[GDXJ] update

In the previous GDXJ update and backlinks I provided the high level model shown below.




The current snapshot is below and it suggests that the high level model is intact.  The odds (not the certainties) are that it will bounce a little and then give more heartbreak to the bottom fishers.  These things often end with a throw under.  Look for the chart to kiss the lower rail or bust through.  If it busts through, hand on trigger waiting for 5 full waves down into red C OR simply wait until it breaks back up in the channel.  I would love to see this hit the $18's - exactly a 90% loss from the manic peaks.  That is a typical reversal point. 
 

We have had amazing selling in the juniors of late.  In one recent comment, reader "TJ" asked "Captain, Any insights into the recent JR Miner bloodbath (GDXJ, JNUG, DRD, TRX)? I do not believe these companies are worthless".  With respects to TJ (an obviously bright person) and apologies for using him as an example (no offense, TJ!), these are exactly the wrong questions to ask.  Unfortunately, I have been in TJ's place years ago before I really figured things out.  One important aspect of his question was whether we should be led to believe by the recent blood bath that these companies are worthless.

Economically speaking, the world has a need for real money (gold and silver), and thus the companies who produce it are economically worth something to society.  However, it is a big mistake to think that the shares are actually worth anything.  They are paper promises.  This is why they can be so volatile!  The herd doesn't know if these promises will be kept.   What if the dollar goes to the moon, gold goes to $700 and 90% of the juniors go BK?  The productive assets of those companies will simply be purchased in BK court, the shareholders who supposedly owned these assets get the middle finger and some other venture picks them up at pennies on the dollar.  With a low cost capital overhead structure, the new company does very well but the old owners of the equipment, property and I.P. get stiffed.  So, shares are intrinsically worth zero.  They are not real ownership of anything.  Thus we should not be surprised when we see the market price them emotionally.  Given that this is the case, good luck trying to justify a share price.  Sometimes it is way overpriced, other times way underpriced, but always based on the mood of the herd.


Gold is moving down right now but not very quickly.  How can this be correlated to the GDXJ ETF which has no options leverage but which has been moving down day after spirit crushing day?  In short, if it is correlated then it is a multi-variable complex relationship and no human knows the precise relationship between the two.  If such a relationship were calculable then it would be common knowledge.  How does one "calculate" an exact relationship between such things?  All I can say is that if someone is trying to explain it in those terms then it certainly means that person has deluded himself with a false sense of understanding.  Even if some relationship appears to hold for awhile, they are just waves interacting with each other and when a new wave shows up and joins the interaction it can completely ruin that supposed link that existed between the first two elements.

I say, stop looking for causation and you won't be disappointed when you find none.  Stop listening to CNBC explain each tick of the chart.  They are clueless.  They aren't even entertaining.  They are merely a commercial for Wall St.  Turn them off and free your mind from the message that they are sending which is that if you are really smart you can get rich in the stock market.  The real truth is that you will make money interacting with your market adversary (other humans) once you understand the nature of man and adapt your trading tactics accordingly.  That is wisdom, not intelligence.  There is a world of difference.

The game I try to play is "catch the bottom".  There is no such thing as buy and hold in this game if the tick goes against you.  You buy only when your interpretation of the wave count looks like a bottom is neigh.  Then you set stops below your buy point.  You do not hold onto your losses!  Losses are telling you that you have the wrong count!  I got stopped out of JNUG a few days back for a 10% loss because of the gap down at the open that occurred.  The stock went on to lose 10 more percent that day, 15% the next day and was down 19% at the low today.  All told, it is down 50% in 6 trading days.  As far as I'm concerned, I won that battle big time!  I can now re-buy more shares due to lower price.  Did I lose 10% doing this?  Sure.  For 3-4 days.  And then I will make 400% over the next 3 months.  You have to be willing to cut your losses short in the bottom picking game.  Buy and hold works much better when you buy an already established trend.

I traded in and out of JNUG several times on Tues and ended up buying the final time right after the inclining double bottom (JNUG not GDXJ) and then watched it squirt up rapidly into the close.  Then I had to decide whether to hold overnight or bail out.  I know that the massive sell off is going to reverse pretty soon and you can see from below just how suddenly these reversals can occur.  So I kept a 1/4 position with stops below red B. 

Conversely, if this creates 5 waves up from here, WAIT for the pullback.  Wait to see that a-b-c.   The typical pullback is at least 38.2 but in cases where something has sold off big time, the 50 or even 61.8 happen (deep vee second following trend change).   After that deep vee occurs, selecting the stop is trivial.  You don't catch the exact bottom using this technique but when things have been falling this hard you catch 90% of the benefit with almost 0% of the risk.

Personally, I hope I get stopped out at the open and that GDXJ is allowed to capitulate below the lower rail of the falling wedge of the top model above.  Whoever times that bottom correctly is going to make big money on the next JNUG bounce.

And now a look at things from the other side of the mirror.  JDST appears to be using FIB levels for support and resistance.  The 38.2 was breached handily and never allowed to fall below.  The 50 was breached with gusto but backslid into the close.  The next thrust should be to the 61.8 but unable to break through at all, just kiss from below.  You can see the herd getting weaker on each thrust.  When JDST turns back down it is going into freefall and JNUG will freaking skyrocket to a higher high as gold climbs to $1400 into the summer.

Failure of JDST to retake the 50 today would be very bad for gold shorts and should not be ignored as a positive sign by gold longs.  But I think it would be most satisfying if the JDST chart would end cleanly on the 61.8.