fyi- i will be out most, if not all of the day tomorrow and won’t be able to post anything until possibly after 2:30pm est, if at all. i am also leaving town tomorrow evening, returning on sunday or monday so my posts will be few, if any until i return.
the major indexes, as highlighted earlier, have broken down (for what seems like the umpteenth time lately) but a sell signal is a sell signal until proven otherwise. the recent daily and intraday charts list most of the significant support/target levels should anyone be short now looking for areas to cover or play a bounce as well as for those long-side traders looking to buy or add to existing positions on a dip. be careful about getting caught up in all the “buy the dip” cheering in the media as we have reached or exceeded numerous technical levels such as overbought readings and sentiment readings that have only been seen a couple of times in the last few years+ and have historically almost always led to significant corrections not too long after these readings were recorded. maybe this time proves different, maybe not but the one guarantee that i can and will give you in this business of ours (trading/investing) is that the news WILL follow the next correction, not the other way around. stocks down first, then the news will follow and if it doesn’t, i promise that bubble tv will retrofit every little dip and rip with a headline or reason-de-jour for the drop or pop. trust the charts and don’t get caught up in the hype. yes, sometimes the charts do give false buy and sell signals but more often and not they do play out. besides, with a stop just on the other side of your entry you might lose on a few small trades but you’ll end up catching most of the big ones.
one of the trades that i’ve continued to hold and update for months now is the GDX short and as posted today, GDX made a clear break of the bottom of that very large broadening top pattern. in february i had mentioned a very bearish occurrence within the pattern known as a “partial rise”. a partial rise occasionally occurs within a fully completed broadening top and statistically (according to bulkowski) results in a 61% probability that the pattern will break to the downside. not only did this partial rise provide an early and so far very profitable short entry on GDX (or NUGT) but it increases the odds that we will continue to see additional selling in the gold stocks, possibility much more than most would imagine.
yes, gold stocks are very oversold and are due a sharp bounce. no, this pattern, nor any other pattern in TA is guaranteed to play out. however, i did go through the chart of every signal component of GDX tonight and i wanted to say that many of these stocks are at, or even in some cases just below, potentially critical support levels. i will try to post a few of those charts shortly before i sign off for the night.
while i am out over the next 4-5 days, i will do my best to post anything that looks compelling, especially if the market were to do anything exciting. remember, the VIX and VXN have tagged and remain slightly above key multi-year support levels. they might sit there for weeks before making any sharp moves higher or they could explode at any time. most, if not all, of the ingredients are in place for that to happen so continue to exercise caution on both the long and short side and don’t get complacent or remiss in using stops.