MINERS AT A LOW!!

The history of the stock market reveals how specific patterns come into being, and how it influences subsequent behavior. Pattern sequences of a previous time are reborn and under the right circumstances, can identically repeat. It is simply a reproduction of how investors are behaving collectively at two different points in time. But knowing that a pattern has a particular script it follows can constitute a path that holds (or leads to) a likely outcome!

Ninety percent of the time all market declines will have two panics. The first is associated with volume and volatility, invoking maximum participation. The second is a byproduct of the first and unfolds in a final ‘flush out.’ It is less dramatic in size and influence- but prices reach new lows.

Time is also a component and is equally as important. Once a protracted decline sets in, historically there is not a typical short squeeze of five to eight percent in the other direction, but a tremendous upward spike which reverses the trend all together.

The modern day scenario that is most fitting is of course, the GOLD MINING INDEX. And after an extended three month correction, we can officially say "the rubber band has been stretched!" The technical picture provides enough evidence to define a clear cut two- panic low sequence, but more interestingly, the second panic has a particularly complex nature that morphed into a sideways and seemingly base pattern. This now calls for a violent uptrend underway!

GDX-Daily Chart (click to enlarge)

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Darah

PANIC COMING!

The TV pundits all contribute their fair share to the conditioning process by clouding thoughts of any market player. To the extent that all ambiguities presented will bait investors to thinking IRRATIONALLY! Like, waiting for a 1000 point rally to emerge once the fiscal cliff is resolved.

Fortunately, underneath all the headlines a visual and graphical interpretation can be mathematically extracted. It is here, in these very charts, where you will find an answer that illustrates what is really going on, so that us technicians can observe, scrutinize, and formulate a particular bias.

The information provided does not tell you why, or when, but what!

In this case, ‘the what’ is a bear market rally. These particular rallies are very sneaky and most convincing, but can be properly identified when using the right tools.

For starters, a basket of heavily weighted companies, ‘THE NIFTY FIFTY,’ which offer the bulk in the performance in the averages -all now have chart patterns that cannot sustain the continuation of this advance. Invariably, when volume remains light during an extended window of time, the result is an inevitable sharp collapse back down to the previous lows or worse, new lows that can no longer support a bull market.

The S&P 500 index is a case in point, which is still in rally mode, and perhaps can continue higher if there is further consolidation. But if only mother market is ever so accommodative to our own expectations.

And it is because of her complexities that make it an impossible arena for perfection. The current rally back is clearly overworking itself to recapture the previous drop in November and rather than guessing where exactly it will end, think of it in terms of direction. The future course of these violent counter trends ultimately end in a scare plunge; and all the pumping in the world cannot uphold the violent cascade of selling pressure that will implode on the masses.

Consider the technical chart below, which projects a disaster waiting to happen, and with only a small chance of one last leg higher before this rally is all said and done.

S&P 500- Daily Chart

 

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Darah

OVERSOLD RALLY COMING!

The ever changing nature of the stock market will often boggle analysts if the current price information displays an unclear message. There has always been, and there will always be a fascination to wrongfully challenge what the future holds, instead of interpreting what’s at hand.  It’s as if what is already known is simply not enough.

Such aspects should never be the primary tool of one’s own decision making. In fact, this is very reminiscent of my encounter with one wise expert on Wall Street. He is a seasoned grizzly who has weathered decades of all different market climates and his ever influencing demeanor once expressed to me, “Don’t tell the market... let the market tell us!”

Many have already come forth with bottom expectations, but none hold any convincing basis for this belief. With regard to the averages, the message across the board is simply no message at all. The only, if any, ‘take away’ from this most recent emotionally inspired wave of selling has served as an oversold condition. No reversal has transpired to even consider a change of events.

BUT, the last thirty minutes into Friday’s close did reveal a heavy interest of buying for reasons we will soon find out next week. Any follow through of this will result in a swing low, but I must caution those who feel this may in fact be the more important bottom. Let me explain.

Even in the perverse of markets, rarely do stocks ever go down and then turn back up to form a ‘v-bottom.’ These particular bottoms are suspect and almost all fail. A true bottom worthy condition must present a subsequent retest of the low or in the very least, find support near the general area to confirm that prices can hold despite all of the bearish news.

Bottom Line:

After a second low is presented, odds increase tremendously for an oversold rally into year end. Leading into the second low, divergences will erect on all fronts and most of the selling pressure should be ‘wrung’ out. Below is several examples to further underscore this very sequence.

NDX 100- Daily Chart

 



In case Friday was not a low of some kind, a bottom will soon be realized in the coming days.



 

The CC Report offers two subscriptions- $9.95/month or $100/year. It is well worth the information received.

Darah



A Free Lunch!

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11.05.2012- Sample Newsletter


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Darah

A SECOND CHANCE FOR ALL GOLD INVESTORS!

Not long ago, in the article entitled, “The Final Run in Gold,” I outlined a sequence of specific events that called for an imminent correction in Gold. Contrary to this viewpoint, the pervasive narrative among analysts at that time was forecasting the metal price to reach as high as $2,000 an ounce. Of course, this expectation never came into fruition, nor was it rational enough to give any credence either.

For those of you who are owed back the explosive rally in September NOW get a second chance. Prices are in their final days of this current decline, and will present buyers with one extraordinary opportunity. My target between 1850 and 1900 I see can be realized in the coming 4-6 weeks, likely leading into mid December. All it will take is a one day stroke higher of 20 to 25 points that initiates the reversal, and which generates an avalanche of buy orders thereafter.

As you all know, psychology in the commodity markets is driven by the element of FEAR, but this time it will be BULLISH PANIC. The truth of the matter is that Gold is in a roaring new bull market. And these hyper-sold conditions trap investors because they are emotionally forced to sell their positions at the very wrong time. Bottom fishing to this degree where valuations are extremely suppressed is not an occasion that comes very often.

The canvas below you will see I’ve ‘inked’ with my long expectation of the price action in the yellow metal. Don’t get left behind as the train is not far from leaving the station.

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Darah

GOLD AND MINERS ARE APPROACHING BOTTOM!

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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Darah

 

A YEAR-END RALLY IS SOON UNDERWAY!

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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Darah