GDX Update

Here is a back link to my first post in the GDX series.  The model suggests that the GDX ETF has bottomed and is now getting ready to break out.  Notice how I purposely drew a double line up.  This is my notation for indicating that the move up will likely happen within a range instead of me saying that the move up is currently under way.

Below is the real time chart.  Since my last post it has put in another short term inclining double bottom which, if you were to turn it upside down, you would recognize to be a pair of owl ears.  This formation is very bullish in the current market cycle.  The formation is not historically always such a strong indicator as it has been over the past year.  I find that the market tends to rotate it's emphasis on different technical indicators as if to keep most people in the dark, playing by the old rules while those who have the decoder ring (perhaps distributed at Bilderberg meetings) are clued in on what to look for.  Yeah, I know, it sounds conspiratorial but most trading is done by computers now and so implementing this would be pretty easy.  Just a tweak to the algorithm parameters and double tops are critical whereas head and shoulders are only minor technical indicators.  If it sounds outlandish then you might be a sheeple.  In fact, if I were a useless elite I would be sure to implement this system in order to fleece the heck out of you.

But I digress.  The double bottom below has a high probability, > 80% IMO, of powering a breakout from the down trending top resistance line.  When it happens, it will probably occur with gusto.  All the factors are in place.  Gold miners have just finished prepping for a collapse in gold prices by cutting staff at HQ, shutting down mines that are not high yielding and hedging their gold production again.  In other words, they think that government manipulation of gold prices is going to continue to overpower market forces.  It is human nature to give up near the bottom, to capitulate.  This is why persistence pays - it is a rare commodity among the human species.  The smart traders wait until it looks like everyone else has capitulated and then they buy while there is blood in the streets.

A break below the lower support line will negate this bullish view and give cause to revisit the chart to better understand what the herd is doing.  I only give 20% chance that that will happen.  I think that this last small wave down was a failed E wave of an ending diagonal.  GDX @ ~25 is most likely going to look cheap soon.  What I really like about this kind of trade is that fairly tight stop loss can be set.  Only a couple bucks down, if it should occur, will debunk the model.  If the model is discredited, a rethink should occur.  We will know soon enough on this one.

Here's a close up of the recent action: