Edit: I wrote a lot of this yesterday over lunch and last evening (9/7). I then start to see TA’s everywhere calling for new lows. On ONE fucking day people….with no news. In an environment where a company with $305 billion in liabilities is defaulting as we speak, doing a repeat of 2008 Lehman’s. Literally a day after perhaps one of the biggest job misses ever. AS the eviction moratorium ends and extended unemployment ends. I ask in what scenario is this a high “risk on” move where people sell gold to $1400?

Me: “We had a sharp move up and the macros put more wind in the sails. We see pullbacks on strong moves up with profit taking and stair stepping up. Our macro picture has never been better.”

TA: “Friday was great! But it went up against a resistance line and we are now headed for lower lows and the next few months look grim. If we don’t get a move to x, we will go down to $1600, then $1500, and depending on how I’m feeling, it may go to $1400”.

I think I just get frustrated by some of the TA guys who stare at charts and ignore the macros. Yes, price action is behavioral, but that move up on Friday had a part of the bigger picture in it – jobs missed, by a LOT – which essentially may negatively affect taper plans and may lead to even more spending programs, so this is not an isolated news event. At the exact same time you have India and all central banks vacuuming up our gold sales at discount. And you are trying to tell me Trader Bob is thinking gold is going to go down $300 to $400? I can see this happening with a Lehman event. So if a TA guy is telling me they see new lows coming in the $1400-$1600 range, he needs to disclose WHY he sees such a drop. We have pretty good support at $1680. We had one bad day and you are now making a projection of a $200-$300 move down???

Anyway – sometimes we have to remember why we fight. This is one of those times. I’m now looking for a “boooooooo” button on Twitter posts and videos from some of these guys. I am from outside of Philly and all, and we are pretty famous for booing Santa Clause at an Eagles game.

One thing you have to ask yourself about TAs. IF they are actually right all the time, then that also means they are fortune tellers. And, by nature, this means each one of them should be a billionaire. My guess is, they aren’t. What frustrates me about most TAs I see is that they don’t talk about probabilities, but talk in certainties. That’s one thing I loved about Kevin Wadsworth and Patrick Karim’s analysis. I’ve been seeing them for the last year or so and I was welcomed on to their show where we did a mix of macros and technicals. Kevin is a meteorologist and his way of looking at things in probabilities suits very well with my approach. Patrick I think does 40 charts a day and updates his information very frequently, so if the tide changes, he simply adapts to price action – but he often talks with a probability mindset. Then you add Michael Oliver on to their show, and holy shit you have some incredible popcorn watching stuff.

P.S. Take a look at Kevin and Patrick’s service here.

My “style” if you will is to use macros and technicals together – and I’m refining my style to pay attention to oversold and overbought conditions. I am an AMATEUR, by the way, so I also will reflect some of the sentiment you are seeing.

One comment I saw on one of the TA’s posts had to do with accusing him of being significantly short and perhaps trying to steer a narrative short to cover his positions. Interesting. Many of us are libertarian, contrarian, and like a good conspiracy when we see it. Problem is, none of us know what positions all of these guys have, and many of us now saw the Cramer clips where he talks about pushing the markets around. The PM community is EXTREMELY small relevant to the markets as a whole. IF you have an ability to push or shape a narrative, I wonder how that make affect your positions? I am very transparent in my posts where I’m long tons of miners. There are times things go down and pull back. But the conviction of some of these guys, with certainty, on one bad day troubles me a little. It makes me now wonder how they are positioned when they make these calls?

End edit

Background

2 years ago I knew none of this. So, some of you who have been in the industry for 40 years can probably click away, but I’d like to take the opportunity here to show newer people WHY we are all crazed.

Sometime next week I plan to put a video series together (or at least start it, I don’t have Maloney cash by the way) so all of you can show your family and friends why you aren’t a nut job investing in gold and silver. It will be geared towards a general investor who may want to understand new opportunities – and IF gold breaks out soon like many are hoping – you will want these videos to show them where we are in the move. Hint: we are still very early.

For NOW, I’d like to focus on where we are, TODAY, on this cup and handle thing. And we all have heard while history may not repeat, it sure does rhyme. And rhyme this does….

So let’s review….cup and handle formation – BULLISH! What does it look like?

See the source image

You see a few phases here we can break down:

Phase 1 – a run up to a new high and tons of people rush in

Phase 2 – Welp, we overdid it. Too many people bought at the high and hold – slowly selling off.

Phase 3 – new run up. All of the sellers are out, and the market dynamics have changed.

Phase 4 – revisit the previous high with possible overshoot. Many bag holders from the previous run up now break even and sell off, never to come back to the space.

Phase 5 – Bullish pullback – Bull flag – recent highs were just hit. Is this the real deal? People who bought at the low in the middle are selling into the rise and taking lots of profits. Selling will continue…until there are no more sellers

Phase 6 – bottom is in?

Phase 7 – run up to new highs

So keeping this in mind, take a look at 1971 to 2011….

The bottom isn’t as rounded as the typical shape, but all phases are there. In the middle, I drew a lot of colors with Michael Oliver’s momentum structures and the bottom you can see RSI. Arcs tend to have this pattern which I can get into for the 2011-2021 run up in a sec.

But for now, let’s zoom in to the yellow ellipse in the top right.

This covers phases 5-7.

You can clearly see the overshoot of the previous high, then massive profit taking. This high occurred the week of March 17th of 2008, and pulled back from 1031 to 683 on October 20th of 2008. That’s about a 7 month consolidation and a 33.7% pull back.

Over the next 3 years, you see it go from a low of 683 to 1923 the week of September 5th 2011. That’s a 3x move in 3 years? Geez…

My YouTube cohort Ashley was probing me last week on a video I haven’t had 5 seconds to review and publish yet – where she was more or less like, “you are missing an opportunity to invest in other things”.

She’s right and wrong at the same time. Huh?

First, she’s right that this pullback has taken a long time. How long? Well, let’s take a look first of all at what all of us see this time around.

Look familiar? Yeah. I thought so too. Look at 7 phases going on here.

Let’s zoom in to the yellow ellipse again….

This looks extremely familiar, doesn’t it? While many thought the end of May was the time the chains would break free and make a move above the channel, gold had other ideas in mind. Recently, Michael Oliver on NorthStar Badcharts YouTube channel mentioned that momentum is indicating that a WEEKLY close above $1865 gold and $26 silver is THE indication it is on like Donkey Kong.

So where she is wrong is many of us are getting in at these lows trying to get in on this massive move up. In theory, once this pull back started, it was not known if this would be a 3 month or 2 year pullback. At lows (where the green circles are) are great buying opportunities for call options to make money on moves. The REAL money will be made when the channel is definitively broken on the upside. Then it is essentially 1-3 years of up moves followed by minor corrections.

Additionally – you can see a double bottom in the green circles. This is a reversal pattern. This to me we telling me phase 6 is now in the books.

See the source image

So gold has a double bottom pattern in, it would then make sense that we could see this in the GDX, right? Yup.

Lastly – this is why so many of us are excited – that once we clear this channel, we are looking at a target of $3000 gold. From the bottom of the flag in 2008 to the peak in 2011, you had a 3 year move. It’s very possible we have this move to $3000, but much, much faster. Why? Well, it took 30 years for that cup on top – and there was a pull back of 33.4%.

In this case of the 2011-2021 move, the high was $2074 the week of August 2nd 2020, and the pullback low (so far) happened twice at about $1680. While this felt like a constant kick to the nads every few weeks, it was only an 18.99% pullback over that year of time. That move hard down in June seemed to only delay this next move up, not cancel it.

On the flip side – while I can smell this channel being breached any week now, you do have more of the pundits coming out seeing they see another downturn. I just don’t see it. But these guys get paid the big bucks and you have me as a butcher or candlestick maker as Rule would call me, so don’t listen to me.

What you can glean from this?

  • We are almost at the top of the top of the channel, bouncing off of 20/50dma and long term trend line resistance
  • Daily RSI has a lot to go yet before 70. Doesn’t have to hit it obviously, but bullets left in the chamber.
  • Michael Oliver calling for needing $1865 weekly happens to be at the top of the channel.
  • $1680 has now been hit 3 times. Also right around a fib level that doesn’t seem to want to be breached.
  • Word is that central banks and India are buying all dips.
  • After $1680, you are looking at full retracement of the move down to $1458.
  • To get to $1458, you are looking at a free fall once the trend line is breached and $1680 falls – and I would think it would look for a lower touch on the descending broadening wedge.
  • For the above to happen – it looks like it would be a massive sell off in the stock market to do this, not just an attack on gold.
  • If it WERE to hit $1458, it’s still only a 29.7% pull back from the high – and you could bet that dip will be hammered hard to a buy.

If you look at the great distance to cover – $350 down move, or $60 up move, my “bets” are with the double bottom and a market that has consolidated for 13 months.

Lastly- IF we breach that $1865 on a weekly, this is what we have to look forward to for a few years….

How do we measure the goal here?

See the source image

1980 – 2008 you had the $872 high. Low was $247. This means the depth of the cup was $625. Add $625 to $872 and you get $1497. Gold ran up $420 more than that to $1923.

2011-2020 you had the high of $1923. Low was $1048. Move of $875. Add this to $1923 and you get $2798. Add a little overshoot and this is how you hear about $3000 gold.

And here is what your measured move looks like – once the chains of the upside of this channel are broken.

Do we have a black swan with Evergrande coming? Possibly. How many hedge funds could be tanked with this? Unknown. That is the ONLY way I see the macros sending gold to $1468. However, even if so, we can expect a rubber band move as cash moves to gold and then we see the run up to $2800 after that.

It’s a train in motion that cannot be stopped, but it can be re-routed. It has a few times, and my bets are on breaking through this channel upside to then launch to new highs.

So let’s zoom in and see how close we MIGHT be to explosion? X marks the spot. If we close any of the next few weeks at that level, it’s game on.

Macro questions…

  1. Are we paying off the debt in the next few weeks?
  2. Could there be massive downsides to the stock market with Evergrande
  3. Are we likely to see a high PPI to push us over?
  4. Will CPI still be over 4.5? Could it be higher than 5%? Could the down move be BB trying to get less short, anticipating one of these high inflation prints will be when they lose control of price to the upside?
  5. With low jobs numbers, will taper talk be walked back more – perhaps slower taper than anticipated? Remember, they are not reducing the Fed balance sheet, just adding at a lower rate. Is a taper of $1b a month a real taper? $5b? $20b? At what number can they seem legit with taper and not take the stock market to the woodshed at the same time? Talk is their only stick. Markets will wise up, soon.
  6. What will the Fed say on Sept 21st? How will that affect futures options on the 23rd?
  7. Is the dollar out of steam? Stochastic indicates it’s ready for a down move.
  8. Will the stock market go sideways a bit on hum drum news or continue much higher?
  9. Will the 10yr start creeping higher?
  10. How will Evergrande affect bonds elsewhere?