Those who checked the links to the recently posted 60 minute live chart of the SPY & QQQ might have noticed some resistance levels that I added earlier today. With this being an OpEx day (options expiration), I typically don’t place much consideration into what the market does as OpEx days are often driven more by position squaring due to all of the expiring options than by the true underlying forces of supply & demand. Regardless, I figured that I would go ahead & point out those resistance levels out as prices are current challenging them at this time. We’ve also seen prices on the SPY regain the wedge today, something that definitely warrants monitoring into next week as if we don’t see prices move back below the wedge by early next week, along with a break of the support level that the Q’s bounced off of yesterday, then the odds that the markets will take out the recent highs will rise sharply.
The Gold & Commodities category is a sub-section of General Market Analysis that includes charts and commentary associated with precious & industrial metals such as gold, silver, and copper as well as various commodities such as oil, gas, wheat, corn, etc…
Market commentary & new trade ideas continue to be on the light side as the risk/reward on both the long & short side for just about all sectors remains unfavorable at this time. Regarding the US broad markets, both the SPY & QQQ continue to grind higher while the divergences that I’ve been pointing out for weeks now only continue to build, thereby increasing the chances of a correction and long-side breakouts failing. The live charts for most of the US broad indices (SPX, NDX, COMP & RUT) have all been updated although little has changed recently other than the possibility of a double-top pattern formation developing on the $RUT (Russell 2000 Small Cap Index).
The divergences & near-term overbought conditions in the gold & silver mining stocks has begun to play out with GDX & SIL already down nearly 7% since the peak on Thursday morning & GDXJ (junior gold miners ETF) down over 9% since then. Based on my interpretation of the charts, I still favor additional downside in mining sector in the coming days, possibly weeks and have listed an updated pullback target range on the 60 minute GDX chart above.
The EGO (Eldorado Gold) Long-Term Trade idea hit the third profit target (T3) yesterday, as well as today, for a 36% gain from entry. As discussed in the mining sector video posted earlier today, the odds for a pullback in the mining stocks are quite elevated at this time and that holds true for EGO as well.
Not only are reactions off the price target levels typical in general but EGO is also coming off overbought levels (on the daily RSI) not seen since the stock peaked in Sept 2012 as highlighted on the left of this updated daily chart. I don’t expect anything remotely close to the 46% plunge in the stock that immediately followed that previous similar overbought condition, as that one had occurred during the early stages of the recent bear market in the mining sector whereas this time around, the stock is most likely in the early stages of a new bull market.
I’ve also added an very steep uptrend line on which prices current sit precariously on top of. Any solid break or daily close below that trendline would likely spark a correction which could provide another objective entry in the near future. T5 remains the final long-term target at this time but again, the odds of at least a decent correction before EGO gets there is quite elevated at this time. Additional details on this trade, including the longer-term bullish case, can be viewed in the Gold & Silver Trade Ideas video posted on June 13th.
The first part of this video covers the both the near-term & long-term outlook for gold & the mining sector. A case is made that although the intermediate & longer-term outlook is still bullish, the mining sector is overbought while at resistance, thereby elevating the odds for a near-term pullback in the sector at this time or at the very least, careful consideration should be made before adding new exposure to the sector at this time despite the recent bullish price action. At the end of the video, we take a quick look at the charts of a few of the largest components of the GDX (gold mining ETF): GG, ABX, NEM, SLW, & FNV.
I’ve received a few inquires as to my thoughts on the mining stocks recently and although I posted my thoughts on the sector in this post just yesterday, things move fast in the market & that holds especially true for the mining stocks when the sector is hot as it has been lately. First off, I want to clarify or expand on yesterday’s statement that I my plan was to wait until either my pullback targets were hit OR both the metals & the miners clearly broke out of their recent trading ranges. The key word in that statement, which may be subject to various interpretations, is clearly.
SSRI SIlver Standard Resources) has hit the final target, T3 at 9.18 (recently trading as high as 9.19 so far today) giving this trade a 42.3% gain since entry just over one month ago. Typical swing traders should consider booking full profits while longer-term traders or investors should at least raise stops if planing to hold out for additional gains.
While I remain longer-term bullish on the mining sector, this most recent trade on SSRI was based off the 60 minute time frame with T3 list as my final target as, although the stock may certainly continue to climb, the near-term R/R for typical swing traders is no longer favorable to remaining long at this time. With that being said, SSRI may be added back as another swing trade or possibly a Long-Term Trade idea in the near future should another objective entry in this silver mining stock develop in the coming days, weeks or months. Previous & updated 60 minute charts below:
For the most part, nothing major has changed from a technical perspective in weeks now & as such, I continue to keep my trading light for the time being. Last week I highlighted the divergent highs in both the SPY & QQQ as well as a backtest of the SPY wedge. Shortly afterwards those divergences did begin to play out with both major index tracking ETFs finding support at the levels shown on the updated 60 minute charts below (following their respective previous 60 minute charts for reference). Although my opinion is not as strong as I would like it to be to establish a short position against the broad market, my current scenario would have this most recent bounce off those support levels terminating very soon, quite possibly on this morning’s post-opening bounce, with prices continuing lower to the targets shown on these updated 60 minute charts.
As far as gold, silver & the associated mining sector, the recent price action has been about as bullish as I could have expected. The near-term overbought conditions, negative divergences & 60 minute uptrend line/rising wedge pattern breakdown did cause the mining stocks to trade sideways for the last couple of weeks but the ‘correction’ fell shy of even my most modest pullback target (so far) and with the GDX starting to move above the recent highs of that consolidation range today (albeit by only a slight margin so far), the miners continue to exhibit bullish price action that is likely to continue going forward on the intermediate & longer-term time frames.
However, the metals themselves (GLD & SLV) are still within their respective recent consolidation ranges and unless/until both the miners & the metals clearly break above these ranges (or pullback to my aforementioned pullback targets) will I begin to aggressively add back the exposure that I reduced to the sector recently. Bottom line is that the metals & miners can break either way & my confidence is not high enough, nor is the R/R favorable to position long or short in advance of my “best guess”, which if I had to pick one or the other at this time, would probably be a downside break from the current trading ranges with GDX, GLD & SLV going on towards one or more of the downside targets listed on these updated 60 minute charts.