GDXJ, Bull Market Review

 

GDXJ-July-11-2016

 

What a great run for gold stocks so far.  It seems that a major bottom has occurred with GDXJ in January of 2016. Yes, all the analysts can see the same bull market, and even more investors would be jumping on this bandwagon, because they don’t want to be left behind. Many others jump on just because it’s going up. Meanwhile, the contrarian may start to feel rich today.  As a joke I say that if you are an investor and you feel rich, then “sell everything”.  Well, that works best on the tops of an extreme bullish cycle, unless you think that this bullish party is coming to an end.

The start of a diagonal bull market can be easily confused with the start of a bearish rally followed by a new record low.  This would be all a non issue if we have a better understanding of those wild diagonal wave structures, and where they happen most frequently.   If the 2016 low is a major bottom and we think we are in a 4th wave position, then I draw or visualize the entire next move, based on an idealized chart.  I look for two major patterns, an obvious single zigzag bull market, or 5 waves of the diagonal type. I have to start calling them with a distinct name, so we can always tell the difference. In this case I call it the “Diagoanl5” or the “Impulse5”. They always alternate, between the two sets of 5 waves in a zigzag.  There is also a major difference between the two, and I want readers to understand that. Many wave analysts just roll the two into one type, which I think is not the way it should be done. 

I am sure this diagonal 4th wave bottom dipped well into the previous bull market wave 2, which is the maximum I would allow. In short, we can have an ending type diagonal, but it still would be part of the original bull market. This is not a new bull market heading to the moon, but the continuation of the old gold stock bull market. 

I am looking for a correction big enough to shake out all the late comers and scare the majority who bought “high” recently. Gold stock investors love to buy high,  as they are oblivious to any sizeable correction that may happen.  It would be extremely rare if gold stocks kept on going in a vertical move, as it will be harder to see the bullish zigzags. If GDXJ crashed back down to the $34 price level, this would not surprise me, as that would be the setup for the next zigzag leg up.

I don’t want to get too crazy and say gold stocks are going to the “moon” but breaking a new record high would be next on my target list. This still may be some time away, but at the speed that this first move went, you never know.  If we drifted into a triangle correction, then this would be a bad sign, as then only a single zigzag may form.  Either way I am sure we will see some heavy insider selling reports come out, (contrarians) before this bull market dies again.  In mid June 2013 insiders did some of their heaviest buying that I read about, and I would think we will hear about major insider selling when the bull market ends. 

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