Metals and miners update.

So you played the turn in JNUG/JDST that I modeled yesterday and knocked down some green.  It is time to party without worry yet?

First off, my high level primary model for GDXJ is given below:  There is certainly a lot to like about this model and so far it has been good.  But now everyone will see the break back into the channel and will assume the gold bear has returned.  For now, we have to go with the model.  The good part about it is that we seem to have gotten an e wave throw over which very quickly broke back down into the channel.  As long as it stays in the channel we are golden but if it comes back out I would sell without hesitation for the same reason that the head fake down into the DJIA (supposed) ending diagonal was a kiss of death for the model. A real direction change will not likely include waffling above and below support.  So at we have an easily identifiable sell trigger for JDST now.

Zooming in, what is good is that it looks like a 3rd of 1 back down took out the upper rail (blue circle) and that we are now working on some kind of triangle.  This could either be a 4th wave or a B wave and it is very hard to tell at this point.

The blue path suggests that the current tiny triangle is a B wave, not a 4th wave.The blue model says today's pullback in GDXJ was just A of C which will eventually retrace to the level of the prior 4th - a healthy pull back that, when completed, will lead to higher highs.  If Monday gives us a rapid move down in GDXJ to about the level of the prior 4th I will dump JDST and strongly consider re-entering JNUG at that point because that would mean that my alternate top level model (below) is taking control.

However, if GDXJ goes down only a little bit on Monday and then does an a-b-c back up to kiss the upper rail from below before a more controlled move down then the red (my current primary model) path is in effect.  In that case, wave E of 4 has really completed and we are now in the beginning of a 5 wave decline that will comprise the 5th and final wave of a large downward impulse which started in Nov 2010 and has lasted until now.




Right now it could really go either way but we will know a lot more based on the wave action on Monday in GDXJ.


Here's that alternate top level GDXJ model I mentioned above.  SORRY, I got the color reversed in this model relative to the last one and it's too much trouble to change.  I mainly wanted to show how the 4th wave could legitimately either peter out here or alternatively rise back up to the level of the prior 4th.  I also wanted to point out that wave red A could easily be counted as a 5 wave move which would mean it is not part of a triangle. Same for 5 of 3.

At the same time also check out the model in this post which expected a pull back to that triangle (treating it as a 4th wave and not a B wave) and then compare the shape of the chart to below.  Yes, I was early in modeling the top of 5 because of the unusual power of this 5th but IF that really was 5 of just 1 then the retracement target should be the same no matter how high the 5th wave went (the level of the prior 4th).

So with all this, you can see that both models have something going for them.  Monday we will likely know!!  I personally hope to have to switch to my alternate model as a result of a massive swoon by JNUG on Monday to about $22 (which is the 50% fib).  I don't think the 38.2 fib will be low enough and the 61.8 looks too extreme.  The key is that it would happen in 5 powerful waves down because it will be a C wave.  also, the chart has to scare as many late-comers into JNUG as possible so the best way to do that is with hurtful cliff diving, taking out stops all the way down.

One more piece of evidence that suggests that the alternate is really the primary is the shape of the gold chart (below) which indicates that the E wave rally is about half way done.  The E of 4 wave should be a-b-c in nature like the others in this 4 wave.  EWI likes the GLD chart count shown below.

Do not mistake this chart for GDXJ!  They look similar but GDXJ already breached the top rail while GLD is only half way there.  In retrospect, that would be a lot of upward travel for GLD if JNUG is already headed down.  So again, I hope to switch my alternate out for my primary model on Monday but I will do it based on observed wave count and not on gut feel or speculation.  And if I have no count that I trust, CASH is the right asset class to hold!