by Poly, Zentrader
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I'm looking for the miners to break below the June Low, but for Gold to hold above it. A decline by miners below the low should trigger exhaustion selling, but if Gold doesn't confirm, it should mark a significant bear trap for investors in miners. If Gold holds above the June low, additional weakness in miners should be short-lived...and a final bottom in miners will become more likely.
Last week, I wrote that I did not want to trade Gold Long until it dropped toward the $1,220 area. I wanted to see the current Daily Cycle step-down into a sharper decline before I had the confidence to buy an oversold Cycle. Waiting, I believed, would provide a good trade setup with a much tighter stop, with the June low of $1,179 just below the expected DCL/ICL.
Last week's strategy is still on play, with Gold having done as we expected. It is now much closer to our target and a week deeper in the timing band. Patience has allowed the setup to come to us. One last drop early next week will create an ideal entry point.
Expected Trade: Within 1-3 Sessions. I'm preparing to buy a 35% position Long Gold/Silver/miners.
Editor's note: This week GDX hit a five-year low of $21.54 on Monday, rebounded to $22.36 Monday afternoon and has traded $21.60 and $21.90 for most of Tuesday and Wednesday.