Friday, March 13, 2015

Sold [JNUG] into the close. [GLD]

On the 1 minute chart below, JNUG had all afternoon to create a higher high so that this would count as 5 up.  Instead, it left itself with a long legged doji right where it would have to commit itself to being a 5th wave up instead of wave 2 of a downward trend. 

I just don't need to carry this kind of overnight risk so I sold into it.  This is the kind of thing that can possibly result in a big AM gap down to wipe out those who think the turn is in place.  Besides, let's say it moves up at the open tomorrow and confirms that it really does want to form a motive wave up.  I'll just let it go knowing that it will have to retrace most or all of that move back to the level of the prior 4th which is, best case, $16.40.

There is no way to be certain about this since no reversal upward has been confirmed yet.  However, it is certain that I don't have to assume unnecessary risk and it is certain that I value retaining my capital more than I value making new money.   Lack of emphasis on risk management is always where inexperienced traders get taken to the cleaners.  I'm not saying I have to be right about this short term decision but I am saying there will always be another opportunity to make money if the train leaves without me this time.  I can catch it at the next station.  But if you lost your capital by managing risk poorly then you have nothing to play the game with.

Miners will trade in line with gold.  I've diagrammed my two most likely models to occur below.  The first one is in blue showing a double bottom that takes off.  The blue wave could also extend below the Nov low slightly and still have the blue model intact.  That is because of the stutter step just down the slope from green 2.  That can turn the current wave into 1-2-1-2-3-4-5-3-4-5.  If that were to occur, green 5 would likely reverse upward on the trend line that goes through green 1 and 3 (there could be a momentary throw under as well).

The alternative is that wave green 1 was the extended wave, we just finished green 3, and are finished or close to finishing the sideways move into green 4 and so we have one more good sized wave that is less than the length of green 3.  This would likely land in the top range of Avi Gilburt's November model prediction (GLD $95-$105).  This blowout bottom would in fact be a good deal more bullish over the long term as it would almost certainly remove the potential that the crash in metals since 2011 was just A of C.  So if you see that, don't weep for the miners, rejoice with them to the long side because a massive, once in a lifetime reversal most likely awaits them.  Please do not forget: GDXJ is down almost 90% of its value since the peak.  Talk about buying the freaking dip!  That is buying the bottom of the Great Depression.  This is the perspective that people need to have way down here.  The jr miners are not all going away.  Some will BK.  Many will consolidate.  Once the mining industry has finished this process it will have pricing power at a time when the scam ridden paper money system of the world is teetering on the brink.  This is the big picture that I think most non traders need to have in mind.  Expect volatility for sure but GDXJ is not going away and it is much closer to a multi-decade bottom than to any kind of top.

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