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Robert Edwards
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Contrarian daytrading technician who specializes in micro scalping of stocks (using 1 minute bar charts), swing trading of stocks overnight, weekly stock option premium selling, pre-market and post-market psuedo market maker and stealth trading activity, and selling commodity option strangles... More
  • Robert Edwards: Calling For Gold Top Wednesday, Oct. 30, 2013, Then 2 Week Down Cycle 8 comments
    Oct 26, 2013 7:24 AM | about stocks: NUGT, DUST, GLD, GDX

    If you have read my articles, you know that I project future price action based on past price movements. I do a "count" where I find a similar price pattern in the past that matches what the market is doing currently, so that I can have a road map of the future. It is kinda hokey pokey but I still do it, because it so often works. When I start looking for the price patterns I never know in advance what exactly I will find. I often have little conviction in the results, especially at first, as I try to remain an open book without any bullish or bearish bias that could skew the results. Once I get the "count" I then ask myself if it makes sense or not. I am often just as surprised as others are, when things work out as planned. So looking at the tea leaves, what do I see coming up in gold? My study has come up with a definitive conclusion that we should have a gold metal and miner top on Wednesday, October 30, 2013, followed by a 10 trading day (2 week) down cycle.

    Background

    I was having problems getting a "count" looking at the gold chart, but when I looked at Platinum, it all fell into place quite quickly. Just look at the daily January 2014 Platinum chart below:

    (click to enlarge)

    Back in June 2013, platinum had support around the $1460 level as marked in the above chart. Counting the day that support was broken, we fell 10 trading days to a low in late June at around $1310. We then had a three day rally and a three day selloff to retest the low. Comparing that to current price action, you can see in the chart above that when the Fed surprised the market by not tapering the bond buying quantitative easing program on Sept. 18, 2013, we topped out in platinum on Thursday, Sept. 19, 2013. We then experienced a 10 trading day down cycle, followed by three up days, and three down days, just like we had last summer.

    Looking again to the summer price action, the 3 days up and 3 days down were followed by 10 days up to a day that I have circled and marked as the current doppelganger or body double to the bar comprising Friday's close. For the current rally has also gone exactly 10 days so far, with strong up days on 1, 4, 7 and 10, similar to the 10 up days in July. If we are following the July pattern, Friday, October 25, 2013, is equivalent to Friday, July 19, 2013. To see what is ahead, we merely need to look at what took place the following week in July. We find that Monday, July 22, 3013, was extremely strong and that we topped out on Wednesday, July 24, 2013. We then went sideways to lower for two weeks. Now that we have established the pattern, lets compare this to the daily December gold chart shown below:

    (click to enlarge)

    Here I marked the corresponding low that platinum had just prior to the 10 day rally to the July 19, 2013 doppelganger. Again we were strong in gold on the 4th, 7th and 10th days in July. We see the same strong Monday in gold on July 22, 2013. A nearly unchanged Doji on Tuesday and instead of a topping Wednesday, gold starts down on Wednesday and instead of going mostly sideways, it falls for two weeks. It does not fall hard those two weeks, but it is down nonetheless. If we repeat the same pattern now in October, we should get a strong rally in gold starting Monday, October 28, 2013. (Note: We did in fact take out resistance on Friday in gold between $1353 and $1355, so it is logical that we could shoot up Monday to resistance at $1375). We could continue strong until Wednesday, October 30, 2013, which happens to be the Federal Open Market Committee (FOMC) decision announcement. If we follow the same pattern as before, gold should drop when the decision is announced. Since the government shutdown slowed the economy, no one is looking for the Wednesday FOMC announcement to mention any hint of a taper and it is supposed to be uneventful with no metals reaction. However, maybe they will say something that boosts the dollar and depresses gold and starts the projected two week minor selloff.

    Gary Savage Is Calling For A Similar Wednesday Top In Gold

    At Kitco.com I found the following audio file, click here, and select the third entry on the page "More Thoughts On The Possibility of $1,000 Gold" where Al Korelin interviews Gary Savage. Mr. Savage explains how the banks want to kill gold again, like they did in the April/May timeframe, and he believes it will begin this Wednesday beginning with the FOMC statement. Unlike a two week selloff that I am calling for, Mr. Savage sees a 6 week selloff I believe. His analysis is somewhat in line with the $1200 gold low in late November 2013, predicted by the Charles Nenner Research Center, click here. I happen to like to listen to Charles Nenner Research predictions because they are contrarians like myself, but their track record is not nearly as good as they claim. They probably miss on a lot more calls than they hit on. Still, it is fun to hear another person's opinion and keep it in the back of your mind in case we do see weakness ahead.

    I do believe that Gary Savage hit on a very important point. There are very powerful forces at work (banks and governments) that want to keep gold prices down and they will do almost anything to accomplish their goal. They have recently benefited from the market manipulation of renegade bears, powerful traders who place thousands of sell orders at once, in the thin overnight Globex trade, knocking out technical chart support. Even though gold has recently been resurrected from the bottom, it is still fighting a very strong headwind of bearish sentiment and big money with an agenda to see lower gold prices.

    Conclusion:

    I don't see $1,000 in gold, or $1,100 right now. But a retest of $1250 down to $1200 would not be impossible. Even if we just return to support in the $1300 to $1325 range, the "count" indicates we could top out in gold and turn lower beginning Wednesday October 30, 2013, and we should head sideways to lower for ten trading days. Until I get new information, this is my best "guess" of where we are headed in gold and the miners. If gold starts rallying Sunday night, October 27, 3013, I will probably buy some gold futures and may play GDX/NUGT from the long side early this coming week. If long, I will definitely take profits by Tuesday's close and will be prepared to jump in DUST beginning Wednesday, October 30, 2013. If DUST catches fire I will continue to day trade DUST for up to two weeks when I will be looking to switch back into GDX/NUGT. This is all just a projection and will have to be confirmed by price action. If things fail to materialize as expected, then I will throw this plan out and consider it just a bad dream. Time will tell.

    Stocks: NUGT, DUST, GLD, GDX
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Comments (8)
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  • njtoms
    , contributor
    Comments (22) | Send Message
     
    Loved your Article except for the 2nd to last sentence. "A Bad Dream"?
    26 Oct 2013, 11:40 AM Reply Like
  • glaserdx
    , contributor
    Comments (262) | Send Message
     
    Rob-
    Thank you again for sharing your thoughts and the logic behind them. It takes a lot of guts to put yourself out there, and you do it consistently with a sort of modest grace.

     

    I agree that there are very powerful political forces that want to protect the dollar, which means attacking the gold price. We will soon see how this current dream turns out.
    26 Oct 2013, 02:26 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (587) | Send Message
     
    Author’s reply » GDX & NUGT were higher on Monday, Oct. 28, 2013, but both completed a bearish deliberation block which you can read about at americanbulls.com by clicking http://bit.ly/1cf8Df1
    29 Oct 2013, 12:38 AM Reply Like
  • ptTL9
    , contributor
    Comments (273) | Send Message
     
    thank you for the link
    29 Oct 2013, 09:55 AM Reply Like
  • tfinavia
    , contributor
    Comments (20) | Send Message
     
    Robert, so the bearish deliberation block completed which delivered a bearish day today 10/29; but the system would recommend it as 'STAY LONG'. So, I guess it's just a warning on the bearishness that's arising in an uptrend? I am just trying to see how to read it and what to make sense of it.
    29 Oct 2013, 02:56 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (587) | Send Message
     
    Author’s reply » When I say we turn bearish on Wednesday, 10/30/13, it is a turn in the cycles but it might not exactly turn on that date and may have come a day early. The bearish deliberation was confirmed when we weakened today,10/29/13 in GDX and at americanbulls.com they sold today to take profits on their long position. They did not go short as they must believe we are still in an up trend and want to be ready to buy GDX again when they get a buy signal. It will be interesting to see if tomorrow we continue to fall.
    29 Oct 2013, 09:06 PM Reply Like
  • tfinavia
    , contributor
    Comments (20) | Send Message
     
    Thanks for your insights. USD looks ready to fall for a few days, hitting stops before starting a couple of weeks of an uptrend. This could coincide with no tapering FED stance. If that's true, then I am thinking that GDX/NUGT will rise till Thursday/Friday.
    29 Oct 2013, 09:44 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (587) | Send Message
     
    Author’s reply » As we are upon the FOMC meeting, these are my thoughts. I expected a two day rally in gold to occur Monday and Tuesday of this week. Instead, gold has been weak. That increases the chances that today, Wednesday, Oct 30th, will be up somewhat in gold. However, I still believe today marks a top and I will be using the strength in GDX to force DUST down towards $25, and I will buy DUST if it falls today. Starting tomorrow, Thursday, I am still looking for a 2 week selloff in gold, GDX & NUGT. I am looking for a 2 week rally in DUST and look forward to possibly getting in at cheap prices today if there is strength in the metals. The last rally on a FED decision (no taper) caused a massive rally but it did not last. It was an opportunity to sell. Any rally from today's FED decision should also be faded, IMHO. Even more so than last time.
    30 Oct 2013, 05:25 AM Reply Like
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