Precious Metals Breaking Out

This is a condensed version of Rambus Weekend Report. There are over 20 individual PM stocks individually updated in the full version.

I would like to start out this Weekend Report by looking at a long term monthly chart for the GDX. The multi year bear market actually began in September of 2011 at the head portion of the 3 1/2 year H&S top. The H&S top actually began to form in September of 2009 and ended in February of 2013 when the price action broke below the neckline. From that point the GDX declined for the next three years in its bear market so from a technical perspective the GDX ended its bear market in January of 2016 which marked its all time low.

The rally out of the 2016 low lasted seven months and ended in September of the same year. After a strong impulse move like that one looks for the price action to consolidate its gains before moving higher. There was no way to know at the time what trading range would develop and how long it will take to complete. Now in hindsight we can see the GDX built out the 2016 bullish falling wedge, that we’ve been following for well over a year, which took two years to complete from the August 2016 high to the September 2018 low. It wasn’t until the breakout above the top rail of the 2016 bullish falling wedge and the completion of the backtest two months ago in May that we had significant confirmation that the bear market that began in September of 2011 was officially over.

Now that we know the bear market is officially over depending on what matrix you want to use, calling the 2016 low the beginning of the new bull market or the completion of the backtest to the top rail of the 2016 bullish falling wedge in May of this year the completion, the bottom line is that it’s time to start thinking in bull market terms leaving the bear market logic behind.

After five months of the breaking out and backtesting process out of the way the GDX has  created a new high this month keeping the new uptrend intact. So if we are going to start playing by bull market rules we can now do a measured move to see how high the power of the 2016 bullish falling wedge can take the GDX. The measured move I’m showing on this weekly chart is called an impulse measured move which measures each half of the impulse move with the 2016 falling wedge being the halfway pattern. The first two blue arrows measure the first impulse leg up from the 2016 low to the August 2016 high. The second set of blue arrows on the right side of the 2016 falling wedge measures the second impulse move which has a price objective up to the 43.57 area.

There is also another important area of resistance that might come into play and that is the old neckline from the 2011 H&S top, labeled neckline extension, which will come into play around the 37.50. The bottom line is that the PM complex is in its second impulse leg higher which will look clear as a bell when we look back in hindsight. As I’ve mentioned previously the hardest thing to do during an impulse move is to do, NOTHING.

I’ve spent all weekend updating and annotating all the stock in the, Gold Stocks Portfolio, so you can see how things are coming along. There will be three charts for each PM stock, daily, weekly, and monthly which will show you the reasons I picked these stocks to start with. As this new impulse move continues to move higher I may tweak some of the weaker PM stocks for some that are showing more strength, but for now I’m content to stick with the original portfolio.

When looking at each individual stock, note how the daily shorter term charts will show many small H&S bottoms and double bottoms that have or are forming at the last reversal point in the bigger 2016 patterns. The weekly charts will show you the dominate chart pattern which is the 2016 bullish falling wedge with a few triangles. The long term monthly charts should put the new bull market in perspective with many of the PM stocks building out some very large consolation patterns.

There are many different ways to play the PM stocks. Some investors like to stick to the big cap producers as they will perform well during the bull market but won’t give you the leverage and is a safer play. Some will gravitate toward the Royalty stocks that usually do very well in a bull market as Sir Plunger has done.

As for me, after trading the bull market before the 2008 crash, I found that in a bull market the tide lifts all boats, some higher than others, but in general most get lifted. Even some of the juniors that from a fundamental perspective don’t look that good on paper can still rise with the tide. There is no other place in the markets that offers a chance for leverage to the degree some of the PM juniors will show during their bull market. To get that leverage one has to buy them cheap before they explode higher knocking down your leverage. This strategy is much riskier than buying your safer PM stocks but if you can get several to really take off it will make up the difference for the ones that don’t play out as you expected.

Before I finish I want to make if perfectly clear that we could see a backtest take place on the GDX to the one and a half year old neckline that would come into play around the 23.95 area.

A backtest to the top rail on gold’s 2016 triangle would come into play around the 1345 area.

A backtest to the 6 year golden neckline would come in around the 1345 area.

On the portfolio stocks below I’ve added a blue circle to the monthly charts that shows up in the top right hand corner of the chart, which shows what each stock did for the month of June on a percentage basis. I’ve also got the, Gold Stocks Portfolio, updated on the sidebar, with these stocks to follow. Everything should now be up to date. All the best…Rambus

JNUG 6-30-19 Update: 5 for 1 reverse split on 6-28-19. Daily.

 

JNUG weekly:

JNUG monthly:

NUGT daily:

NUGT weekly:

USLV weekly:

USLV monthly:

Going Forward I will be focusing on the PM Sector , as that is where the greatest potential moves are , following the breakout of many stocks in the PM Complex. Big bases = Big moves.

Of course I may also have a new portfolio of General Market Leveraged positions , as these markets are also on the verge of breakouts.

Interesting and Exciting times for Traders and Investors alike. Stay Tuned.

Plunger’s Response

Plunger (at the Chartology Forum) has received some questions about his work.

His responses are so poignant that I feel they should be posted here at Rambus1.

Happy New Year to all Members : May 2019 be a prosperous trading year for all.

FGC

……..

Questions answered

Plunger

The Weekend Report seems to have made somewhat of a stir, as one would have expected. Making a call that a secular bear market has begun and will be in force for likely well over 10 years might just scramble some brains I suppose. Also the result of this is there will be a “changing of the guard”. This phrase simply means different asset classes will come to the fore and will be favored by the market. A bull market in real money will eventually come to dominate along other assets which reflect their intrinsic store of value features. Innovative technologies which serve to improve society will of course always be subject to attracting capital and will see their own bull markets from time to time.

Below I will address some of the questions asked referring to the recent weekend report:

Question #1– You say that stock markets are now in a secular bear market. At the same time, at the beginning you have the following: “In this phase of the bear market that’s about all you need to know. The market’s going lower until it gets its drugs. But then what? Well, we get a hellacious rally, but then investors should finally come to their senses.”

Answer #1
The rally which you refer to is a bear market rally? I assume that it would not be higher than the highs we have seen before in 2018 else it would not be bear market rally?

ANS. Yes, a BMR or a full blown secondary reaction in a bear market. Typically SR’s last 3 weeks to 3 months. How high could it go? Well, keep this in mind this future rally would come from a market level much lower than today. We know this because the FED has said no QE until the market falls significantly further. So let’s speculate with some numbers: say early next year the market rolls back over and heads down. It violates the late December lows and starts to cause panic. By then we start to get some confirming negative economic numbers coming out which is what the market has been discounting over the past 3 months. Say the DOW drops below the psychologically important 20,000 level. That means the DOW is now down -26%, Baby boomers are starting to panic as they realize they are screwed and their retirement plan now looks to be going up in smoke. Have you seen those E-trade ads where they show old geezers in the work force? That then becomes the fear. It causes a market rout, the DOW free falls 2000 points in a day. The FED makes its move, here they come to the Rescue… Thank god they are going to save us! (small g intended, for the financial god’s)

They announce QE4. It is a multi faceted program with different elements for everybody. It alleviates many fears. Not only is the FED now going to buy treasury debt but they are going to monetize state pension funds so government workers will be able to retire comfortably. Furthermore the FED announces that in later years they will introduce other QE programs, QE5 which will buy back all student debt which will allow the younger generation to be able to focus on their own self-actualizing needs with the side benefit of advancing the economy. The millennials will now be able to concentrate on their “experiences”. Later still, QE6 will introduce UBI (Universal Basic Income) addressing the lower strata of societal needs. As a minimum every citizen will be entitled to $1,800 per month in addition to already existing social welfare programs. UBI will now will be considered a “human right”. Buried in the fine print of QE6 is the language that corporations can now write off the value of stock buybacks as a corporate expense.. Again a little bit for everyone.

So of course the market loves all of this and puts on an impressive surge. How high? Well we are just going to have to see, but likely it would fail prior to exceeding the all time highs. It would be a rally that the boomers welcome as something they can sell into having the bejesus scared out of them just months before.

Now obviously the above can be considered as “making shit up”, but I think you get the idea. Who knows how the FED will respond, but the bottom line is the market has now been broken, all rallies should be used to sell into. We are in a secular bear market and you should get on to the correct side of the market. Future rallies should be failing rallies. How high will they go? That’s unknown but we will use our tools to measure them, Fib retracement guidelines, moving average resistance and levels of compression (ROC). Nobody ever said this is easy and if you are looking for a soothsayer to guide you accurately then I have a news flash: There are none and if someone claims he is then he is a crank.

Question #2 “Is this your first call for a secular bear as of now which is a pretty big deal or were you fooled many times in the past and made the same call and changed your mind. I say that because gold bugs always see the sky falling and have been burned so many times and have heard these calls before so I say that with all due respect, just curious. And if we are really entering this time zone do we really abandon stocks altogether”

ANSWER #2
Quite a wordy question so let me rephrase it: How reliable is this secular bear call? I don’t really know you, so are you just another gold bug nut job making incendiary claims for attention? Just to get a sense of you let me ask, have you already prepared your doomsday bunker or do you already have a shack in the woods in northern Idaho? How many rounds of .223 do you have stored and how many pallets of MRE’s do you keep stacked in your garage?

First off over the last 100 years there have only been 2 secular bear market triggers, 1929 and 1966. So it’s a bit difficult to establish a track record making these calls, I was only 11 years old the last time and my notes were not detailed enough to get that call off. Have I ever stated we were entering a secular bear market in anything before? Ans: No. In the summer of 2017 I briefly thought we may be putting in a cyclical bull market top in the DOW, but that was quickly proven not to be the case. The great analysts of past eras said a top call is far more difficult than a bottom call. Some of the greatest market observers of the past made a few erroneous early calls of market tops. William P Hamilton, probably the greatest market prognosticator ever thought the bull market was over in 1925. He later went on to amazingly call the turn of the tide in October 1929 against all public sentiment. Roger Babson thought the DOW topped in the Summer of 1928, he was one year early, but he later came back and called the ultimate top within a few days of it in Sept 1929.

By no means am I inferring I am in the same league as these gentleman, I am just a guy offering insights from a life of non-professional market study. Frankly, if anyone wants to consider me a fringe character I really don’t give a damn since I only trade for my own account and do not give market advice. Personally, I have no interest advancing any false narratives. I am not trying to uphold a narrative trying to sell a product whether it be an investment vehicle or even newsletter advice. I am just giving the unvarnished truth the way I see it. If that comes across as suspect, well that’s fine I don’t really care as the only thing I have to prove is accounted for in my own personal balance sheet. I am held to account by Mr. Market.

Question #3 (follow on question). “To me even if we are entering a secular bear we have a market of QE junkies that will refuse to believe it at all cost and will listen to their dealers on CNBC so there seems to be many opportunities if one were nimble enough not to be crushed by a new tweet or headline of the hour. I hope more people begin to talk on this forum”

ANSWER #3. Of course they will refuse to believe it. This is really just a statement of the obvious, as this has always been the case. It’s why the bear market doesn’t end today. If they all believed we were in a bear market then they would sell and the bear market would be over-period. But the historical record shows that retail investors buy one third of the way into a bear market. They still believe the bull market narrative and see the lower prices as bargains. They are buying the dip. But over time this dip buying quits working since it’s a bear market it becomes increasingly painful. They get worn down over time until eventually they are like Roberto Duran the “hands of stone” fighter. On November 25, 1980 the legend states he simply stated “No Mas”. But that is not what he really said, the truth is (stated by Duran) he said “No Sigo No Sigo No Sigo”. which translates to ” I am not going any further”. Well that describes perfectly the course of the retail investor in a bear market. He has now prepared himself for the point of recognition. When it comes soon thereafter there will be a panic to get out of the market. Welcome to Phase II of the bear market.

This is how it has always been and if one thinks the “QE Junkies” can hold out against the great tide of the primary trend then you are going to get a history lesson.

Question #4 Is uranium now the flavor of the month and since KL wasn’t on the buy list is it a non-starter?

ANSWER # 4
Uranium is in a long term bull market. Look at the charts of the quality names. Massive bases taking 3-4 years to form. The bigger the base the bigger the move. So after the quality stocks put on moonshot moves coming out of their bases then pull back to trend we get screaming and panicked claims that the bull market never started and it was all just a flash in the pan. Let me say this: This sector is not for 98% of all investors. I have stated numerous times that uranium stocks are the most volatile stocks in the universe…. more volatile than silver, canibis or anything. If one gets rattled by a pullback to trend then he should not be in this sector. Often times a technical analysis site is ruled by the “what have you done for me lately” syndrome. Janet Jackson would be proud.

I am at the heart a value driven long term investor with a technical bend who doesn’t mind trading targets of opportunity as they present themselves. But don’t lose site of the reality that the big money is made in the long term full cycle steady as you go approach. I suppose the technical analysis element confuses many into thinking ya gotta make money this week or this month and if you are not then the asset should be abandoned. I would think the position I have held in Scandium over the past 3 years might dispel this notion as it pulled back 70% and I held it through the cycle purposefully because I believed the story had not changed. This is one man’s approach, you can do what you think best for you.

Kirkland Lake: First the best info on Kirkland comes from Eric Sprott. Put him on your Yahoo newsfeed. It is not my intention for my opinions to be a recommended buy list. I am not doing that as anything I mention just consider as an investment idea. I can’t recommend anything for anybody as I mentioned I trade for my own account only. There are many great investments in the gold space I don’t mention or even know about. As far as Kirkland it’s a great investment, but it has moved too far for me to be interested. It’s just a percentage move thing that’s all.

Question #5 Will the EU and Euro Break down like the Soviet Union?

ANSWER #5
I doubt it, but I would avoid it. These are deep geopolitical questions that even the Henry Kissinger’s of the world can only guess at. Hey they all missed the breakdown of the Soviet Union anyway. But if there was any one signal that foretold the breakdown of the Soviet Union let me ask what would it have been? It would have been market related. It was the collapse of oil from $40 to $10. The rot in the system had built up for 70 years but it was the cutting off of revenue that kept a propped up system which allowed it to fail. So we avoid Europe and watch the charts. They are in a deep bear market now, watch it from the sidelines. We can only guess what it leads to.

Answers to some of Lawrence’s questions:. I concur with Fully’s response “if you are counting on uranium stocks to make your retirement….” Actually I would add if you are counting on your uranium stocks for retirement you are screwed! Why? Because Mr. Market knows this and he will use the importance you have placed of this investment against you. You have placed so much importance in the performance of these stocks to make up for the past that the inherent volatility will blow you out and leave you worse off than you were before despite it being a bull market. That’s what people don’t get that investing is more a psychological game than anything else. And the worse enemy is oneself.

Dave Collum’s year in review article had a great principle. He says one should save for retirement and invest to mitigate the effects of inflation. I think this is a sound investment principle. Also in Dave’s report he quotes Howard Marks as saying the biggest mistake investors make is their reach for yield. Sounds to me that this is a pitfall you may be setting yourself up for.

Updated: December 31, 2018,3:13 pm — 3:13 pm
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5 CommentsAdd a Comment
Afasilver15 December 31, 2018,3:08 pm at 3:08 pm Edit
Thanks Plunger … we appreciate your thoughts and expertise … please keep them coming. 2019 will be interesting for sure! Happy New Year.

Reply
Bleu9 December 31, 2018,4:58 pm at 4:58 pm Edit
Thank you Plunger, and no I am the furthest thing from a goldbug, after being burned in 2008 I am trying to learn from wisdom filled people such as yourself but I am kind of blown away that if one were to use Dow theory as the basis of the call then why aren’t more people chiming in but perhaps in my ignorance I`m not reading the tea leaves right. Thank you for the responses …I appreciate it !

Reply
Plunger December 31, 2018,6:06 pm at 6:06 pm Edit
Surprised by people not understanding the significance of what Dow Theory is saying?…. Really? Well, you shouldn’t be. Actually that is what one would expect…ignorance.

First off I am only aware of one other person sounding off on Dow Theory and it has been Trader Vic. He is not what one would refer to as a main stream guy. Plus his reference was actually incorrect when he made it. He mentioned a Dow Theory sell signal occurred in early December . No it didn’t because it only triggers on a closing basis his call was based on intra day numbers. It actually occurred on December 14th as I pointed out at the time. But that is a somewhat minor technicality since it eventually triggered.

But Dow Theory does not make secular bear market calls. It only makes bear market calls since it does not distinguish between the two. Dow Theory is based on the study of valuations and market actions. Many would point out that the decline occurring in 2015 was a Dow Bear Market trigger as it completed all of the technical hurdles we have talked about. But it was an invalid signal as the only Bear Market signals that are valid are those that come in Phase III of a bull market. In 2015 we were not in Phase III we were in Phase II, therefore the decline could be classed as a mid-point slowdown.

So DT has declared we are in a bear market currently. This fact combined with the universal levels of extreme valuation super imposed on the upside blowout in RSI momentum gives me enough data to declare a secular bear market is now in effect. Elliot wave indicators also give validation to this pronouncement.

You should not be surprised that you don’t hear about this from any quarter. Trust me few people in the past were aware of this in past secular market tops.

Reply
paul G December 31, 2018,7:59 pm at 7:59 pm Edit
Plunger…..and you answered all questions with such complete composure!
You are the man,