Gold/Different Buy Points In a Market Bottom Revisited
Trader Scott’s Market Blog
January 16, 2017
The previouspostabout the different points to buy in a major market bottom (this example is in and around the 1999 gold bottom), shows there is no perfect spot to enter. But there can be numerous really good points. In the expanded chart of gold, all of the volatility around a major bottom (the same with any market) can be seen. But waiting for some initial/preliminary sign (ending action), preferably signs, is very beneficial to help with timing at least somewhat. The main thing to notice from the chart is the patience required to sit and wait for the market to start giving off preliminary signals. This is when to be extremely attentive regarding the potential end of the downtrend. Doing this will help to stop the normal human desire to guess/predict where the bottom will be. The other thing to notice is the patience required to sit thru all of the weirdness involved in/during major bottoms. When the preliminary signals start, avoid guessing and just use the weakness to buy. Yes it can honed even more, but we’re talking about the big picture –this chart gives a more detailed view of that time period. And my belief in this current time period around 2015 was, from the December 2015 post, the best time in several years to buy gold, especially miners, on a secular basis. And late 2016 would see a secondary test/retest of the December 2015 lows at a much higher price, with the first big rally coming out of December. We really needed the good rally out of December to “confirm” the continuation of this setup. This rally in gold has shut up the gold permabears. But they’ll be back again, as there will be more volatility. And they’ll also be wrong again. I’ve stated this numerous times, but this whole thing in gold is a major accumulation area which started in April-July 2013. This is akin to the big accumulation period around the 1999 period. This thing in gold is winding down, but there will still be volatility – these are buying opportunities. The second half of 2017 is when we can start seeing the beginnings of a less impeded rally in PMs, as we should start to see the major topping process to begin in the US$. That topping process could go on a long time, but it should be enough to take some pressure off of gold. Two years ago, my belief was the huge resistance area in gold would prove to be $1350. It was one reason for my concern about gold in early November. After the rally had started from the December 2015 lows, the $1350 area did become a big barrier. But the next time around, we’ve had that struggle there already. There will be another struggle, but it won’t be as tough. As for GDX, the big barrier will continue to be $32, as can be seen in the chart, along with my buy zones which have been marked off for several months. Several posts laid out my approach to this big retest in gold in late 2016, which would be focused on the miners and silver, not gold. The reason is because of the extreme likelihood of a major secular low in inflation in early 2016. And silver would be a big beneficiary of that later in 2017, relative to gold. Which is why I used trading below $15.75 last month to buy silver, but bought no gold. So this thing in PMs is winding down, but I do notat all believe we have seen the major top in the US$. How will gold react to the next rally in the $ – it’s still going to be a problem for gold. Shorter term, the reaction in the $ is needed to set itself up to eventually break thru 104, but the reaction in the $ is helping PMs. There were alot of brand new “Trump Dollar” bulls who climbed onto the same side of the boat into the 14 year highs. Yet even when the $ index went to another new high on January 3rd, consider gold’s relative strength. Lastly, $1191 in gold has been an important area in my approach, both on the downside and on the upside. Last Friday’s close in gold above $1191 was solid, but it does not mean gold is going to the moon. Rather, it is a “confidence” builder that the next selloff in gold will retest above last month’s low. It’s been a good rally in gold and silver so far. I’m more attentive to PMs having a violent price surge to then lighten up positions.
About
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.
'Trader Scott’s Market Blog – Gold/Different Buy Points In a Market Bottom Revisited – January 16, 2017' have 13 comments
January 17, 2017 @ 2:06 am Fen
Hi, Scott:
Do you think $ is trying to build the short term bottom here?
January 17, 2017 @ 9:46 am traderscott
Hi Fen, yes I do. The $ trade had gotten quite heavy, and needed a reaction (re-accumulation) to be able to push higher into the Spring time of this year. It’s funny in the blog post from Sunday I said “the President-elect will not be pleased at all with a ‘too strong $’. Fast forward to Monday night, in a WSJ interview, the President-elect stated he doesn’t want a “too strong $”. So now, everyone is claiming this is why the $ rally is finished. I already had this factored into my outlook for the $, as it needed this reaction. But his not wanting a too strong $, is going to require a much stronger $ first, to bring in the major top. Look at this $ chart here and keep this in mind as you keep learning Fen – remember to factor in sell stop areas. The first one was 101.30, then the little bounce. Now 100.70. The bigger one is 99.40.
January 17, 2017 @ 10:20 am Fen
Thank you very much, Scott.
January 17, 2017 @ 6:45 am David V
Might have a nice setup this morning with gold at resistance and the dollar at support. Still optimistic with my support line at $1146.
January 17, 2017 @ 9:42 am traderscott
I assume you’re short term selling/shorting into resistance – NUGT, JNUG, etc.
January 17, 2017 @ 10:06 am traderscott
Alot of buy stops in silver are at around $17.25 – there are folks who’d like to see those stops triggered. If it gets too emotional there, I’ll have to make a decision about my own long position. If silver could back off first, it would have a higher probability of being more sustainable into that situation.
January 17, 2017 @ 11:04 am traderscott
For the short term traders, Stocktwits is an excellent resource for “ideas”. Early every morning, I look at the “trending” stocks, and as a contrarian strategy play, often get trading opportunities there – taking the other side. Meaning daytrading the first hour move, if it’s been rallying/selling off for several days, and then gaps/spikes into resistance/support – that can create an excellent ENTRY POINT. You’re basically, believing the momentum trade-the crowd is ending, at least short term, but you MUST pull out some profits, AND set stops. But there is also another strategy. If a momentum move has JUST started, for example up, then the contrarian play is actually to look to buy reactions. Why is that contrarian? Because if the move JUST started, the crowd still doesn’t believe in it, they’re not long. They’ll get long as the move keeps going. The crowd DOES NOT buy into the “scary” selloffs. I do. So keep this in mind, contrary strategies are very nuanced.
January 17, 2017 @ 11:18 am traderscott
Stocktwits is where I found this mess – ETRM chart. I left a comment about ETRM at a post a few weeks ago. And what, if any, would be the contrarian strategy now? It’s not black or white.
January 17, 2017 @ 11:24 am traderscott
BTW, this thought process/approach is not just for short term trading. These general ideas span all time frames. The stop/profit strategies will be much different, but the general ideas are similar.
January 17, 2017 @ 1:23 pm traderscott
I’m very bullish on commodities, metals and energy, not as much on crude oil, but energy prices are very bullish long term. That includes nat gas, and solar. And as written about many times, my extreme bullishness on ags. Today RJA went to a new six month high. Is this the “momentum breakout”, I have no idea, but that is on the way this year. And the ag stock which Dmitrii brought to our attention, IPI, came back to support today.
January 17, 2017 @ 5:30 pm David V
As if the market wasn’t flighty enough now its floating on Trumpisms, everything will be moving like Pharma stocks next.
January 17, 2017 @ 5:53 pm traderscott
Trumpflation. Yippee!! I left this stock symbol at the January 10th post about how the momentum boys and girls were going wild for the biotechs, and it’s time to be looking to take the other side. Look at this ETRM chart and what has happened to the stock since the high on January 10th. The gold juniors will become this type of market someday also.
January 17, 2017 @ 5:27 pm Jon
I found this interesting…
https://likesmoneycycletrading.wordpress.com/2017/01/15/gold-train/