Well, today it finally happened. After peaking some 5 or 6 weeks ago, Market Vectors Gold Miners ETF (GDX) finally gave us a nice looking BUY signal. This daily chart details the True Strength Index (TSI) indicator's BUY signal. The TSI (7,4) gave us a trend line break signal and the slower TSI (25,13) below appears ready to provide confirmation with a moving average crossover.
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Click on any chart to ENLARGE
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I have also identified the very similar TSI BUY signals that we got this past late January. Better than similar, they are practically identical!
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Time to load up. Cast worry to the wind. Bet the farm. Get rich quick.
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Or, maybe not.
The price movement of the US Dollar has a great effect on the price movement of the precious metals and their miners. This next chart is a clone, time-wise, of the GDX chart. I have identified the late January breakout of the GDX as well as our current BUY signal for miners.
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While these two time locations compare identically on the GDX chart, I do not think the same can be said of this chart of the US Dollar. The late January time period was a concluding breakdown of the US Dollar from a long consolidation period. The current period appears to be a very brief consolidation following an explosive rally. These appear to be two entirely different animals.
This final daily chart of the US Dollar ($USD) does provide a clue at what may be in store for the US Dollar in the very near future. While our current situation does not seem similar to the late January `11 time frame, it does have an uncanny resemblance to the November `10 time frame.
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In this case, price made a bull flag following an explosive rally, and this flag occurred just above the crossover of the 10 and 50 dma. The bull flag turned out to be the midpoint of a huge rally in the US Dollar.
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Our current situation is virtually identical. Compare the action of the RSI, Slow Stochastic and MACD for additional confirmation.
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If indeed the US Dollar is currently making a bull flag that is 'en route' to the completion of a huge rally, I guarantee you the miners are NOT going for the ride.
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Time to cast worry to the wind and bet the farm?
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Not for me.
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Let's see what the US Dollar does first, then make a good decision.
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Good evening John
ReplyDeleteCan you take a look SLV, SLW, price movement next few weeks
I'm sold my Put May 21 too soon and buy June 18 call too early,
I'm guess,
Please give me some advice,
Happy Trading
John,
ReplyDeleteGreat post, you absolutely read my mind. I am eager to get back in for this bounce however the dollar really concerns me. If it closes below the 50dmva tomorrow I will buy some positions but otherwise, I will continue sitting on my hands.
Hey, if we are wrong and silver goes back up to $40 atleast we can still play the downside for the summer doldrums.
John,
ReplyDeleteWhen I read the title to this post, I was immediately concerned.
My first thought was has John forgotten about the dollar. B/C the dollar looked like it was forming a bear flag -- like last November ...
And I stopped reading to pull up a dollar chart to confirm my thinking.
Then I read the rest of your post.
LOL -- you had me going.
It feels good that my initial reaction was confirmed by the remainder of your post.
Keep up the great work that you do!
John: always good to see what price actually does. But I'd argue, go look at what the dollar did in August and September of 2010 on the DAILY chart. Look at MACD in particular. I'll bet the same thing is happening here, and that the slow MACD (red line) is gonna skim the 0 line from underneath and then head back down.
ReplyDeleteI'm betting the dollar is in the process of rolling over, and that we WILL get our big C-Wave finale for gold by the end of June, with gold hitting somewhere in the neighborhood of $1720 - $1750.
As they say on TV: "Stay tuned!" Never a dull moment in the markets.
All the best to you. (And I'm still planning on becoming a TSI-Jedi!)
John if UUP falls below 0 line on the TSI 25,13 will that be a good time to add GDX?
ReplyDeleteI know it could be argued that I'm just "confirming my biases" (although I did take my position over the last 2 weeks from reading my charts), but here's the conclusion from an interesting currency by Faros over on King World News:
ReplyDelete**********
"....Over the next few weeks we will gain more color [MY EDIT: certainty] regarding Greece. Whatever the outcome, we expect the surety of a solution to be EUR/USD positive. The EUR/USD has pulled back over the past few weeks from its highs as the market has unwound positions given the uncertainty. Certainty will attract long EUR/USD positions.
Central Bank activity continues to dampen USD strength in general. With Asian Central Banks and Middle East reserve managers continuing to buy the EUR/USD, GBP/USD and AUD/USD on dips.
We believe that just as the move from 1.4920 to 1.4050 was fast; the move from 1.4150 back to 1.5000 will be just as swift on the back of rising interest rate differentials, greater certainty and market positioning. The market is no longer extremely short the USD. Indeed our most recent poll suggests that shorter-term Macro funds are now long the USD and short EUR. Bank desks are currently short the EUR/USD as well. We expect both positions will be squeezed out and liquidated as soon as clarity in the problems faced by the European 5% [MY EDIT: this refers to the "peripheral" countries of Greece, Ireland and Portugal, discussed earlier in this analysis] rises.
We held a 3% trailing stop in our short DXY (USD/Index) position from Dec 3rd, 2010 that was executed last week, locking in a gain of 5.66%. Once again we like shorting the DXY (USD/Index) with the usual 3% trailing stop. Clarity is coming to the coiled spring.
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All the best.
Anon - your plan sounds quite reasonable. A ZERO crossover into negative and add in a crossover of the TSI (25,13) with a moving average of 9 or so, and that would put the odds squarely in your favor.
ReplyDeleteJohn,
ReplyDeleteI have been thinking about your excellent chart that clearly breaks downs the similarities between the dollar from 11/10 and the current set up.
With the apparent bull flag forming, I am expecting to see some dollar strengthening soon.
So I pulled up my dollar chart on freestockcharts.com and I saw immediately saw something that would argue for the dollar to weaken.
You see, my chart has the three year trend line drawn in from the 08 low.
Back in November the dollar was above this trend line. After the dollar it tagged this three year up trend line, the dollar rallied, stalled and formed the aforementioned bull flag and continued to rally.
Now the dollar is below the three year trend line and was turned back as it was nearing it. I suspect that this will act as resistance.
This, to me, helps explain the powerful move lower in the TSI for the dollar.
$$$, I see your point. UUP shows that 3-yr support level clearly as confirmed by tags in Nov'07, Mar'08, Nov'09 and the last one in Nov'10 before the rally...
ReplyDeleteThe $USD and the Euro trade inversely. If the Euro is weak, the dollar will look strong but it is in relation to the Euro.
ReplyDeleteIt is and has been possible for gold to be a safe haven from the Euro especially when, as now, there seems little reason for the dollar to be perceived as strong in its own right.
The Euro drops when Greece et al become, as now, headline news. And $USD will then rise but that doesn't mean gold will fall even though it does tend to trade inversely to the $USD.
John,
ReplyDeleteI hope all is well.
Hopefully you will return soon with your excellent chart work