Nightly Briefing 5/13/20


The Dow has dropped 1000 points in 2 short days. Dip buyers will defend the first drop. The market may scare some shorts and make a new high into early next week. Our staff will filter data this evening to see the possible outcomes of this bounce and or new high. One good headline and the market can easily gap up 1000 points forcing early shorts to cover, panic and chase. We take great care in shorting outside of an intermediate decline (large decline), as the Federal Reserve is relentless and often these DCL's, daily cycle declines, are minor in nature. Our 2-4 day plunge events are scattered over the next 2 weeks into late May. Today was a profit taking event by nervous longs. A drop right off of a fresh high is very rare unless accompanied by an event. Tops are a process which fool most. We remain patient for our SPXS short.

GDX has already back tested support on the last pullback, the key level of $32 since breaking out. It is very rare to get a second test. We expect higher prices in the days ahead. It is hard to time the day-to-day with the miners so we continue to focus on the larger more profitable weekly trending trade.

The junior miners have yet to break out of their baby bull highs of 2016, which coincided with Gold’s first run out of its December 2015 bear market low of $1040. $32 was  the magic number for GDX to signal a major breakout. For GDXJ it is $52. Once through that expect $60 quickly. We are a few weeks away. Pilot, starter positions are not a bad idea, as it will rise with GDX. However, we will try to stay with the stronger asset class for the next 2-3 weeks in GDX.



Gold catalyzed the entire move up in the metals sector on May 31st of last year. It's presently catching its breath. It will shine strongest from late August into October generating an approximate 400 point move. For now the miners are playing catchup with Silver soon to follow. We caution against buying Silver just yet. If it breaks through $18 (spot price) our thinking would change. A year ago if we asked many fund managers their targets for Silver we promise you none would have had lower prices for May 2020. Silver has dropped! Just like many other commodities as we work through this initial deflationary trend from the coronavirus crash. Ultimately, all roads lead to inflation and hyper inflation.

HFZ

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