Gold And GDX, Catching A Falling Knife!

 

gdx-nov-11-2016

 

It was a wild ride last week as this gold market dropped like a rock on Friday.  This violent move south of the GDX, sure looks like a nice spike to me. Of course, many people do not even see the spike, and when they do they think it is going to go much further.   It may sound crazy, but catching a falling knife is what we have to get very good at, to trade this market. The fear comes from not knowing how low it is still going to fall to.  You are not alone on that, as the majority think exactly like that.  GDX did fall to the bottom trend line and the 100 shares is just part  of a paper trade, to help test this  wave count.

If we look at this decline as a correction in a bigger bullish phase, then the decision may be easier. They key is to never take your entire position at once, as that is a basic buying rule that not too many people know how to do. 

The chances are good that the US dollar will resume with its bigger bearish run, and therefore GDX and gold will rise. We also have the classic setup, where the USD, and stocks are pointing up, as gold and gold stocks are pointing down.

 We just had another stock and USD bull attack, and the gold price suffered. This could all reverse and when it does, it will not just last a few days or so. It may last for the rest of the year or longer. 

In early 2016 GDX bottomed, and I show an ((A)) wave in Primary degree. This means we are in a ((B)) wave bull market in Primary degree, and still have a long way to go. 

GDX also hit the $21 price level, last week, which is what I like to see, as 21 is a Fibonacci number.

The Gold/Gdx ratio of 58:1, expanded the most of its entire bullish phase last week as well. 

gcy00-nov-11-2016

 

Looking at gold we can see how it went wild last week, but two obvious spikes have now developed. So far gold has come to a halt at $1220 and I’m hoping it will hold.  Again, that huge spike is another clear example of what they call a “Falling Knife”. These spikes on the daily charts, is what I target with any wave counts. At this point gold slumped about $155, which worked out to about a 48% correction.  Gold crashed below the middle of a previous bull market, so that helps with a potential price support as well. In a panic, it could still dip lower, but that is a risk that is always present.  

If all gold does is breakout to a new high, then you are looking at a minimum $155 price move.  On the real bright side, maybe gold can hit $1600, but we have to wait until the mass media headlines become bullish again.

Any “B” wave rally in a Primary degree is technically a big bear market rally, but it is so big that it will end up being just another bull market to the majority. By then they will all have forgotten about the 2016 bearish bottom, as they think the worst is over.  With any Elliott Wave we should never forget that bottom as it is the base to do all other net calculations from. The majority is hooked on their little slider retracement tool they use, but does a 48% retracement set off any alarm bells to buy? 

I’m looking for a “C” wave bull market in Minor degree, and don’t let the idea of a “Minor” degree move fool us, as a “C” wave move can surprise even the best of us. 

Silver has not completely retraced its decline, but it may turn into a double bottom. That also can give gold a little more room to move lower as well.

In bull markets all corrections point downward, usally finishing on some type of “C” wave, but when the bullish run does come to an end, all these “C” waves will start to invert on the smaller scale.

The US dollar is the key to all this and I will still post a daily USD chart today.