I want to take a special look at gold and the dollar this morning and see if we can’t alleviate some of the fears created yesterday by the big move down in mining stocks. As I’ve noted before it’s not uncommon for big money to try to run stops to enter at the cheapest price possible. We actually saw GDXJ run the stops last winter right before a second daily cycle tacked on some very big gains in the metals sector. We may see that again in the mining sector over the next few days, possibly as oil puts in its final three-year cycle low.

GDXJ 2014

Now let’s take a close look at what actually happened over the last three weeks. As you can see, as soon as the dollar started moving down into its daily cycle low gold accelerated into that V-shaped rally. The discouraging fact is that gold is still being suppressed and even though the dollar is making lower lows below the May low, gold has been prevented from making a higher high above the May high. And of course we also have the attack on July 20th that forced gold below 1131 even though the dollar was not making a new high. Obviously the powers that be are still trying to force gold down to the 1030 support zone.

gold dollar

So it’s clear that gold is responding inversely to the dollar, as it should, even though it’s still being prevented from delivering the full potential of the rally. Realistically in an un-manipulated market without the July 20th middle of the night attack, gold would not have dropped below the 1131 support zone, and with the dollar making new lows, in a free market gold would be pushing above the May high by now. Until position limits start being enforced this is just something we have to deal with in this sector.  

Now Let’s Look at the dollar cycle. Technically the dollar is now in the timing band for a bounce out of a daily cycle low. That daily cycle low may have occurred yesterday although I wouldn’t rule out one more slightly lower low and a narrow range day to ease the parameters for forming the DCL. However as the intermediate cycle is only on week 15 it should still be too early for an ICL (intermediate cycle low). Plus I don’t see anything that looks like the typical bloodbath ending phase of a final ICL. So I think the dollar still has one more daily cycle down to go, and this should correspond with stocks dropping down into their seven-year cycle low in early to mid October.

dollar intermediate cycle

I’ve added in the Fibonacci retracement levels here to give you some idea of where I think the ICL could bottom.

Now let’s turn to the daily charts and you can see there is a month and a half consolidation zone that in my opinion would be a prime target during one more daily cycle lower during a bloodbath phase ICL bottom. That consolidation zone falls at about the 62% Fibonacci retracement level.

dollar bloodbath ICL target

So as frustrating as it is to watch our gains in the miners evaporate as quickly as they were generated, I still think gold has a date with a very strong second daily cycle, and the dollar has a date with one more daily cycle lower and a big bloodbath phase decline into its next ICL. This would be the opportunity for gold to test that 100 week moving average at the 1250 level and I expect miners would play catch up and generate a very aggressive rally during the next daily cycle, even if they were to first run stops similar to what happened to GDXJ last winter.

So we may be in for a frustrating few days ahead as the dollar bounces and gold works its way down into its daily cycle low. But once those moves are complete, and all of the late arrivals have been knocked off I think we are going to see a very aggressive rally, especially in the mining sector. One that is likely to make the 24% rally during this first daily cycle look rather tame.

second daily cycle

For those that missed the initial bottom, I think you are about to get a second chance.


  1. MuffinBottom

    as is said -‘ the early bird may get the worm but it’s the second mouse who gets the cheese’

  2. AlexP

    The 7YCL in stocks is more likely to come as the USD comes out of its ICL and goes into its new YCH.
    There are 2 arguments for that:
    – the new YCH is to be set as markets around the world will not see efforts of FED to suffice the extreme deflationary forces that will grasp the world as China and Japan get hurt big time (Japan may decide to restructure its debt) and
    – the weekly 200ma has been a very strong support during prior periods of crisis which either set the bottom of bear markets (1987, 1998) for SP500 or a strong battle front which once broken delivered an extended bear market (2001, 2008).

    PS1: Interestingly enough yesterday stocks put a DCL AS SOON AS NYSE COMPOSIET INDEX TOUCHED ITS WEEKLY 200MA 😉 !!!!
    PS2: stocks will see their new DCH alongside USD’s

    1. AlexP

      ..forgot saying in continuum with my 2nd argument above that this stocks bear market is set to break the weekly 200ma too !! So, armed with historical evidence, care should be mind on calling a short conclusion of this bear market as it was the case in 1987 and in 1998 when, unlike a it will happen this time, bear markets found support at 200wma.

  3. BCJ

    At 6:00 a.m. CDT, the futures on GDX and GDXJ are up. Of course, that could reverse but perhaps the miners are going to benefit from the broader market surge this morning.

    1. AlexP

      Yes, deflationary forces caused by structural issues in Asia will take a lasting toll on commodities at large before putting a Kondratieff low and ushering a new inflationary age.
      These deflationary pressures correlate commodities with stocks. This fact adds to my above-arguments for a many-month lasting bear market in stocks and not just until OCT…

      I agree though with Gary that an ICL in USD, which will actually be an YCL, will move commodities higher into their new ICH by early OCT.
      Except that, after that …God have mercy for us as the WORLD WILL MOVE INTO THE KONDRATIEFF LOW!!!
      This action will be so strong that will render 2016 the first bearish Presidential year simply because the end of Kondratieff cycle is much stronger than Presidential one.

      PS: Look at crude oil on weekly chart –> its TSI is at an extreme low of -95 (minimum possible=-100). This underscores my certitude that much worse times lie ahead of us after the ICH in commodities called by Gary on early OCT!

      1. Bill

        You pretty much nailed my thought process as well. Hence the reason we buy low sell high, and right now commodities are bargain basement prices.

  4. Tom

    The miners recent bounce out of potential lows was not strong at all especially when considering how beat up they all are over the past 3 to 4 years. For that trade you would have had to nearly time the buy and sell perfectly to make money which seems crazy to participate in. The slaughter just continues and may not end for another 2 to 3 years.

  5. Just a BRICS in the Wall

    During the past aprox. 3 years, every time the stocks markets started to crack the FED heads would immediately jaw-bone the markets higher with dovish talk ….. the past week; FED heads have been noticeably quiet – IMO; the absence of recent dovish talk means they are serious about implementing a September rate hike.

  6. Anthonyo


    All I know is that my NUGT is now down 30%…Are we going to see 1120 per your chart Gary or 1030? Which one before the chart takes off on miners into October?

    And What do your cycles tell you about after October into end of November for gold?

    1. gary Post author

      NUGT is way too volatile to be trading until we are back in a confirmed bull market. This is how traders get killed. They try to use leverage in an already volatile market. It makes it impossible to hang on during the wild swings that normally occur in this market.

      NUGT is only sutiable for day trading and only with about 1% of your capital.

      1. Anthonyo

        Gary 1120 here now, is it going to 1030 or 1250 by mid Sept? Silver is getting slaughtered today too.

  7. Dan

    I will repeat, just stick to physical silver for long term speculation in the precious metals. You won’t be able to panic out of your positions during these wild intraday swings. Leave cash to buy more and prepare for a washout to single digits.

    Miners are still too treacherous, especially if this general stock market crash has legs.

    1. Bill

      Respectfully Dan this is not a crash, not even a blink really, fact is we never even got oversold. Way to many people are biting the FED forbidden ( Panic ) fruit and the ” Save us FED from the doom ” cries ( not saying you are Dan) but this was NOT a crash in fact it was a blip. Look how far the SPY has gone the last 7 years, wake me when we see a 30% haircut until then this is just noise.

      1. Crawford

        YES!!! this is a hiccup in a bull market. It’s not time for Miners, gold or silver (unless you own physical) or oil, there time will come eventually but not yet IMO. All foreigners are investing in the USA and heavily in Tech/Bio.

  8. james moffett

    Last Friday GDX could not close above the 50-day SMA. Yesterday GDX made a swing high after the big drop and closed below relevant band support levels. Doesn’t this signal an intermediate cycle decline?

    1. gary Post author

      It’s still way too early for an intermediate decline. The weekly charts have to get overbought before we start a real intermediate decline. This is just big money trying to run stops and get retail traders to puke up their shares at the bottom ahead of the next big rally.

  9. ALEX

    Hello James M.

    Can you tell me what ‘relevant band support levels’ are? I think I know, and I also believe we closed below them last Nov in miners, but it didnt lead into an intermediate cycle decline. Maybe it has to be Gold itself that triggers that?

    Thanks in advance.

    1. james moffett

      The lower daily cycle band at about 14.10. (Who knows…it could go either way.) Question: is GDX as oversold now as it was over a week ago when Gary first pointed out the extreme oversold conditions?

      1. ALEX

        I’m not sure that it has to get as oversold if we are dropping to a DCL vs the ICL, The march ICL and following DCL didnt …but if you look at last November and compare stochastics, we dipped down in the beginning of Dec ( Stoch was not as oversold) , then we bounced sideways a bit, and dropped again to a higher low (DCL) and THEN we were about as oversold.

        So maybe we get some sideways chop in miners while Gold finds its DCL. Of course, thats not the worst case scenario that I can come up with 🙂

  10. Bill in Tokyo

    I hope we get that 2nd chance. But …

    While the daily GLD chart looks good (higher lows, higher highs) so far, it’s worrisome to me that GDX made a lower low (compare today w/Aug 14).

    As we know, many times GDX leads GLD, so while I missed the 1st rise up (nervously waiting for the higher low 2nd chance perhaps now dead ahead of us), if I did own GDX here/now, I’d be out. If I owned GLD though I’d still hold.

    1. Bill in Tokyo

      It’s also worrisome that SLV is not behaving like GLD.

      So if SLV leads GLD, and GDX leads GLD, maybe we’ll see a huge plunge in GLD soon.

      Anyways, I find these comparisons somewhat helpful, but each ETF has to be traded on it’s own merit. Comparing GDX w/GLD, or GLD with UUP, can only go so far. These are not 100%.

  11. ted

    You know why the bull market is not over, because the market has gone up 200% in the last 7 years and in two weeks it hasn’t even gone down 10% and there is all this COMMOTION! Please! Really, please. Watch the sky. When this is over, it will be a pimple on a baby’s backside. And then we are off to the races!

  12. Peter Dykes

    I think Gary is right. Gold will be moving up for a while and the gold shares will rip. This will only start happening when the main markets stabilize, which should be soon. An Etf like NUGT or JNUG can easily give you 100% gains in 6 weeks or so, especially if the Fed declines to raise in September. After that the gold price will probably decline again.

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