The market is full of bloggers
who write their own forecast. They’ll tell you one thing, and then another.
Some will call it early, some will call it late. Some call it late because
they’re afraid to call it period. But, what you don’t know is the
trend. The trend dictates direction. Direction tells you where.Direction tells you everything.
The Gold market is in a BULL
market. The long-term trend is up. The intermediate trend is up. The short term
trend is down. Name a point in time when levels
of bullish sentiment were at extremes, and you have the majority of people
calling for a top? It just doesn’t happen. Take GDX for example. GDX has
extended to marginal highs, but if you look closer, its individual counterparts
are struggling. GDX is made up of 49 stocks, 21 of which have reached new
highs. The other 28 have not.
Those numbers aren’t terribly
bad. They’re also not great either. And if GDX goes higher, those numbers are
subject to change. I know. But, this ETF is cap weighted.
And its top 10 holdings account for nearly 61%.
Only 4 out of the 10 stocks have
reached new highs. 3 out of those 4 are ranked in the bottom half.
Can these numbers change? Sure.
But if another stock, or group of stocks break to new highs it does not project
a bullish outlook. It’s called front running.
Front running is a trap. And a
very costly one. Front running makes you think what isn’t. Front running is
also short lived.
The culprit will be the dollar. From 2014-2015, the dollar
rallied for 10 consecutive months. Today it suggests nothing short of a
consolidation. Its intermediate trend is up, and still looks very bullish. It
too will rise.
The next few weeks should go
something like this. GDX attempts to rally a wee bit higher. But, anything
higher is only to form a top. Then comes the selling.
And the correction coming is not
going to be pretty. It’s not going to be short. It’s going to last for several
months, and run late into this year. It’s also just around the corner. GDX Weekly Chart:
The warning did not come until Thursday, when price had several attempts to rally, but instead dropped to its previous low. Now after two failures, a third test of the lows would undoubtedly break support and send price in a precipitous decline. S&P 500- 4 hour chart
Other clues came during the last 2-3 weeks of the advance, when price would accelerate to new highs, but after a few days a minor correction occurred. The pattern now has formed several mini peaks along the way, indicating momentum loss. S&P 500- 4 hour (chart 2)
Technically, since we are still in an uptrend, there is the possibility of a final short-squeeze to higher highs. Anything upward of 20, even 50 points would theoretically take the S&P into May for a top. The result would be a divergent peak, indicating the rally is a bad one. It would also be the best scenario for the bulls - as price would form an even larger top, providing enough time for everyone to get out. In any case, whether we drop immediately, or continue on, the coming decline should lead to a 2-4 week sell off.
Stay tuned, more to come next week. Darah http://thecompletecoveragereport.blogspot.com