a sideways structure; a pattern that represents indecision and lack of direction. But under different circumstances, particular price behavior of this kind can presage a grimmer outcome.

The extended condition of Gold has a trajectory that speaks to more bearish possibilities, and not the bullish ‘hype’ that currently orbits our trading universe. Since these patterns are tricky, one cannot be certain of which direction prices will break-so key will be to follow the dollar.
If the dollar breaks its previous swing low, then gold will likely stage a mild advance to the neighborhood of 1815, 1840 max. Anything past that will be given back rather sharply as the metal is ‘overdue’ for a more substantial correction.

Should Gold break down from this ‘up and down’ pattern, then the initiation of a 2 to 3 week corrective phase has begun. I would anticipate the preliminary stage of the move lower to be a quick drop that is followed by a sideways consolidation. Thereafter the metal will stage an upward advance of much greater magnitude than this current one, likely pressing the September of 2011 highs at roughly $2,000 an ounce.

Traders/investors who ‘missed out’ on the August/September multi-month advance might be looking to reposition for what I believe is going to be an extremely lucrative opportunity. One can subscribe to the premium newletter for a detailed description of the expected sequence of events as well as particular points of entry.