CAUTION NEXT WEEK IN THE METALS

I’m starting to see quite a few analysts urging people to chase the metals right here. They missed the beginning of the bull, and are now trying to make up for it by chasing late in the intermediate cycle. They are trying to convince traders┬áthat there will be no correction, or that any correction will be mild. I’ve seen this many times in the past. But I’m going to again urge caution. The baby bull is in the final phase where he destroys the portfolios of the shorts and panics longs into abandoning all commonsense right before the first counter trend reaction.

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31 thoughts on “CAUTION NEXT WEEK IN THE METALS

  1. tulip

    Gary,
    I haven’t seen any word of that… urging people to buy…
    not any….maybe allocate a little on dips of 20% in good pm stocks..
    Who is saying or urging…???

    1. Gary Post author

      Jordan Byre just did an article where he tried to rationalize that the gold COT’s are somehow bullish and Plunger just posted to his blog that the first year of a new bull there are no pullbacks or that they are very mild. Doc last week was also calling for gold to go higher, and he even suggested that it could go much higher.

      I’m not sure why any of these guys would expect price to continue to surge now that the miners are stretched further above the mean than any other time in the last 16 years.

      Like I said; the final phase of a baby bull causes traders to abandon all common sense.

  2. Dave

    You posted on April 3 metals were too early to reenter. Since then you’ve missed a 25% move in GDX and a 100% move in nugt.

    1. Gary Post author

      So what? I caught the first part of the rally and made huge gains. Without a crystal ball there was no telling how high, or even if the miners would continue to rally.

      None of the gains since April are going to be sustained anyway. We are going to have to repeat this whole move again. So anyone (Old Turkey’s) who bought in April are going to ultimately watch as all these gains fade away during the ICL.

      That’s where I want to buy heavy is at the next ICL. The move out of that bottom will be sustained.

      1. Dave

        Oh I see. Because u made gains it’s ok to to miss another 100% in nugt.

        I figured u had a crystal ball because ur always making statements like:
        Just like I predicted.

        You can’t have it both ways.

        1. Gary Post author

          Absolutely it is alright to miss the second half of the rally.

          The difference is that you are taking the luxury of trading in hindsight. Now that the move has already occurred you can say it was a mistake. However none of us ever actually get to trade in hindsight. So a month ago no one could know where the top would occur at.

          I’m more than satisfied with the trade. We made great money and we’ll make even more out of the next ICL, while all the traders that bought after April will ultimately give back their gains unless they can time a perfect top.

          It’s the difference between trading in real time as opposed to Monday morning quarterbacking. Heck I said months ago that if one wanted to catch every last penny then they should just hold Old Turkey. I expect any one who wanted to did.

          I use some leverage at ICL’s so I can’t adopt an Old Turkey strategy because I can’t risk getting caught in an ICL.

          1. GoldenYears

            Gary – at what GDX level did you move to sidelines? I am in the other camp, that since the bull started from the depth of despair, mining stocks are still very cheap compared to metal itself and we might not see a significant pullback for a while. I don’t think it is possible to have a single lens for all the situations. Here is a good writeup by Adam Hamilton explaining it.

            http://www.zealllc.com/2016/gstoofar.htm

        2. Anthonyo

          I think someone is frustrated since they missed both moves up and i snow trying to relieve some of his anger by blaming the analyst who predicted the move up in the first place when no one else was doing it, including the cry baby complainer.
          What a brat.

  3. mike trike

    The majority of the pm stocks I own are very overbought. None of them are overvalued though. They need to double again before I would even consider them fair valued. The stocks were so absolutely, ridiculously crushed in value that even after such a huge move they are still a buy IMO.
    These are junior producers/explorers, none of which are part of GDX or GDXJ.

    1. Gary Post author

      Heck by the time the bull is over every mining stock will be so grossly overvalued that it will be beyond comprehension. Similar if not worse than tech stocks in 2000. But that still doesn’t mean there won’t be corrections along the way. Price can only stretch so far above the mean before a profit taking event has to occur to cool off sentiment.

      1. mike trike

        I agree they will be overvalued eventually. Why not buy some of the smaller plays now. Many of them are still screaming buys. GDX and GDXJ might have a sharp correction but the smaller ones with good projects will hold their value because they are still very undervalued and I think they are in strong hands at this point.

        1. Gary Post author

          I’ll leave that to you, I don’t trade individual stocks. Got caught one too many times by company specific events that triggered huge gaps. Never again.

    2. super_dave

      Mike,
      Care to list your top 2 or 3 prospects on junior producers/explorers and why?

      Thanks

  4. mike trike

    The only analysts I see who are bullish on PM’s in the short term are Jordan Byrne, Adam Hamilton and a few “analysts” at goldtent. Posters at goldtadise like Plunger, Fully, Mark, Surf and others are not professional analysts who get paid for their opinions. They are very smart people with day jobs who post their analysis for free.

    Jordan Roy-Byrne and Adam Hamilton are the only professional analysts I see who are kind of bullish right now.
    The majority, like Clive Maund, Gary Savage, Dan Norcini, Martin Armstrong, Larry Edelson etc, are bearish as hell!
    I would bet that Larry Edelson has multiple times more followers than goltadise, Jordan Byrne , Adam Hamilton and the rest of the bulls combined.
    Almost all analysts say we are in a new bull market but don’t buy until a major correction, which means they are bears currently.

    1. Gary Post author

      Just last week sentiment in gold was at 71% bulls, silver was 75% bulls. These readings are in the top 10% over the last 16 years. Sentiment is not bearish, it is becoming quite complacent. It is these levels that typically initiate an intermediate top, and a more significant profit taking event.

      I’ll say it again: It’s too late to chase. If you are holding Old Turkey you might want to consider putting on some hedges to soften the sting when the metals sector moves down into the next ICL.

    2. Anthonyo

      Jordan Roy-Byrne is chronically long winded and boring, … and almost always wrong.
      The only person who is more wrong, I acll him perma-wrong, is Dennis G(F)artman and the CNBC clowns.

  5. kupqaz

    Gary,

    I see in the vid, you think that GDX will soon double top, its because USD will probably test support again?

    TIA

    1. Gary Post author

      That was just a guess. The miners may head down quickly or they could rally further still. I’ve never found any consistent way to spot a baby bull top.

  6. Joseph69

    What to do with my LABU position?

    You got out at 35 the same time you pounded on the table it was going to the moon. Nasd 25k?
    You re-enter at 30 only to see it crash 20% in 4 days.
    Is this all part of your prediction?

    1. Gary Post author

      We may have missed the bottom by 3 days if Friday marked the DCL. 3 days is close enough in my book. I want to see how we open and close tomorrow before I decide if Friday was indeed the DCL.

      And you have to be able to weather big swings if you are going to trade 3X funds.

    2. J

      You need to do what you think is best ,,its your money. While I disagreed with Gary on the IBB play and posted a chart here a week or so ago why, It is in absolutely no responsibility of his what you do with it. If youre not a subscriber, which I am not, and you bought because of something you read on a blog with no analysis of your own, then youre losses are on you. Take them and learn from them, don’t buy on an opinion of others, do your own homework, Know why you bought and why youd sell, them youd know what to do “with your LABU position”,,You could sell it to me tomorrow, ,,But difference is, if it goes against me, ill know what to do.

  7. Joseph69

    What are the chances the next leg down for biotech is starting? Since you don’t use stops, what’s the strategy if your guess is wrong?

    1. tfinavia

      Labu is a buy now. I would guess xbi target no more than 57.7 by May 20 which will lead labu to 34.50 After that, I would aim for LABD trade.

    2. Gary Post author

      There is nothing wrong with biotech at this point. It’s still making higher highs and higher lows. The only problem is that novice traders aren’t getting the instant gratification they desire, so they are ready to sell a winning trade for a loss.

      This is how most retail traders lose money. They buy with the expectation that they’ve picked a perfect entry (which almost never happens) then they panic and sell for a loss without ever letting the position work.

      Folks all that has happened is that the DCL in stocks has dragged the biotech sector down with it, just like it dragged the energy sector down. Once stocks start the next cycle and test the all-time highs biotech will follow the market back up.

      Give the position time to work.

  8. Gary Post author

    Heck if I traded like the average retail trader I would have stopped out when miners made a lower low in January and missed that big move up off the bottom.

    Folks if you want to make money, and especially if you want to make big money in this business you have to do the opposite of what everyone else does. If you go through life following the herd then all you will ever accomplish is to be average.

    If you want to be exceptional then you have to leave the herd and follow a different path. I’m trying my best to guide traders onto that path. Most will never be able to make the transition, but some will, and those are the people that will make money in the markets.

    I’ll say it again for the umpteenth time. If you are serious about wanting to make money you absolutely must have a subscription to sentimentrader.com so you can get real sentiment data and condition yourself to be a contrarian when sentiment becomes extreme. (sentiment has reached extremes in the metals setor). I also believe a working knowledge of cycles is a great compliment to monitoring sentiment. So when sentiment reaches extremes and it occurs late in a cycle you will have the confidence to pull the trigger.

  9. Roadster

    Of course you are right on this on. It’s when you start seeing articles stating that gold and the pm shares are special and will completely ignore technicals you know they are in for a fall.

  10. Gary Post author

    We’ll see how the day closes but I suspect we printed the daily cycle low on Friday. And gold should still have a good ways to drop yet before it completes its DCl. It needs to break the cycle trend line. Then there should be at least one failed daily cycle before the ICL is complete. A retest of the 200 DMA would be completely normal for a first reaction low off the bear market bottom.

  11. Don

    LABU is now down 32% from it’s high just a month ago. Gary, are you ready do do another short term trade on XBI or IBB?

Comments are closed.