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Truth is timeless: “Markets never change” – Jesse Livermore, 1923 The early masters, Livermore, Wyckoff and Loeb isolated themselves from the crowd and crowd thinking. None of them ever graduated high-school and yet they each became legends in the market. Their techniques have been time-tested.... More
  • Market Summary: AEM, AUY, DUST, GDX, GLD 0 comments
    Apr 17, 2014 4:23 PM | about stocks: AEM, AUY, DUST, GDX, GLD

    "What is the market doing?" This is the question that seems to be ever-present.

    The financial press that is comprised of internet, radio, television, newsletters and brokerage reports recognize the demand for and supply the answer to that question.

    By doing this, they keep the majority of the public focused not only on the wrong question but on the wrong answers as well.

    Meanwhile, on the other side of the market are those (the non-public) that ask a very different question: "What is the market not doing?"

    In his book "The Black Swan", Nassim Nicholas Taleb1 has a similar form of the same question. I am not able to provide a quote as I do not have copyright authorization. However, the same 'not doing' question is there.

    Let's briefly apply this question (or anti-question) to the following markets:

    • Market Vectors Gold Miners ETF (NYSEARCA:GDX)
    • Direxion Daily Gold Miners Bear 3X Shares ETF (NYSEARCA:DUST)
    • SPDR Gold Trust ETF (NYSEARCA:GLD)

    Looking at a monthly chart of GLD we see that GLD has been declining for over two years.

    (click to enlarge)GLD Monthly

    Chart by TeleChart

    All of us by this point have heard ad-infinitum that there is supposed to be inflation as a result of massive money printing. So, where is it? Where is this run-away inflation (as would be evidenced by a stratospheric gold price)? What is the market not doing?

    What the market is not doing is that it is not going up. It may go up later but it is not going up now.

    Notice that the "why" is nowhere to be found. The why of the market did not concern the early masters. They wanted to know "what", not "why". As Wyckoff is quoted saying: "The why always comes later, after the fact."

    The same goes for GDX. It is not going up either. In fact, GDX is currently in a steep down-channel that is becoming more prevalent with each session.

    (click to enlarge)GDX Daily

    Chart by TeleChart

    The why of all of this market action will come out later.

    For now, our job is to recognize that gold and the gold miners are not going up. For whatever reason, they are not moving higher and in fact continue to push lower.

    The following is a brief comment on the Agnico Eagle Mines Ltd. (NYSE:AEM) and Yamana Gold Inc. (NYSE:AUY) Osisko deal:

    The combined cap-value of AEM/AUY is about 13% of the top eight gold mining equities.

    AEM and AUY may have (repeat, may have) assured themselves of at least two years of accounting frustration. In addition, they are forming a "joint-ownership" of the former Osisko.

    For those who have had the experience of being the leader in a high-stress position, the last thing you want is "joint" anything.

    We will see how this all works out. However, the market is already voting thumbs-down for both AEM and AUY.

    The case is especially bad for AUY as it now has a measured-move target below the 6.00 area:

    (click to enlarge)AUY Monthly

    Chart by TeleChart

    1: 2007, Taleb, The Black Swan: The Impact of the HIGHLY IMPROBABLE ISBN: 978-1-4000-6351-2

    Disclosure: I am long DUST.

    Stocks: AEM, AUY, DUST, GDX, GLD
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