CHARTS OF THE DAY

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CRB sentiment

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Source: sentimentrader.com

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It’s your choice. You can either follow the smart money and buy when there’s blood in the street. Or you can be the typical retail investor and pull the trigger at the top when your emotions tell you the coast is clear.

I can assure you the correct time to buy is never when your emotions are calm. It’s always when they are in the most turmoil and you are sweating bullets when you click the mouse.

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64 thoughts on “CHARTS OF THE DAY

  1. Tom

    Gary:
    NUGT volume is obviously going to increase as price decreases which is the same for any instrument. Pointing to a 3x leveraged ETF for clues is misleading and a waste of time. Where is the volume in GDX, HUI, or other non leveraged ETFs?

    Most of these pros are too early when looking at past purchases they have made. In addition, they make a lot of purchases in their diversified portfolios.

    Metals still have a ways to fall…Looking at HUI under 100 and eventually under 50…38 is a historical long term support area.

    1. gary Post author

      I’m looking at the one day sudden change in volume. Now if price closed one day at say $10 and then opened the next day at $3 then yes there would be an argument that the dollar value was the same. But that’s not how price behaves. Price grdually declines until one day something changes and volume spikes 2-3 times normal. That is smart money buying when they start to sniff out a bottom.

  2. Stefan

    Yes I bought Timmins at 31c Yamana at 1,92 and NUGT at 2,45 on Friday, I’ve allocated 70% of my capital now. Look at coal, is it a turnaround and coal showing the way for other commodities? Coal is down 97%

  3. Bud Fox

    Billionaires control risk. If they didn’t, they wouldn’t be rich.

    As a percentage of their net worth or market cap, those purchases are very small.

    Buffet 1.3%
    Icahn 4.2%
    Soros 0.1%
    Druckenmiller 6.6%

  4. Bud Fox

    Tom

    You are correct. Looking at a unadjusted chart of _NUGT shows exactly that.

    http://schrts.co/xwxUCK

    Dollar volume traded on 9/10/15 was $87 million at a price of $2.66
    Dollar volume traded on 8/29/14 was $118 million at a price of $45.74

    1. MuffinBottom

      blasphemy! troll! kill-joy! why let past prophecies gone wrong get in the way of a cliche like ‘buy when there’s blood in the streets’?

    2. Jay

      I’m glad I graduated from trying to trade in and out of volatile sectors with surgical precision, which only results in ultimately getting chopped to death. My advice to anyone reading this is: find a way to hedge your position from the moment you take that position. Make sure the hedge doesn’t invert your position, and make sure there is no risk of losing 100% of your investment in the hedge. (even though the hedge may decay gradually over time). That’s all I’m saying. Learn to hedge your drowning positions before they go underwater. πŸ™‚

  5. Anthonyo

    “ou can either follow the smart money and buy when there’s blood in the street. Or you can be the typical retail investor …”

    The problem is there is no blood in the gold street yet; but there will be when gold gets below $1,000.

    I agree with the managing risk comment about mega billionaires starting to dip their small toe in commodities, and that they tend to be early. They will add more as gold drops lower.

    Now, gold may get a bounce to 1150, 1180 or a bit higher after Fed says no rate hike this week; but it will be an opportunity to add to shorts.

      1. Anthonyo

        Gary, I take your word on the negative sentiment number. But I just don’t see this reflected in MSM headlines; there is no sense of “Wow look at gold get pulverized” in mainstream media. What I mean is it does not feel like capitulation yet.

        1. gary Post author

          This is why I track “actual” sentiment numbers at sentimentrader.com and not just try to guess at it by listening to CNBC or monitoring the media.

  6. Max Mueller

    Wow Gary ! It seems the entire herd has turned against you ! While you are encouraging to buy more at these depressed prices for the miners, all I am reading here is calls for price to go lower for gold and the miners.
    I bought my biggest chunk of NUGT on 8/26 at $2.66, and would have bought more when the price finally broke the $2.6x successive lows on Friday 9/11, but then reversed higher at the end of the day. JNUG did the same – an outside reversal day. But it doesn’t seem to be enough to convince the herd? Or, are paid shills trolling your site too?
    Your thoughts and comments are appreciated, Gary.

    Cheers,
    Max

      1. Doc

        Yes, that is true, but a 10% drop means much more after the consolidation, especially if you wake up and find out $gold has been monkey-hammered the night before and there is a huge gap down.

        1. gary Post author

          A 10% drop is the same whether the asset is priced at 3$ and drops 30 cents, or priced at $30 and drops $3.00.

          10% is 10%.

          1. Anthonyo

            Gary,

            On a reverse split;
            For example if NUGT is at $2 and you own 1000 shares, and then they do a 10-1 reverse split to $20. Now you have 100 shares after the split. You used to have only $2 to lose(to zero); but now you have an additional $18 “room” to lose until you reach zero? But if NUGT goes to zero, your loss will still be $2,000 be it before or after the split.

  7. William

    HAHA…good to know that so many people think gold is “surely” going down some more. The chances of gold doing the opposite is getting higher!

  8. William

    To put miners in valuation perspective, i’m not talking about PE here, but, absolute dollar value, XAU Philadelphia Index has already plunged 81% since 2011’s peak. In % term, this has far exceeded the last great draw-down from the peak in 1996 to the trough in 2000 (right before I new bull started)…

    Smart money being smart money, they don’t just look at technical, they are very focused on valuation too!

    1. Anthonyo

      OR … If HUI breaks the lower boundary of the channel , it is all white space till 40 for a double bottom with year 2000.

      1. William

        If HUI breaks further, there would be a major trend change where there’s no need to talk about any commodities at all in coming quarters! So, the key thing here is “trend change”…

        I could show you the quarterly chart of CRY Index, and, it’s supported right at the quarterly uptrend support line, a make or break time…more downsides from here would announce a permanent death of bull on any commodities!

      2. gary Post author

        That would be a 60% move. It would require gold to drop to probably $500 to shave off another 60% in miners. It took 4 years to drop 80%. The odds of losing another 60% would seem to be pretty slim and if it were to happen would likely take at least another 2-3 years.

  9. MuffinTop

    This message is intended for some (but not all) of you and may contain a couple of curse words here and there. Discretion is advised!

    I’m always amazed at the number of people on this forum that continually need to argue against a little thing called common F*ing sense! Guys.. Gary isn’t always gonna get it right because the Market is ever so changing and requires (now more than ever) us to be nimble.

    So! The next time he presents his case and backs it up with common F*ing sense, than for God sake’s just listen! In fact, try and incorporate his point of view into your trading/investment strategy — whether it be short term or long term. And for the love of God.. stop trying to prove him wrong (Ego) with some bullshit argument whose only purpose is to show how little you know!

    The long and short of it: Listen and learn.. and shut it!

    Aaaah Thank you, haha.. I actually feel better now πŸ™‚ Carry on.

    1. Tushar

      What a valuable advice! I agree and think you’re spot on. To add, always be humble and appreciative of a viewpoint and/or insight.

  10. Bill in Tokyo

    I think Gary’s spelled this out very well. Even cycle heathens like me have to agree that the evidence on balance says that a major bottom is at hand.

    The only big question I have is, is Muffin Bottom the same person as Muffin Top? πŸ˜‰ And are we talking banana nut muffins, or oatmeal, or what? Need more data! πŸ˜‰

    Lastly, as an aside, as I wander aimlessly in the land of Wa, I’m now thinking that Einstein may have made an error – maybe light doesn’t travel at a constant speed from all points of reference – maybe time does. Feels right.

    1. MuffinTop

      Haha, nice one! No relation to ‘MuffinBottom’.. In fact, the scoundrel popped up shortly after I joined the party.

  11. Stefan

    Β£MuffinTop, great post. Just look at the drop in two of my recently bought miners:

    Timmins Gold: Jan 25th 2015: 1.40CAD today at 30c I could go lower but … c’mon

    Yamana Gold: Feb 22nd 2015 5.30CAD on Friday 1.90CAD

    That is enough blood for me πŸ™‚ FOMC this week lets see how it unfolds, maybe 70% allocation is a little bit on the aggressive side but I’ve no trouble sleeping at night.

  12. Bill in Tokyo

    AUY is showing strong positive divergence in the daily charts’ MACD (I use PPO). As are ABX, RGLD and SLW. It doesn’t mean we go up here on that alone as we all know, but it does show that downward momentum is slowing.

    I took a look at the 7 yr $HUI daily chart and laid it over Gary’s sentiment chart – and while the late 2008 trade was a great entry point good for 2 yrs, the one in mid-2012 was good for a trade but that’s it – price continued downward after this.

    Like I said, it’s not one piece of Gary’s evidence, it’s all of it as a whole, that convinces me he’s got this right.

  13. bob davis

    I’ll take two charts form examples above. Hui and slw. From the six month and yearly charts both have fallen well below the 50 and 200mda, very bearish. Both are showing clear H & S patterns. I estimate a fall between 8-10 for slw and around 80 for HUI. Both Rsi are around mid point and have further to fall. The MACD on slw and hui are + but look like they are turning negative. The bloodbath phase in my honest opinion hasn’t even begun. Have hedged miners been going bankrupt left right and centre, nope. You can always find charts to support a cause, be patient wait for a signal.

      1. Tom

        Everyone here is going to need more than shorts to cover up that stench. I think these bottoms might need diapers.

  14. Stewie

    I’ve read all the comments and 90% here is also bearish which would reflect sentiment charts that Gary posted. Gold and miners will be going up from here even if it’s only bear market rally but I suspect 1072 was the bottom. Miners usually bottom 4-8 weeks ahead of gold. Miners double bottomed already. Even if gold retests 1072 or drops in false break down to 1050 miners IF in fact bottomed miners will be going higher from here.

    So position for bear market rally but in good scenario prepare for massive short squeeze as masses realize bottom has formed and chase the “getting away from them rally” which may be short squeeze accompanied by long buying pressure by people that missed the bottom. If everything in commodity sector is bottoming so did gold.

    1. bob davis

      Maybe worth shorting oil in that case. Probably its opec flooding the market with oil as well as shale oil pushing the price down. Also the zero, negative interest rates have caused deflation in the equities, gold is no exception.

      1. gary Post author

        Look at that sentiment chart again and tell me in the past if you were better off shorting, or buying at current sentiment levels.

  15. Don

    I am with Gary on this one. The miners are ready for a big rally. I bought TMM this morning at 0.28 (CAN funds). It’s a solid company with huge upside potential. On another note, everyone should be aware that NUGT and JNUG are risky bets. The manager makes extensive use of options to achieve the 3X leverage and therefore they suffer a very high rate of time decay. You might as well play the options market directly.

      1. Anthonyo

        The leveraged ETF nd ETNs act like Options with time decay albeit a milder time decay than the one of options.

      2. Don

        Simo83″ The example you used, SPXL, has the least amount of time decay and slippage of all the 3X leveraged products. Was that a deliberate choice in order to make your point? In fact, the 3X leveraged ETFs and ETNs are structured differently and accordingly they all experience different rates of slippage (due to daily re-balancing) and time decay ( if options are used to achieve the leverage). It so happens that NUGT and JNUG demonstrate the 2nd and 3rd worst of both slippage and time decay of all #X leveraged products. The worst is UVXY. Go back to data points for GDX GDXJ and plot them to JNUG and NUGT at the same points in time and the horrendous tracking error will become readily apparent.

        1. Don

          I thought I better give an example. Today, GDX closed at 13.12. On August 25, three weeks ago, GDX closed at 13.09. NUGT, which closely tracks GDX (at 3x) closed August 25 at 3.11. One would think that in only three weeks, NUGT would be somewhere near that 3.11 price level given that GDX is currently 0.02% higher. Wrong. Today, NUGT closed at 2.63 which is a whopping 15.4% LOWER than it was on August 25! Now that is EXTREME slippage!

          That, gentlemen, is why it is so difficult to make money playing NUGT or JNUG (which follows GDXJ closely at 3x leverage) The further back one goes at comparable price points in time, the worse it gets.

        2. Simo83

          Uvxy is absolutely the worst but if you has verified the next are nugt and jnug I think we should stay away from these instrument. I’ll put some data in excel to understand better and quantify the effect not tied to compounded returns.

  16. William

    Indeed, back in year 2000’s bottom, miners rallied ahead of the mass commodities bottoming seen in CRB Index. In other words, miners could once again leading the pack while general commodities are still lagging and seeking their respective bottoms!

    1. Anthonyo

      That’s the thing; even if one is right in saying gold will have a Fed rally bounce to $1200; if for some reasons stocks go down instead of the expected up, miners still lose value. We had days last week when gold was flat to up and stocks were down when miners still lost value. Miners are stocks first.

  17. Gregor

    Stanley Druckenmiller is wrong to be buying gold, and it bears mentioning he’s been wrong on macro for years now. In fact, one of the reasons he got out of money management years ago, according to him, was that “the markets no longer made sense to him.” And Buffett buying a refiner is not a play on oil prices going up. It’s a play on oil prices staying down, thus making for a handsome refining profit on the spread between gasoline and oil. The one guy you mentioned here who is probably right is Soros: mining stocks–copper, iron ore, and all that–this is probably the correct bet.

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