GDX, Gold Stocks: Bull Trap Or Bear Trap?

 

The question is simple and direct. How do you know when some asset class is just in a bear market rally (Bull Trap) or bull market, in which case your in a bear trap. If you have any doubts then you should not be playing this game as commodities have a vicious streak to them that majority of investors ignore or even forget. A bear market rally “ALWAYS”  retraces its entire move from its point of origin, with no exceptions.  I caught the “Falling Knife” in the 2008 crash and it was one of my best trades ever. This can happen again, and the only regret is that I got out to early. At that time I made 4 buys as GDX crashed and I ended up with a $19.10 average with 1200 shares and $22,900 at risk.

I would love to have a big US dollar trading account, as I would definitely do the same thing again, when GDX implodes. Retail investors and the majority of e-wavers don’t have a clue when something is in a bear marekt rally, and therefore they get caught in a crash, when they least expect it.

It’s sad to say but gold bugs are the easiest to fool, and I have no guilt feelings or hang-ups, shorting those that think gold stocks are still going to the moon.  The top bearish trend line should be enough to scare the gold bugs, but it doesn’t fizz on them yet.  A rising wedge is clearly visible, which is one of the most bearish indicators in your chart tool box that you can draw, yet the majority of gold bulls ignore this indicator.

So far the bear market has been mundane, but I for one will expect this market to make very violent swings. If participants are not fully prepared they will miss out on another huge bullish phase that could take GDX back up to my wave 2 bear market rally.

The slope or angle of the entire GDX bear decline broke away from an impulse decline at the top.  An impulse decline would have a far steeper decline angle.  I’m working a diagonal 5 wave decline, and eventually, I will need another 5 to complete a big zigzag in Cycle degree. All, except for a few of my commodities are in Cycle degree zigzag bear markets, and any GDX crash will put us about 1/3 of the way.  As you can see many bottoms occur at the end of a month so October, November would be the best time for this to hit bottom. When this starts to get close to the bottom then you will see prices fall like all leaves falling in an Autumn storm.

We have all sorts of GDX support prices and not one of them will hold in a bearish rally as the big correction is har from over.  Remember, we need a clear “ABC” pattern to finish a bullish correction. If we are lucky we only have an “A” wave, but no “C” wave finish.

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