Earlier this week, you should have added Direxion Daily Gold Miners Bear 3X ETF, symbol DUST, to your E-Wave Trader portfolio, and your timing could not be any better.
Junior miners as a group are down about 6.5% already since the peak last week and gold has pulled back about 2% so far, trading now at $1,325 as I pen this. But we’re likely in store for a bigger correction, as I pointed out last issue, before the next major move higher for metals comes later this year.
So please remain patient and watch for my trading signals.
Look at it this way; the yellow metal has advanced 15% year-to-date, and surged more than 9% higher just since early July. Gold needs a pause to refresh – and rebuild momentum – before it launches into the next big upside move. Ditto for silver, palladium, platinum and mining shares.
Here are my updated key levels to watch for gold …
Key support lies roughly in the $1,280 to $1,300 zone, which I have pointed out previously. This zone served as resistance on the way up, with gold knocking on the door several times before breaking through on the upside.
Now it’s critical that this level serves as key support on the pullback. Otherwise a steeper correction is possible.
First resistance lies near $1,350; a level that’s needed to close the gap lower in gold on Monday. Even more important resistance lies at $1,366. This has been a key level I’ve been watching closely all year.
A monthly close above this pivot point would be bullish, signaling a possible upside target of $1,700 for gold.
Please keep in mind, there are plenty of tricky cross-currents in global markets right now; too many to list. So it’s too soon to say which way gold will break. But here’s the good news: the deeper the correction now, the better the opportunity to add to our metals holdings on the cheap before the next big move higher, and that move is coming soon!
Meanwhile, jot down these key levels listed above, watch them like a hawk as I will be doing, and stay tuned for more updates.
U.S. Dollar update …
The dollar continues to languish near its lows. Beneath the surface, momentum is building for an upside move, but no confirmation yet, contrary to our cycle forecast.
The reason why? A temporary reversal of global capital flows.
After several years of persistent inflows to U.S. markets, money flow reversed mid-year in favor of Europe and Emerging Markets.
I see this as just a temporary shift, the normal ebb and flow of money chasing performance.
In fact, U.S. stock funds experienced 11 straight weeks of outflows, with a net $30 billion leaving our markets since June. Meanwhile, European funds have enjoyed inflows over $30 billion so far this year.
The reason: Relative performance …
The Euro Stoxx Index is up 23.7% year-to-date. That’s more than TWICE the 11.6% gain for the S&P 500. Money moving out of U.S. markets means money moving out of the dollar too, plain and simple.
As a result, our September calls on the PowerShares US Dollar Index Bullish Fund (UUP) expire today with no value. No excuses here. Some trades just don’t work out as you expect, and the forecast timing was plain wrong on the dollar. That’s why it’s so important to limit the risk you take on any one trade.
However, the dollar downtrend may soon reverse.
U.S. stock funds saw $300 million of inflows the week before last, the first positive money flows in 11 weeks, so the tide may finally be turning in favor of the buck. And you can still profit from this move with your ProShares Ultra Short Euro ETF (EUO) position. Continue to hold.
Oil update…
More good news: The uptrend in oil and energy is already starting to happen, right on cue with what the cycles have been forecasting.
Crude oil surged nearly 5% higher this week, after the IEA boosted its 2017 global crude oil demand estimate by 100,000 bpd, to 1.6 million bpd, a 2-year high!
Also assisting the up move in oil was a decline of 8.4 million bbl in EIA gasoline inventories – nearly a two-year low. Natural gas surged even more on the upside this week, rallying 6.4% higher, before pulling back a bit today.
This is great news for your expanding energy sector holdings: US Oil Fund (USO), ProShares Ultra Bloomberg Natural Gas ETF (BOIL) and ProShares Ultra Oil & Gas ETF (DIG). All three positions are posting growing open gains, and I see more to come!
Continue to hold all other open positions and associated stops, and keep working your sell limit order on HD October put options. There is still plenty of time to get filled on this order.
Meanwhile, stay tuned for more market insights, analysis and updates coming your way soon.
Good investing,
Mike
