Bought some JNUG near the close today.

Well I have been on bottom watch for metals for a about two weeks this time.  Yes, I was expecting M+M to go down into 5 of A along with everyone else but then several things caught my eye like this USLV chart.  They started me wondering if E of 4 was really done yet or if the market was just taking the long way around in order to avoid the snapping jaws that were clearly lined up for the event.  The DRD breakout which I reported here was one sign of the markets getting tired of selling metals and miners.  The force is strong in those shares.

Still, the broader M+M markets continued their decline with JNUG losing a massive 36% of its value in just the last 4 trading days!  I thought Friday might have been the bottom but the selling started right from the open today and the gap from 15.15 down to 14.90 should have triggered any sensible trader's stop loss.  Hint: Gaps likely mean 3rd waves which mean there is more to come in the same direction.  The odds always favor buying the gap up and selling it when the gap direction is down.

In any case, I count 5 pretty clear waves down from early to mid august and that means we should be very, very near some kind of a trade-able bottom for M+M, likely starting upward either tomorrow or Wed.  Per above, JNUG moved 36% in 4 trading days and if you look at the prior bounces, the numbers on the upside are just as impressive except for one not so small detail: if JNUG bounces back up to the same level that it stood 4 days ago, the move won't be 36% but rather 57%.  No wonder people like to be long and not short...

The first bounce target is around $20 as marked by the red rectangle.  If this looks to be an a-b-c then bail out with your cash.  But I'm guessing that what we are seeing here is something potentially bigger than that, perhaps a trip all the way back up to resistance marked in blue. 

 Why the optimism?  Well, while things can always go lower, I really don't like the short stroke E wave that everyone thinks is in.  I think E of 4 can still play out and in fact almost needs to play out in order to get more participants into the game.  Why?  Because it's all sellers right now.  The daily sentiment on silver hit 4% today - very close to the all time low of 2%.   The only time it should really hit 2% or lower would be if a capitulation bottom was in.

While the selling was heavy and the overall volume was higher than normal, I think it it not capitulation volume but rather volume that calls for a significant relief rally for everyone who has been catching that bloody falling knife all this time because of worries about immediate hyperinflation.  Hyperinflation will find us but not until the deflationary depression finally bottoms.  You will know this by when the stock markets have collapsed huge time (like the Great Depression...).

In any case, the last time we got a selling volume peak like this was the start of the year and that marked the start of a good sized rally.  Also check out the RSI, it has not been this low (and in fact it is lower than) April 2013.  That coupled with a 4% bullish (96% bearish) sentiment tells me that everyone is on the same side of the Asian ferry and we all know what happens to the trend when we see that...

Below is the same chart of JNUG as shown earlier but this time without any lines on the chart because I want to call your attention to the RSI which is again down to levels from which big rallies have been ensuing.  Also check out the huge capitulation type volume that seems to have peaked and is now coming back down.  This is good evidence that lots of extreme stops were taken out. 

OK, so is this really, really the near term bottom?  Here is a close zoom in of just the last few days of high volume selling.  While the count is not perfectly clean, it's not unreasonable either.  The truth will be told very near the open tomorrow.  If there is one more small wave down then I could see it hitting $12.40 before finding the real bottom.  Since I am swinging a pretty big stick here, I will not hesitate to sell if this thing cannot hold $12.80 (my buy price was $12.76).  Heck, even an AM swoon down to $12 is possible.  If I end up selling I will immediately be looking to re-enter at the next likely bottom.  There is a LOT of evidence saying that the juniors are due a nice bounce from around these levels but with something that moves as fast as JNUG I don't sit around long if the trade is going against me.  I cut my losses quickly and look for another entry point.