No stall at the GDX gap fill

In this post I defined a trigger condition to look for which could indicate that the now-unfolding rally in M+M could be a very short term head fake.  While GDX sailed through that gap fill, it is not out of the woods yet.

As you can see from the model below, I'm still clinging to the likelihood that the falling wedge with the 5th wave throwunder will turn out to be a 3rd wave.  Today's action did nothing to dispel that model view.  In fact, it left GDX with a 3 wave retracement that may or may not be done yet.  So far we have:

• an apparent 3 wave move up
• it is contained so far within a narrowing channel
• it has currently stalled mid channel while building the 5th rail bump

 So if this is going to turn out to just be a 3 wave retracement into wave 4 then it will most likely reverse itself either:

• right here in the middle of the channel
• move to the top of the channel @$18.90 before reversing
• throw over the top, perhaps closing the gap @ $19.45-$19.57 before reversing

Again, there is no guarantee that it will in fact reverse and in fact it could morph into a 5 wave movement easily by doing something like the red path.  It could also gap up hard on Monday thus showing that the current wave had not completed and that would be a buy signal. 

But with the data I have right now, I think something similar to the blue path will most likely be taken.

Again I am basing this mainly on that large falling wedge.  So from the top level we could end up with a real bottoming count that looks as depicted below (which is my primary model right now).  The dynamics behind it are simple: the seller began really selling because of the deflationary threat not just in the past few weeks but since mid August.  In early September the chart suggests to me that the momo shorts began to pile in and they have thrown the kitchen sink at it.  I think they have overplayed their hand.

Folks, deflation is a real threat for the USA but not for the world.  Japan and China and Russia and pretty much everyone else but us are seeing massive inflation.  The Ruble has gotten the shit kicked out of it.  The peoples of the world need a safe haven from the volatility associated with the fake money in use by every government.  I would not write the metals (or the miners) off easily.  Gold and silver have become nearly worthless to the investing public.  They loved GDX at $67.  They recently hated it at $16.50.  They will love it again at $75.

While I am trying to play the swings (and doing pretty well at it I might add), I think people with less time to "Invest in Gambling" (c) Economati 2014 should just find a nice dip to buy and then dig in.  Then, set stops just below your buy price and see what happens.   If the model shown above plays out then you will be presented with an inclining double bottom at a time when negative sentiment in M+M is extreme.  This is an uncommon setup to be sure and it is the smart gambler who sees it for what it is: an opportunity based on the madness of crowds who accept fake money in exchange for their goods and services.  Because the money is fake and intangible, it ruins the herd's ability to determine how much of it to trade for any given item.  Thus, emotion is left to rule the day and this is where all the massive volatility in M+M (and in stocks) derives from.