Clearly Gold and Mining stocks are oversold and due for a bounce but be careful. You see, every TA methodology, except Cycles, focuses exclusively on Price action that tries to spot a low. Cycles is the only approach that combines Time with Price to help me not only set my stop levels (e.g. GDX, etc.) but also tell me when to get out and stay out until the next Intermediate Cycle Low (ICL) is set.
The Coronavirus Pandemic now seems to have eviscerated all financial assets one would expect to be safe havens with perhaps Bonds but even TLT took a beating last week. Margin calls are rampant and Cash is King right now.
But back to Cycles. How did I know to exit Mining stock positions about two weeks ago before the big dump (see chart)? It was because 14 days ago price formed a “swing high” late in the cycle which was an initial warning of Topping action. Two days later price closed below the 10ma on the Daily which confirmed to get out. The next day price gapped down to move below the early November low which was GDX’s last 5-6 month Intermediate Cycle Low (ICL). This price action along with Time which was extremely Bearish and confirmed the next rally, if cycle norms applied, would be into a lower high followed by a lower low while continuing to move into GDX’s next ICL. After that Failed Intermediate Cycle, my Daily chart clearly shows a 5-day rally that forms a lower high, rolls over quickly and then Boom, a massive dump lower that not even I was expecting.
So is now a good time to buy GDX and other mining stocks or will they be heading lower still? This is where Time becomes very important. While the bottom may be in, Time would suggest otherwise. We may also see just an oversold bounce. I find it to be much safer to wait until the next ICL is confirmed which is what I do on my site using Time in conjunction with Key Cycle moving averages. I hope this helps…
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