A moment of truth is quickly approaching for the gold mining sector. I follow and trade this space because the volatility and % returns far exceed anything else on a non-leveraged basis. Add in 3x ETFs and you have incredible trading swings. I personally don’t use this kind of leverage unless I have 100% conviction. And that is lacking at the moment and I’ll show you why.
After the 2016 high, a preferred analysis was presented in October 2016. This focused on using the January 2015 high as the 45 month cycle high. This has been a major uncertainty for me and it changes the view materially if instead, one uses the 2016 summer high as the 45 month cycle high. I’m not going to getting into the pros and cons of either scenario. What I want to show you is that each scenario has quite different outcomes for the remainder of this year.
Here is the preferred view. The projected path from last fall has been tracking well. Even this pullback into current lows is allowed. Daily, weekly, and longer term views as a refresher follow.
So looking at this first analysis presented above, with the 45 month high pinned (yes pinned and is based on my interpretation), the path forward is for the most bullish phase into a 7.5 peak is due to start very soon. A tradeable low is due no later that early next week. Price is expected to attack last year’s highs if this market is truly bullish.
However, if we consider another phasing alternative, and that is simply allowing ST to identify last summer’s peak as the 45 month cycle high, then things look much less bullish for the remainder of the year. I really don’t know which way this goes and will have to trade the coming low and watch price action closely. Price is sitting on several forms of support. The 22 and 45 month FLDs are just below price. There is not much room for lower prices. The real tell will be the coming 16 week cycle after this near term low, which should form by early next week (FED day of course). It needs to be bullish, attack recent highs, plain and simple.
And while it would be grim for the remainder of the year, the long term bull would still stand in front of us.
Another reality check is for the 48 week VTL (green line shown above) to hold on this pullback. I’ll have to update the look on the USD for clues.