GDX made a fake breakout above the top line of a wedge, which is not a typical “bearish” rising wedge because it formed during an uptrend, not within a downtrend (in which case it could have been a bear flag). But there was a failed break about the top line, which is a bearish indication. HUI also failed its would-be channel buster above its parallel channel. Might an Elliott Waver call this an ending diagonal? And if so, might one disregard it since HUI is in a normal channel?
I am the simple TA guy, not the complex one. As such I see the bottom line of the “wedge” and its intersection with the rising SMA 50 (blue). A hold there keeps the rally nice and comfy. A failure there likely brings on a stronger correction. Oh and we happen to have the noisiest week of the year coming up with October Payrolls tomorrow, election hysterics on Tuesday and the FOMC on Thursday.
It has been a very pleasant year so far. Almost eerily too pleasant and according to plan. Per the trade log I bumped up broad market shorting a bit to go along with the gold miner hedge (DUST) added yesterday (per the TL). I’ll be watching the 50 day averages on HUI (it’s dinging the SMA 50 today) and GDX.
A loss of the SMA 50s and lower trend line would be a warning of potential for a deeper correction. The critical spot to hold is the October 9th low (GDX: 38.17 & HUI: 304.32).
Considering the risk that has ridden with this market for most of the year, I am going to be intolerant and impatient. I am not a day trader, but nor am I some true believer, buy ‘n holder. I’ll increase the hedge on the miners and sell and short more broad stuff as needed. I prefer to get my selling ducks in a row before getting too heavy into short speculation. As for the gold stocks, along with hedging, I’d anticipate some selling if the Oct. 9th lows are violated.
Risk management, baby. And on that note, the VIX is making its move off the bull flag. In its best suit the gold stock sector will be unique and defy the future broad bear market. But as we have noted for much of the year, the precious metals rally has gone hand in hand with the broad rally. So that implies vulnerability should the broads break bearish.
