GOLDEN BOTTOM II

It’s time to do a follow-up to my last Golden Bottom article. We are coming down to the wire and the action on Monday after the Swiss referendum should tell us whether gold has already formed a final bear market low, or whether we have one more drop in this intermediate cycle to the $1050 level before the final bottom.

If the vote is a yes then I suspect gold will reverse all of Friday’s losses and immediately head back up confirming that we got the final bear market bottom in early November.

If however, and I think probably the more likely scenario since the consensus is the vote is going to be a no, gold continues down on Monday then the odds are we have one last lower low in the next 5-10 days that will form a final bear market bottom somewhere around the $1000- $1050 level. Gold is already moving into the latter part of its daily cycle timing band. Monday will be day 16. The average timing band for a bottom is 18-28 days. So if the bear market didn’t already bottom in early November, it’s going to bottom in the next 5-10 days.

gold cycle

Traders and metal investors need to prepare mentally, because unless the Swiss vote turns gold back up on Monday, then we are going to see a final intermediate, yearly, and major multiyear cycle bottom over the next 1 to 2 weeks. And as I have pointed out in the past the final move into an intermediate cycle low is always quite scary. I call it the bloodbath phase. When the move encompasses an even larger degree yearly, and in this case multiyear cycle the final selling climax is always a truly mindbending event.

I’m pretty sure the OPEC decision not to cut production has ushered in the bloodbath phase for oil and the rest of the commodity complex as they move into a final three year cycle low.

CRB three year cycle low

Since oil is the driver for the commodity complex the entire sector is likely to remain under pressure until oil finishes its bloodbath phase and exhausts every last bit of selling pressure.

I’ve come up with a couple of potential targets for a bottom. The first and most likely in my opinion, would be a tag of the 200 month moving average similar to what occurred in 2009.

oil 200 month moving average

The second, but more unlikely scenario, would be a test of the secular bull market trendline. Since we should only have 5-10 days in this bloodbath phase there probably isn’t enough time for the second scenario to play out.

oil secular bull market trendline

Whichever way this plays out the three year cycle low is just waiting on oil to find its final bottom.

As I am writing this article the news has come out that the Swiss vote was a no, so we can probably expect gold to follow oil down into this final bloodbath phase over the next 1-2 weeks. I’m guessing that means we’re going to be treated to one of those mindbending events, and gold will drop $100-$150 in the next 5-10 days to reach the $1000- $1050 level which will complete a final bear market bottom.

gold $1000 level

Now here is the good news. A selling climax of this magnitude is going to generate a monster rally off of that final bear market bottom. As I have pointed out in the past, in order to confirm an intermediate bottom an asset has to rally far enough to break its intermediate downtrend line. So even though gold is likely to collapse over the next 1-2 weeks the initial surge off of that bear market bottom is going to be a truly amazing event as smart money floods into the sector generating one of the largest short squeezes in history.

gold intermediate trend line break

We’ve already gotten a little taste of what is coming over the last three weeks. In what will likely turn out to be a countertrend move, the junior miner’s rallied over 30% on massive volume. Once we get the final bear market low I expect mining stocks will rally 75% to 100% in the first 2-3 months of the new bull market.

GDX J

Traders should get prepared for what is likely to be a very rough 1-2 weeks. Buy some hedges if you already have long positions, and if not, prepare to jump on what will likely be the buying opportunity of the second half of this decade sometime in the next couple of weeks.

Watch the action on Monday into the close. If gold holds the reversal and ends the day positive then there may just be too much buying pressure as big money smells a final bear market bottom and we don’t get another leg down. That would mean that the final low came in early Nov. Wait for the close as it’s going to be volatile today.

35 thoughts on “GOLDEN BOTTOM II

  1. Bob UK

    Thank you Gary.

    You are the only person I know who not only explains in plain English what you think is going to happen – most other ‘experts’ are deliberately vague IMPO – but you have the dangly bits to make bold and clear calls.

    FWIIW, I am preparing to buy having watched several of your calls be spot on this year already.

  2. M.D.Cov

    Gary is it possible with Friday’s capitulation phase, the ” no Swiss gold vote” and with ALL the negative sentiment going NOW that in actuality TOMORROW will be that “buying opportunity”? It appears to me that tomorrow’s open may be equivalent to test the 52 week lows ABROAD and that THIS will be the double bottom confirmation?

    All the negativity reminds me of tops and bottoms from my trading experience……. just like when we had here locally as well as nationally multiple outlets advertising to buy your gold jewelry for “top dollar”. I remember also back during the “dot com” era my customers recommending me what stocks to buy. I also remember in 2008 when I found out my sister in law “out of the blue” became a mortgage specialist.

    I see everyone and their grandma touting to short gold and silver!

    I see this as THE contrarian event as such so much so I think I will buy some ETF’s at the open to “average in”.

    Happy Holidays Gary,

    M.D.Cov

    1. gary Post author

      It’s still possible that Nov. 4 turns out to be the final bottom. Tomorrow should tell us. If it gaps down and ends the day near the bottom then yes we still have a final blood bath ahead.

    1. JLM

      M.D.Cov

      If you are not a member yet you are certainly welcome. We have a diverse group of traders short term and long term that would love to hear your comments on a regular basis and discuss them!

    1. gary Post author

      It may go under $1000 briefly as the bottom is going to be incredibly volatile but once it is complete we are going to witness a truly mind blowing rally as gold makes the initial surge out of the bear market bottom.

  3. M.D.Cov

    Holy moly overnight metals are SOARING! THIS will stamp a third HIGHER low for all the ETF’s! Short covering is IN EFFECT……. wish I could’ve bought in overseas trading but have already placed my open additions which still should peg me my lowest mark thus far (bought early Friday as well).

  4. M.D.Cov

    JLM appreciate the invitation, that is very kind of you. I am a technical analytical trader and have been following Gary for about a year now and have been marveled not only by his thought process illustrated which is concise and thorough but also in conjunction with his timing calls……. I will definitely stick around.

    I am ultimately thrilled what’s happening now with precious metals however I am NOW concerned with today’s early market activity in equities……. I hope this isn’t THE top because I’ve seen this happen before with “smart money”. It’s an EARLY precursor event which reminds me of our 2014 spring top.

    Keeping an eye out for today’s remaining action for sure.

    Cheers — M.D. Cov

        1. Bob UK

          It is almost as if someone(s) – someone(s) with a load of cash – simply decided to jump into the gold and silver market in a big way… as if they had decided that there was no money to be made in oil now for let’s just get into PMs? Or perhaps even thinking that it is time to get out of the conventional markets and into PMs? Or a bit of both.

          It totally defies logic what has happened today and hence whilst I am wary. This could be a great plan to lure people in this week and then BHAM! Pump and dump.

          Just because I am paranoid doesn’t mean that they ain’t out to get me 🙂

          1. Robert Grosek

            ……hypothesis:…..it’s the Russians working to clean out the Comex before they announce the ruble/gold peg….let’s see what happens today on Comex

          2. will hudgins

            I have to be careful not to “play too much”. I have been in gold and gold stocks since mid 80’s and I can tell you; this market will make your mind think it is down the hole with Alice. DO NOT let your emotions get away from you.

  5. Carl Van

    Guys, always trust your first feeling, even for a trader. I still Gary’s first thought (Swiss referendum No = New Low to come) will hold: especially before going into a supposedly long lasting position trade I always look on the daily chart and indicators. On several volume indicators, but also on the old good MACD, Awesome Osc and even DMI, I don’t see any divergence; however, any dip below Nov 4 low, especially a quick dip, would make it. I am still waiting on the sidelines for now. FWIW. Good luck for the traders already long: in their position I would probably tighten stops…

  6. Joe

    Your scenario seems more plausible by the day, although I’m wondering if the CRB will actually tag 200 now with the oil price rising (although it’s just one day’s price action).

    Any thoughts on the possibility of a general market crash before the end of the year? I’ve read a couple of analysts saying that current conditions look like a blow-off top.

  7. M.D.Cov

    Today’s Comments:

    1) Precious metals……. “a picture is worth a thousand words”: http://stockcharts.com/freecharts/gallery.html?s=gld

    Previous day’s capitulation WITH voulme, today’s reversal WITH volume, HIGHER lows AND GLD closing ABOVE her 50 DMA isn’t a fluke nor a false flag charade it is purely heaving purchasing which lead into short covering then into accumulation.

    HOLDING ALL positions.

    2) Tech outflows was concerning to me although her candlestick is promising (need to watch this carefully tomorrow for a possible liquidation in my various positions). Lower than normal volume is again promising.

    FWIW — M.D. Cov

  8. will hudgins

    We are close to a bottom. If one is convinced of this then it is time to add positions and stay put.
    Add incrementally. Upside is far greater than downside, but be patient. If today’s positions take a hit
    don’t panic and sell. Use that opportunity to add more; incrementally. The key here is to not bet the farm because, I will guarantee you, your emotions will win and you will beat yourself almost every time.
    [if you get greedy and play too much]

  9. CountOfMeltedCrisco

    “Something” is pushing GOFO rates further into negative territory, and further into the future, an historical anomaly. I’m with you, Mr. Grosek, it almost seems as though some sovereign – Russia quite likely, and backed by their new Best Friends Forever China – may be about to play the “Gold Card”.

  10. TP

    Will JNUG ever normalize its price ratio to GDXJ? It has been pulverized compared to the price drop in GDXJ. Do we ever see this trade above $10? Or, did the underlying derivative fees kill its future?

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