More GDXJ Follies …Trader Dan
I chose the word, “follies” to describe the chart action in the GDXJ because that is what it puts me in mind of. It seems to be a case of, “You’re kidding me, right?”
Chart20150121114236Those of you who have experience reading charts and trading – Take a look at this convoluted chart and tell me how one is supposed to interpret this from a short term basis? First, we get a huge OUTSIDE REVERSAL DAY pattern forming on Tuesday of last week. It opens far above the previous session high and then proceeds to drop throughout the remainder of the trading day not only exceeding the prior day’s low as well as its high, but it also then experiences strong follow through selling pressure the next day, CONFIRMING THE PATTERN.
Then, it meanders slightly higher for the next two days, NOT EXCEEDING the high of the reversal day until it decides to do that yesterday. As I mentioned in yesterday’s post, that NEGATED the reversal day pattern.
Chart20150121114236Then what do we get today? Any upside follow through? Sure – on the open. From then on, it moves lower forming yet another OUTSIDE REVERSAL DAY pattern. Anyone who likes trading these things much be a masochist at heart. Price action like that makes me very glad I am a commodity futures guy!
The question is, “Now what?” Answer – who the heck knows? These things can do just about anything.
Of course this reaction is coming on the heels of the information we received this morning out of the ECB Executive Committee of the ECB itself. That gave us a number to work with on the expected QE program to be announced by the full Bank tomorrow. We are thus working with a EUR50 million/month number or EUR600 million for the first year. Apparently gold is unsure what to do with that number at the moment as are the rest of us since we are still awaiting the formal announcement tomorrow which will fill in a lot of what are vague details at this moment.
I am interested especially in seeing the composition of the bond purchases and how they are going to be spread across the various Eurozone member countries and exactly by whom the buying is going to be done. Will it be through the various national Central Banks such as the Bundesbank in Germany, or what?
I still have serious doubts about the efficacy of this ECB effort but I have to leave that at the front door and see what the market thinks about it.
I have no idea how that is going to go.
I am noting however something I mentioned was a possibility when the details of the plan are finally made known although not to the extent I thought might be possible. Namely, that consists of Safe haven trades being lifted. The bonds are lower today here in the US with a nominal rise in rates occurring on the Ten Year which are ticking a bit above 1.83% – up from yesterday’s 1.807% close.
Also, gold itself move slightly lower on the news surrendering its $1300 handle. It has held together fairly well however with dip buyers emerging on the slight retreat in price.
Same goes for the Safe Haven Japanese Yen( excuse me while I wash my mouth out because putting those two phrases together is extremely distasteful to me personally as I fail to see how any currency with a national debt the size of Japan in percentage terms of its overall GDP can be remotely considered ‘safe’) which was sharply higher last evening and into the early morning hours here but then surrendered more than half of its gains when the ECB news broke.
In other words, we did get a response that I thought might be possible although it has been rather muted thus far. This tells me that the market is uncertain how to assess the potential efficacy, or lack thereof, of the program right now or is unwilling to commit too greatly before getting some final details.
That is why the action in the GDXJ is so strange to me. Those junior miners have been lagging the majors and the bullion itself recently and I am still at a loss to understand why. I, along with others here at the site, are noting this but do not know quite what to make of it. It still concerns me however especially with that GDXJ to Gold ratio moving the wrong way during a move higher in the actual metal.
We’ll just have to wait and see what we get tomorrow. What I do know for certain is that for a good many of us, it is going to be a long, long night.
Something else I am noticing, while both copper and silver seem to like the ECB news and moved higher, the Platinum metals group, Platinum and Palladium both moved lower. That is not exactly a ringing endorsement of efficacy for the policy that those metals are proclaiming. So, what do we have? Yep – more confusion and uncertainty…
Same goes for equities – they initially liked the news and moved higher but have currently surrendered a good portion of their gains. At one point during the session I noted that the emini was unchanged. Again – no one really knows for sure what to do at this point.
Heck, even the soybean market is getting in on the “Let’s play convoluted games” act. Between last week’s cancellation notice and yesterday’s, we had reported bean sale cancellations from China of some pretty hefty size – 464,000 metric tons to be exact! Today we get the mandatory USDA reporting system telling us that a sale of 176,000 tons of beans, ( They cancelled 174,000 tons just yesterday!) was booked for this marketing year to China! What the hell are those guys smoking over there? I have seen bi-polar/schizophrenic behavior before and this sure looks a helluva lot like that!
Maybe everything and everyone is confused about everything and everyone. Can we blame all this on the Central Banks? I vote “YES” as they are a pretty good source of most of the volatility we are getting in the markets nowadays anyway.
more later.., just as I am putting the finishing touches on this set of comments, I am seeing the gold mining shares getting a bit of a bid back into them.. .. now that earlier reversal pattern in the GDXJ is being mitigated somewhat as we move into the last hour of trade. For all I know the infernal thing could make an OUTSIDE REVERSAL HIGHER before the day is over! Sigh – it never ends does it?
Where is that futures contract for bubble gum.. maybe we could trade that stuff and get some rest. The price would at least be tame for a while. Not much profit potential but good for sanity.
all breakouts are sold and all breakdowns are bought….eventually once the gdx:gld has crashed to new lows…
Thats the rule pay attention, why dont you understand?
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LOL
I Know NOTHING
after 13yrs of bull cough market still that is what I know