Is JDST forming a Ying Yang? If so, short term caution for metals and miners.

In this post I floated the idea that metals could be trying to form the D wave of a symmetrical triangle.  However, it seems that others on the web are making this wave count as well including Elliott Wave International.  The EWI team suggests that these direction changes usually required a blow out event to take out all of the stops (and thus screw as many leveraged gamblers as possible) before making the turn.  If metals are going to put in a blow out bottom then so will miners. 

I've already shown the chart from the long side in the post linked above using GLD.  What is not known is how far south that gold chart will go before it makes a bottom on the triangle.  Since I don't plan to play the turn (should it even happen) using GLD but rather through JNUG, it might pay me to look at JDST for the opposing view to see if it will tell me anything.  Below is that chart and it shows that after an massive smackdown from $84 to ~$13, it has only bounced up to the level of the 23.6% fib.   This is an unusually low retrace and it suggests that there might be something left in the tank before the a-b-c retracement is done. 

The prior 4th wave was a triangle as shown by the red lines.  Note how the 38.2% fib is just about at that level.  It would not surprise me to see this thing break through the 23.6 with gusto very soon and then move up to the $40 range by mid June.

As you can see from the model below, that would result in a very nice a-b-c formation that I like to call Ying Yang.  In fact, in this post I mentioned the Ying Yang formation in an earlier wave up for the GLD chart.  Below is the chart model for GLD that I presented in that post.  Within the blue circle is a model ying yang.  On the left the chart rises rapidly to an asymptotic peak into wave A and then declines into B before taking off with an exponential shape into C.  Note what I wrote there about Yang Yang not normally being associated with the start of a new bull market.  In other words, it is generally a corrective pattern.

Below is what actually happened.  GLD peaked the C wave at about 133 instead of the $128-$129 that I was expecting.  In the model above I show GLD's current move taking it down to about $110 as a rough estimate.  Where it ends up will tell me a good deal more about whether this large triangle which has been playing out since last June is an ending diagonal or a 4th wave.  The lower it dips, the more bullish it will be longer term.  If it stays above about $114 as a bottom level then it will be short term bullish as shown in red but it could mean much lower gold prices in the future (which is what the EWI team thinks will happen).  Don't stress, they have been wrong before plenty but it is another data point to consider.

So what I am now looking for is for JDST to take off pretty soon and break out of the 23.6 fib which has been binding it for a couple months now.  A rapid move back up to the 38.2 here should put the fear into the metals and miners investors that could set us up for very nice gains in JNUG once JDST peters out.  Remember, Ying Yang is corrective in nature, not motive.  So while it can move fast and furious in the C wave, it will most likely eventually peter out and then plummet as the gold bears run out of steam.

So, how to play?  One play is to just sit on your hands and see if this C wave in JDST plays out.  Remember JDST is inverse of the move of metals and miners.  That means it cannot go up forever.  The train cannot leave the station without you.  Gold and miners are not going to zero.  The reverse is not true.  Gold and miners can go way, way up in a hyperinflation scenario (check out the chart of the Zimbabwe stock market to see what that looks like as money dies).  So if you see an exponential rise in JDST here, keep eyes on the 38.2 fib and look for the presence of 5 waves coming off that triangle because if the triangle is the penultimate wave then the 5 wave impulse move that follows should be the end of the smack down (for now) in metals and miners.

Other plays include buying JDST on a break out above the 23.6 and then using a sell trigger of a return below that line. Then ride JDST up to the 38.2 and then be prepared to exit and flip long into JNUG for a huge percentage move (250-300% if my model is right).

So many models, so little time!