CHARTS OF THE DAY – Huge Explosion in Volume

Huge Explosion in Volume - NUGT

Way back in December I called attention to the huge explosion in volume in the triple leveraged mining fund NUGT. I warned that it meant smart money was accumulating ahead of a big move that was coming. Of course the usual dumb money crowd said that I was wrong. They had a million excuses for why I was mistaken and it was different this time. Well the rest is history and the mining stocks soon rallied 85%.

Huge Explosion in Volume - ERX

A huge explosion in volume is now occurring in the energy sector. As usual the wrong way crowd is disbelieving. They are convinced that the “fundamentals” will turn oil back down and as usual are missing another great opportunity.

cotd3

And now we have probably the most intense surge of all in the biotech ETF LABU and again, Joe SixPack cannot see past the daily action to the bigger picture. An incredible investment opportunity is developing in this sector. Biotech is in the final stage four bottoming process of the stock market’s 7 year cycle low. You can learn from previous mistakes and take advantage of this opportunity or you can wait until it has rallied 100, 200 or 300% before you finally get on board.

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97 thoughts on “CHARTS OF THE DAY – Huge Explosion in Volume

  1. Alexandru Popovici

    both gold and treasuries are close to finishing their pullbacks (DCL for gold and ICL for Ts) while stocks should stocks and USX should deliver one more up thrust before falling in their IC declines.

  2. Alexandru Popovici

    …thus I am readying to start buying pilots TMF and UGLD maybe as early as today or tomorrow, I’ll see

  3. Walt

    I am in cash . I still see a risk for one more really sharp move down in stocks , gold , oil in the next 6 -8 weeks . If you have stops you’ll be ok .

  4. MuffinTop

    Gary โ€” just wanting your perspective on this.. But with such a huge surge in Volume over the past few months, why aren’t we seeing some of these ETFs blast off? Yes, eventually NUGT gave us the rally we were all waiting for but it certainly took a while.. if someone is buying hand over fist, should this not systematically push the price of shares up? Meaning, how are they able to stand by for so long before the actual move up..?

    1. Gary Post author

      Ahh if only markets would do what we want and do it when we want them to. ๐Ÿ™‚

        1. MuffinTop

          Let’s try this again: If I’m buying a shit ton of shares then that should systematically push the price up โ€” common sense! But that hasn’t been the case with these ETFs.. There’s been a humongous surge in volume over the past several months but the price per share remains relatively the same ๐Ÿ™‚

          How are they able to defy the laws of physics/economics?! Teach me!! Lol

          1. Gary Post author

            Well like I said it takes time to transfer shares from weak hands to strong hands. Once it’s done then the market can only go up because there are no sellers left. It took 6 months for that process to play out in miners.

          2. Richard

            MT-
            A lot also has to do with the arbitrage of ETFs, share creation, etc. If an authorized participant buys mining shares and converts to GDX shares, a massive arbitrage begins here. Look at RiteAid, something that is being aquired. It still trades a ton of volume and look at the price.

    1. Gary Post author

      The spit adjusted charts don’t adjust the volume numbers. You can easily determine the actual monetary values by multiplying price times volume though.

      The point is that during most of an intermediate decline volume remains pretty steady and then all of a sudden the bell rings and volume surges signalling that something different is happening. The difference is that a bottom is forming and smart money is accumulating in preparation for a big move.

  5. Duncan Smith

    Long term technicals (20 years plus) vs one year charts. The S&p, Dji, Ftse 100 all look like they are on an edge of a cliff, with perfectly formed rounded tops/ domes which began forming in may 2015. On the case for cots ,I still ask the question how did they look before the 2000 and 2008 crashes. Did the commercials go short or were they caught out. I think this is key before ruling out a downturn based purely on long commercial cot numbers. Can cot numbers predict worldwide market crashes? Here is an article looking at the long term s&p500, written last April showing technical similarities between now and 2000/2008.

    http://www.zerohedge.com/news/2015-04-18/technical-signaled-last-two-market-crashes-and-it-just-happened

    1. Gary Post author

      As I said the NDX contract almost perfectly called the top in Nov. 2007.

      This is why I don’t base my trading on charts. At major turning points the charts lie to you. I’ve seen it over and over.

      It’s simply too late in the 7 YC for an extended bear market to begin. So this has to be the correction that sets up the bubble phase. The same as what happened in 98.

      Seriously, we have every central bank in the world printing trillions of currency units and most are at negative interest rates. How does one get a bear market under those conditions?

      History has suggested that on the contrary you don’t get a bear market you get a bubble.

      Then you get the bear market.

      1. Duncan Smith

        I guess the derivatives/debt bubble bursting could cause a bear market. But sure i’m open to both scenarios.

      2. Richard

        Gary, all of your points are true and we definitely have to monitor for your situation arising.

        I view things a little different. The average “joe sixpack” is not in this market anymore as he was in the 2000 top. They don’t trust the market anymore, they don’t have the funds to invest anymore, and the millenials do not want anything to do with the market. Sure, smaller hedge funds have replaced him and are acting in the same fashion, but they are in already.
        Bubbles have been created and have blown up. Even though Valeant has news and balance sheet problems to cause it to crash, it is simply the weakest biotech leading the pack. Most view this as a “one out,” but look when VRX turned down with IBB and the following declines. Everybody was aware of the balance sheet when the stock peaked, but there was no focus on it. Looks like the biotech bubble popped to me. I have been saying for a long time, most biotechs do not even turn a profit! There is no regard for valuation in this sector, which equals a bubble. Irrational investing. The same applies to consumer staples and other dividend plays. Valuation. These companies are spending all of their cash on dividends and supplementing their cash flow with debt. Nobody is concerned about this right now, but when these stocks decline, that will be the focus and “new” concern, even though it exists today and we all see it. I believe the FED is uneasy about this mis-allocation of funds by these companies.
        Now, the final question, can we get a series of bubbles? It is possible. After a reversion, it is possible that bond money may flow more into stocks as allocations change, but I don’t see this happening until you get your 7 YR CYCLE low. If we were to enter the “bubble phase,” companies would need to take on even more debt.
        And finally, so many stocks have been in bear markets already. This is a stealth bear and has been for over 1 year. It is just that all of the leaders have not fallen yet; however, they seem to be dropping one at a time.

        1. Gary Post author

          I would argue that biotech isn’t even close to a bubble yet.
          Generally speaking I won’t even consider something a bubble until it has rallied at least 100% in a year or less, and price needs to be stretched a minimum of 40-60% above the 200 DMA.

          I also like to see the public in a buying frenzy like we saw with tech stocks in 2000 and real estate in 2006.

          None of those qualifications have occurred yet in biotech. So my opinion is that all we’ve seen is the first leg and we still have a long way to go yet.

          Some incredible discoveries in the field of biotechnology lie ahead of us.

          1. Richard

            Gary,
            Ok. What is your view on rates then?
            If the public is going to surrender their bond funds to re-allocate toward equities, rates would have to go up.

          2. Gary Post author

            Yes they will. It’s been a 30 year bull market. How much longer do you expect that to last now we are seeing negative rates?

      3. Duncan Smith

        Yes the cots called a top August 2007.You could argue the cot called the top in august 2015. Did the cot call a top September 2008?

      1. tulip

        with all due respect Gary — didn’t you say the same re gold last autumn.. or am I wrong…?
        thanks

        1. Gary Post author

          Well the market tried to drop into a 7 YCL last August but the PPT aborted the Sept. cycle that should have crashed.

          It’s why we had to have another complete intermediate cycle, but again the PPT stepped in at the last minute and halted the left translated daily cycle that was setup to produce the final crash.

          So while I won’t rule out one more intermediate cycle and a final crash in late summer or early Sept. it has become painfully obvious that central bank printing presses are more powerful that the bear market forces…at least so far. And now the 7 year cycle is simply running out of time.

          1. Herman

            Oil will bottom later this year close to USD 10/barrel. At the moment, we experience a (profitable) countertrend rally.

  6. Ralph Wiederzane

    While I am cautious on oil and have difficulty pulling the trigger there, I will have to join Gary in some biotechs when he tells everybody to get in the pool.

  7. Walt

    Look at that move in gold . Vertical down . Big money dumping . Under $1200 soon .
    I wouldn’t take a risk long on a move up soon to the $1300 ‘s . Don’t be foolish

    1. Gary Post author

      I agree it’s too late in the intermediate cycle to be buying now. We’ve made “enough” on this trade. Now it’s just time to wait for the next ICL and not worry too much if gold pops to 1300 first before correcting.

      The only ones that need to worry are the shorts as they may be again too early to the trade.

  8. Tim

    Just read a post by Sunshine Profits on Gold Eagle that Precious Metals are likely to make one more lower low? Really? That would be be pretty awful!

    1. Gary Post author

      They’ve missed the entire rally and now they are trying to predict a revenge trade. Ignore them.

  9. Chris

    Guys, gold have a date with 50 sma, followed by 200 sma. So , be patient. It wouldnt go up to $1500, then meet 50 sma. It may go to $1308, then drop to 50 sma, but its ok. What you want is a low risk entry.

  10. Alexandru Popovici

    all T-notes (not T-bonds though) have opened down on an exhaustion gap.
    It’s more and more likely that I’ll open a TMF position later in the day, after FOMC.

  11. Alexandru Popovici

    Richard, I’d use this exhaustion gap down of T-notes to cover at least 75% of my shorts or long puts in treasuries.
    Good luck!

    1. Richard

      Thanks Alex, I will monitor. The 2-10’s spread is now below 100bps and all other spreads have collapsed. Either we are heading for a recession, which is not my view, or long rates need to rise or the FEDs do nothing and short rates fall.
      I am in TLT June puts from $131 and am looking for $125.

      1. Alexandru Popovici

        if recession is not in your view then … short T-bonds should not be the place to be, Richard !
        If recession is far from us and FED keeps on rising rates, then the spread 10y-2y should turn negative in the next year or so –> this would imply T-bonds yields collapsing, hence TLT going up.
        watch out !

        1. Richard

          Alex, provided we are not looking at a recession, the 30YR bond should target 3% to normalize to the short end rate increases. If the spread transitions to negative, then there would be nothing keeping the economy going except QE, stock buybacks, etc. or the bond market knows that the charade is over and there will be a significant deflation.

          What is your pretense for 30YR rates to go much lower from here, in which 2.5% should be the floor?

        2. Richard

          Alex, I agree one needs to be careful since a steep decline in stocks would “potentially,” but not necessarily lead to a drop in yields. This reaction will be important.

  12. Stevie

    But what about the many times you had folks buying NUGT in early 2015. Ouch. Always look at the good but never talks about the poor performance.

    1. Gary Post author

      It wasn’t me buying NUGT. I’ve never bought NUGT for the SMT portfolio.

      I do try to catch intermediate rallies and we made decent money out of the July bottom but we took profits and got back on the sidelines on the Oct. reversal.

  13. Stevie

    The volume chart is complete hogwash. what looked large today might be small tomorrow. I recall NUGT volume surge in late 2014. Gary was all over that too but NUGT continued to fall another 75%..

    1. Gary Post author

      You are wrong again as usual. What you fail to mention is that the volume surge was predicting a nice bear market rally. NUGT increased by 120% before topping.

      there’s nothing wrong with making money off a bear market rally even if the final bottom still lies ahead.

      1. chartfreak

        If you skim through the public thread here in Feb, The trading has been profitable.
        Not bad for free.

    1. Gary Post author

      Yes that is a warning sign that the intermediate cycle in miners has either topped or is about to top.

      So let me say it again. We’ve made enough on this trade. You need to be on the sidelines in the metals now or only have a small position just in case we do get a pop to 1300 before topping.

      The ones that need to worry are the shorts. They may still be too early to that trade.

    1. Gary Post author

      Nobody in their right mind buys NUGT for a long term hold, so I have no idea who you are talking about?

      I won’t even buy NUGT for the SMT portfolio, the miners are volatile enough all on their own.

    1. Gary Post author

      I’ve never seen a bottom yet that looked healthy ๐Ÿ™‚

      Chartists always miss these bottoms because the charts always look like price is going down forever and traders suffer from recency bias so they can’t envision a turn. We saw it in metals, oil, stocks and now biotech. Human emotions never change so 90% are always on the wrong side of the boat at major turns.

      Sentiment in biotech was at 17% bulls as of last night. That’s the kind of fuel that can power a nice move up once the selling exhausts.

      And I would add that we have to see this kind of bleak sentiment in order for biotech to lead the bubble phase in stocks. It’s absolutely necessary for every to get on the wrong side of the market first before the big move can begin.

      Notice what happened to stocks in 98 right before the bubble phase began. Also in oil in early 07 right before it began it’s parabolic move.

      The same thing has to happen to biotech, and is happening and it will have the same end result.

      1. Richard

        Gary-
        What makes you believe that the bottom in oil will look different than gold?

        Why can’t oil simply trade in a depressed range for a long time?
        Or maybe I am not clear on your upper target.

    1. Gary Post author

      No one should hold a triple leveraged fund long term. You must try to exit as close to intermediate tops as possible.

    1. Gary Post author

      The 7 year cycle is what has evolved from what used to be the 4 year cycle. The advent of global QE and negative interest rates is producing new cycle durations. Cycles evolve just like everything else and the 4 year cycle has now become a 7 year cycle. Back in the early 1900’s one 4 year cycle used to encompass both bull and bear phases. Then with the birth of central banks that evolved into multiple 4 year cycles followed by a bear phase that also encompassed a full 4 year cycle.

  14. Duncan Smith

    This rings true for me.

    “Expect big volatility at 2 p.m. but a moment of pause is suggested, when the Fed announces. The first reaction is generally the wrong one….” Peter Hug

  15. victor

    so, stocks should be done this week… but we’re going to see GDX around 40 this year…, I’m o’k with NUGT this time…, bought LABU back yesterday based on Gary suggestions…, good luck with FOMC guys…

  16. Duncan Smith

    Possible scenarios

    1.No change keep an eye on economic out look possible rate rise later in the year … Yawn.ZZZZZZZZZ
    2. Interest rate rise….
    3. Interest rate cut.
    4. Feeling inspired bu EU decision last week announcement of QE4.

    Feel free to add possible outcomes,

    1. Richard

      1. FED needs to address reserve rate on excess reserves, but will hold this.
      2. Rate increase in efforts to normalize.

  17. victor

    as for oil…, something is not good here, sudden Russian pullback from Syria doesn’t “smell” good, looks like they receive something good in return… I think higher oil price coming. Question, why such actions? I think we’re going to hear very bad news soon from that region Saudi, Jordan, Turkey, UAE, Bahrain should be involved…

  18. jacob 2

    Agree with Gary. Biotechs still struggling to build a base. Volume suggests that a base has formed, its now just up to traders becoming comfortable with a possible uptick in the med tech sector. Resumed buying LABU. There have been a number of false breakouts, but if the next move higher can take LABU above $8 that would be very bullish.

  19. Herman

    Countertrend moves all around. EUR/USD can trade up towards 1,20 and take gold, oil and stock higher. Nice profits can be made. But once the move ends, the bust will arrive. Prepare yourself.

  20. felix

    Gary, why not hold for long term a triple leveraged etf like nugt or jnug, if you believe that in 4/5 years miners will be much higher than today???…

    felix.

  21. pepe le pew

    c r i c k e t s….
    Only four posts since FOMC and gold reversal…. wher’d everybody go?
    Gary’s telling his subscribers to go ahead and buy; Dan and Jorgy and *gosh* I don’t know how many people are running around selling their DUST; and Muffin Top is preppin some peppery repertoire for the knuckleheads who shorted the baby.
    ?

    1. Gary Post author

      No No No. I’ts too late in the intermediate cycle to buy. You need to be taking profits.

  22. Herman

    DUST could be bought when EUR/USD approaches 1,20. Same for DWTI and TVIX. Not now, way too dangerous.

  23. Don

    The biotech is down so everyone can get for that parabolic rise that Gary is predicting. I bought 100 shares of LABU just in case he’s right. Short pretty much everything else except gold.

  24. Herman

    see contrarianadvisor. Down first, reaching 122 or somewhat lower, then sharply up when bust arrives (flight to safety).

      1. Herman

        the short-term target for TLT; first down towards 122 or somewhat lower (coming weeks), then sharply higher when the deflationairy bust arrives.

  25. Ralph Malph

    Gary,

    Have you seen the surge in volume for DUST over the past month? Will this get you into DUST and possibly JDST?

    1. Ty64

      DUST & JDST both have decay issues that have can literally destroy your account balance. I really, really doubt Gary would EVER get into either of these 3X inverse Gold stocks.

      IMO…DUST & JDST should be avoided for even for day-trading unless you have enough “Will Power” to only trade these stocks in Very, Very small amounts…and then it would be just for the fun of it… ๐Ÿ™‚

      I’ve decided to take a “Just for the fun of it” trade position in DUST today…perhaps to show how dangerous this stock can be.

      Bought DUST @ 3.2399 today…62 shares = $200.87 + $7.00 trade commission = $207.87
      I’m already down 20 bucks including trade comm.

      If DUST loses 50% from my initial buy position, I will double down and buy another 62 shares and will hold there. Either my position gets “decayed” away to pennies or I will hold and wait for a 100% gain before selling.

      If I placed any serious money on DUST today. I already would have a DIFFICULT time sleeping tonight…or perhaps I would have already puked up my position back to the system.

    2. Gary Post author

      I don’t short. Did you not read the article the other day? There are easier ways to make money.

  26. Don

    *Correction* The biotech is down so everyone can get in for that parabolic rise that Gary is predicting. I bought 100 shares of LABU just in case heโ€™s right. Short pretty much everything else except gold.

  27. Punster

    Is Jorgy long or short I can’t remember anymore. Maybe he already blew up his account…again…

    I love all these fools writing about buying $DUST after ever pop in Gold. Just get long and do the opposite of that trolling bully Jorgy…

    GL all.

  28. Dammendorf

    Just get long………

    This is THE time to hedge against another global crisis and buy gold/silver.

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