Miner Rally

The Miners closed higher on Monday.

The Miners ran into resistance at the declining 50 day MA last Wednesday. They drifted lower until closing for a gain on Monday. At 19 days, that does place the Miners in the early part of their timing band for a daily cycle low. But since 15 out of the previous 18 daily cycles stretched past 19 days if a swing low forms off of Monday’s bullish reversal, we will label Monday as a half cycle low.

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Miner Outlook

Gold formed a swing low on Tuesday.

Gold printed its lowest point on Friday, day 30, placing gold in its timing and for a DCL. Tuesday’s swing low saw gold close above the 10 day MA, causing it to turn higher to signal that day 30 was the DCL. Due to the proximity of the 50 day MA, we would like to see a close above the declining 50 day MA to confirm the new daily cycle. And if a new daily cycle is confirmed that would mean that gold printed a higher low — the beginnings of a new uptrend.

The Miners did signal a new uptrend on Tuesday.

The Miners printed their DCL in mid September, which I believe was also the ICL. On Tuesday they closed above the upper daily cycle band. Closing above the upper daily cycle band ends the daily downtrend and indicates a new daily uptrend.

I believe that both gold and the Miners are sniffing out a potential top in the dollar. I plan to cover all of the short term and longer term cycles for the dollar in the Weekend Report.

Miner Reversal

The Miners have closed above the declining trend line and have begun to turn the 10 day MA higher which confirms that Wednesday was day 6 of the new daily cycle.

The Miners have also formed a weekly swing low.

The Miners printed their lowest point on week 31, placing them deep in their timing band for an ICL. We now have confirmation of a new daily cycle so the weekly swing low signals that the Miners have also begun a new intermediate cycle.

The Miners had been in consolidating for over 20 months before finally breaking down and declining into what should end up being their yearly cycle low. The long consolidation should yield a strong trending move. I think that the move into the cycle low is got everybody on the wrong side of the boat and the weekly swing low above the previous yearly cycle low is a signal that this is about to reverse.

Miner Downtrend

The Miners signaled a new daily cycle on Monday.

The Miners printed their lowest point last Tuesday, day 17, placing them in the early part of their timing band for a DCL. The Miners were already exhibiting a huge bullish divergence on the oscillators by day 17. These bullish divergences ofter accompany cycle lows. Then on Monday the Miners closed above the declining trend line to signal a new daily cycle.

A swing low and trend line break in the timing band for a DCL are some of the signals that we look for to make a long entry. However, there are 2 reasons why I am not ready to label day 17 as the DCL.
1) gap fill /timing band
2) Daily down trend.

The Miners gapped lower following Labor Day Weekend. That gap lower has not been filled. Since the Miners are in the early part of their timing band for a DCL, a very possible scenario would be for the Miners to back-fill the gap and then continue lower.

The other concern is the the Miners are currently in a daily downtrend. They have been in this downtrend for the past two months. And they will remain in their daily downtrend unless they can close above the upper daily cycle band. So while the Miners could break above the Labor Day Weekend gap, they would still need to close above the upper daily cycle band to signal an end to the current daily downtrend.

Miner Bear Trap

The Miners printed their lowest point this week, week 30, placing them deep in their timing band for an ICL.

A weekly swing low is required as part of the confirmation of a new intermediate cycle. A break above 18.35 forms a weekly swing low. The Miners are in a weekly downtrend. They will remain in its downtrend unless they close above the upper weekly cycle band.

Gold did not follow the miners lower and break below the previous yearly low. Therefore I believe that the Miners are forming a bear trap, getting everybody on the wrong side of the boat.

And after such a lengthy consolidation, once this reverses this should ignite a powerful move higher.

Miner Bullish Signal

The Miners broke lower, printing a lower low. Tuesday was day 12 for the daily Miner cycle, placing the Miners 6 days shy of their timing band for a daily cycle low. Therefore the expectation is to see the Miners continue lower which aligns with the Miners trending lower since early July.

But there is a bullish signal developing for the Miners.

The lower low on Tuesday indicates a continuation of the intermediate cycle decline. However the oscillators are diverging bullishly. Often times a bullish divergence can develop on the oscillators during an intermediate cycle low.

The last time a significant bullish divergence developed during an intermediate cycle low occurred late 2015 and early 2016. The above chart is from January 2016 which shows the bullish divergence that developed on the Miners at that time. Please notice that the bullish divergence for late 2015/early 2016 was not as pronounced as the current bullish divergence (as seen in the first chart).

And the ensuing rally out of the early 2016 low.

The other piece to the puzzle would be for the dollar to be declining into its intermediate cycle low.

In the Weekend Report we discussed the dollar is beginning its intermediate cycle decline. On Tuesday, 9/04, the dollar closed above both the 10 day MA and the declining trend line to confirm that last Tuesday was the DCL. However the dollar printed a bearish reversal on Tuesday. This eases the parameters for forming a swing high. A break below 95.08 would form a swing high, setting up a left translated daily cycle formation to align with our intermediate dollar framework. Then the gravitational pull from the impending intermediate cycle decline should cause this new daily cycle to left translate and roll over. Once that happens I believe that we will see the Miners rally.

Miner Gut Check

On Friday the Miners formed a daily swing low and managed to close above the 10 day MA to signal a new daily cycle. And while gold has confirmed a new daily cycle we still needed to see some bullish follow through this week for the Miners to confirm the DCL.

The Miners did close higher on Monday, but they still have not turned the 10 day MA higher, which is one of our confirmations of a DCL. I will point out that the Miners did close above the 10 day MA on Tuesday. So it is still possible that day 35 did host the DCL. A bullish close on Wednesday would align with that scenario.

However, on Tuesday the Miners printed a bearish engulfing candle, which means that we still do not have confirmation that day 35 hosted the DCL. At this point the Miners could deliver an undercut low. If that were to happen then that would extend the daily cycle count which would make Tuesday – day 43.

Miner Disappointment

We discussed yesterday that Wednesday’s narrow range day had eased the parameters for forming a swing low. And with the Miners being late in their timing band for a DCL that a swing low had good odds of marking the daily cycle low.

The Miners did delver a buy signal on Thursday by forming a swing low (a stop should be placed below Wednesday’s low). What was disappointing was after forming a swing low, the Miners closed lower for the day.

Wednesday, day 28, is still the lowest point following the day 6 peak. That places the Miners deep in their timing band for a DCL. Day 28 may still be the DCL, the Miners will need to close convincingly above the declining trend line to confirm. However, if the Miners break below Wednesday’s low then honor your stop and wait for the next Miner set up.

Miner Set Up

We discussed yesterday that the Miners are in their timing band for a daily and intermediate cycle low. And what we wanted to see was a narrow range bullish reversal to ease the parameters for forming a swing low. And the Miners delivered.

Wednesday’s narrow range bullish candle sets the Miners up for a low risk entry. A break above 20.80 will form a swing low to signal a new daily cycle. Stops can be placed below Wednesday’s low. Then a break above the declining trend line will confirm the new daily cycle.

Miner Capitulation

The Miners breached the 200 week MA last week and this week they are convincingly breaking below the 200 week MA. This is the 5th straight week that Miners are down. To those that do not understand cycles, it looks like a major confirmation that the Miners are in a bear market.

But cycles are telling us a different story.

This was day 26 for the daily Miner cycle and is week 26 for the intermediate Miner cycle. That places the Miners in the timing bands for both a DCL & an ICL. Because it is so late in the weekly cycle, confirmation of a new daily cycle will likely also mark the intermediate cycle low.

The Miners delivered a big drop on Tuesday. What we need to see is a narrow range day that prints a lower low to ease the parameters for forming a swing low. Then a swing low and close above the 10 day MA will confirm the new daily cycle. And once that occurs, I think it will catch everybody on the wrong side of the boat …