Earlier this week you should have rung the cash register by closing out three positions:
1. ProShares Ultra Oil & Gas ETF (DIG) for gains of 19%
2. United States Oil ETF (USO) with profits of 8.5% …
3. Direxion Gold Miners Bear 3x Shares (DUST) for a gain of 13%.
That’s nice work for a week, but there is still more to be done. Your ProShares Ultra Natural Gas ETF (BOIL) remains underwater as natural gas prices stubbornly refuse to break out of a trading range. The false breakout two weeks ago that took nat gas briefly above $3.15 may have been the cycle peak.
But fundamentals continue to support natural gas prices, with exports booming and more utilities switching to nat gas from coal. So I’m willing to give BOIL a bit more time. Stay tuned.
Meanwhile, precious metals have corrected right on cue with our cycle forecast. But they are now oversold after three-straight weeks to the downside, and a counter-trend rally to the upside appears underway already. That’s precisely why I recommended adding the ProShares Ultra Gold Miners ETF (GDXX) to your E-Wave Trader portfolio on Tuesday.
I expect you should be able to post a quick profit with this leveraged ETF. And by “quick,” I mean before metals roll over again as gold and silver resumes the correction into November.
That brings up a topic on the minds of many readers …
How low could gold go from here?
Here are my latest projections. These are based in part on the cycles, as well as my own trusted technical indicators …
Gold broke down through the lower end of the $1,280-$1,300 support zone, trading below $1,270 yesterday. However, based on the volume and price momentum studies I rely on, a counter-trend rally should materialize. That is, if it’s not underway already.
Should the rally unfold as expected, look for gold to move up to initial resistance at $1,300 an ounce. Then it could meet the more important resistance around $1,320.
Gold could extend further than that, aided by geopolitical tensions. And there’s a growing list of potential blow-ups to choose from: North Korea, Spain, Iraq … take your pick.
After a decent bounce, I would not be surprised to see another leg down in gold to test support at $1,250-$1,260 an ounce. Then the yellow metal should stabilize and build energy for the next, bigger move higher. Ditto for silver and mining stocks.
Another outcome would be for a trading range to develop between roughly $1,275 and $1,300 per ounce, with gold moving sideways through time to complete the correction.
Personally, I’d rather see a washout move down. One that shakes out the weak hands, and gives us a better buying opportunity. But whichever scenario plays out, we should know soon enough.
A multi-week rally first … then a second leg lower in gold into early November … would sync up best with what the cycle forecast is telling us. Stay tuned.
As for currency markets, the euro is moving in our direction. That is, down — with euro futures losing almost half a percent yesterday. Blame it on the turmoil in Spain, where Catalonia is dead-set on gaining its independence.
That trend is bound to spread all across Europe. Elections in Italy early next year will be the next test for the European Union.
In the meantime, continue to hold all open positions and stay alert for more updates coming your way soon.
Good investing,
Mike
