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US Dollar, Gold, Silver, GDX & Marijuana Stocks

In addition to investment grade bonds (treasuries, munis & BBB+ rated corporate bonds) which were covered in yesterday's post, a few other potential bottoming plays that stand out at this time are gold, silver & the related mining stocks, cannabis stocks and some the major currencies (vs. the US Dollar) such as the Euro, Yen, Pound Sterling.

Essentially, other than the cannabis stocks, which have virtually zero correlation to the stock market or any currencies, including the US dollar, all of the above (gold, silver, GDX, major currencies & even the investment grade bonds) have a fairly strong correlation to the US Dollar. As such, my expectation for a reversal in all of these asset classes, all of which are in very clear & strong downtrends, hinges largely on a reversal in the US Dollar. (Translation: If my call on the reversal in the US Dollar soon is wrong, then my call on a reversal or at least a meaningful counter-trend bounce in those other asset class will most likely not pan out either).

$DXY weekly Nov 24th

$DXY weekly Nov 24th

Starting with the US Dollar (via the Dollar Index, $DXY), this 1o-year weekly chart highlights some very powerful negative divergences that have been forming as the $USD has recently broken out to new multi-year highs. While weekly charts can help to formulate the longer-term outlook for an index, security, commodity or currency, it is best to move down to the daily & even intraday time frames in order to time your entries & exits on a position. The charts below (US Dollar vs. the Euro, Yen & Pound Sterling) make the case for an imminent reversal in the US Dollar which, at the very least, should produce a healthy counter-trend rally & possibly more.

Should these scenarios play out, that would likely translate into a trend reversal (i.e.- rally) in gold, silver & the related mining stocks with those charts confirming the likelihood of a meaningful oversold rally/counter-trend bounce & possibly more, in the coming weeks to months. The daily chart of GLD, SLV & GDX highlight some objective "buy" or scale-in/support zones as well as some potential price targets.

Unrelated to the US Dollar but on a similar theme of sharp, oversold sell-offs down to support, the majority of the cannabis stocks that were most recently highlighted in this video on Tuesday mounted some very impressive gains the following day (Wednesday) as the buyers stepped in with conviction at those highlighted support levels/buy zones. Too many charts to post but here's the daily chart of VAPE as an example, with the stock exploding to post a 56% gain yesterday on high volume after kissing the previously highlighted uptrend line. My cannabis watchlist to the left (all of which were covered in the video) highlight yesterday's gains along with the volume buzz which indicates that the volume on most of those trades were well above average (a bullish sign of confirmation).

VAPE daily Nov 24th

VAPE daily Nov 24th

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5 Comments

  1. Art November 24, 2016 2:58 pm at 2:58 pm

    Thanks Randy for the very timely analysis, especially on your day off. I too believe we are at a turning point on gold and the miners or at least the beginnings of one. This is a low risk entry point to start scaling in at least. I started a position in the miners this week. Also thinking the market will begin to start rolling over soon, although I have been thinking that for awhile now and have been stopped out numerous times on that assumption but that doesn’t mean it was wrong only my timing. The question that must be asked by individual traders is do I have objective evidence to hold a view of the market, if you do then you can enter a position numerous times even if you are stopped out every time and end up seeing that position pay off when the timing is right rather than abandoning the idea. Most novice traders won’t do this due to lack of conviction or blindly following a guru. That is why I like and appreciate you and your site and the members here, not so much the trades but the reasoning and analysis behind them–Asking how does what Randy is saying line up with my own analysis? If it does then that’s a confirmation of my view, if not then am I wrong? That’s the best compliment I can give! And what I am most thankful for as your site is concerned and of course your giving Spirit.
    I hope you and all the members have a great holiday!

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  2. covey November 24, 2016 9:48 pm at 9:48 pm

    Very well said, Art. I am not a novice trader but find myself making very novice bad decisions by holding losing trades past objective stop points, believing in my analysis more than believing what the price action is telling me. and believing that the turning point is just about here so hang on a bit longer. I have been following Randy for some time now and really appreciate his no hype and no nonsense approach to TA, and, like you, really appreciate his giving nature. I followed him long before his paid subscriptions started and was always impressed by how much he offered the trading community at no cost. Unfortunately, I manage to take more of his losing trades than his winning trades but I have a much better understanding of the markets thanks to following him and following posts from competent traders such as yourself in the trading room. Thank you for your contribution.

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    • irawood November 25, 2016 8:42 am at 8:42 am

      Trust me on this one covey, if you are not willing or able to take small losses when they need to be taken you will not succeed in trading. I have learned this the hard way over the years. It is like quitting smoking, it is easy I have quit a hundred times.

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    • Art November 25, 2016 6:19 pm at 6:19 pm

      Thanks Covey, that was very kind of you to say. Good luck on all your trading.

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  3. covey November 25, 2016 10:16 am at 10:16 am

    Thank you for reinforcing that one, irawood. I know that to be true – I just need to adhere to that rule without exception.

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