GDX and IWM Follow-up -August 25, 2011

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The nasty pullback in GDX intensified yesterday and came close to hit the trailing stop (58.53) of the initial robot position. The current signal for new long entries remain neutral. Today being options expiration for gold futures and with the announced 27% rise in margin call requirements after Thursday’s close, no multi-pivot analysis could provide any help.

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The IWM robot could open its position at its limit entry of 67.97. The trailing stop at 63.85 is now 6.06% below entry, quite an improvement compared to yesterday’s 8.40% from a risk management perspective. The new optimal long stop calculation will often trail the stop approximately 2 support clusters below price at the beginning of a trade, and 63.85 is comfortably sitting just below YS1 (64.40). The position could even withstand a small overshoot below that level.

The ratios of support/resistance clusters are pretty neutral here, and only the very strong buy ST/LT edges should be your motivation to enter a secondary position today at a limit of 68.74. I know, it’s not obvious, but probabilities remain strongly in favor of long trades. However, the robot has not been instructed about the probabilities of the various possible reaction outcomes after the Jackson Hole speech tomorrow. All we know is that the ensuing moves will probably be big!

An intraday pullback down to daily S1 (67.94) would be the most natural thing after 3 up days. This could provide an entry opportunity at yesterday's 67.97 entry limit for discretionary traders.
Billy

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