No ATR Confirmation For A GDX Sell-off - March 29, 2012

[Billy]

In the markets, and especially with GDX, when a prolonged sell-off starts to build momentum, volatility as measured by ATR% normally increases spectacularly. Well, GDX ATR did exactly the opposite and in fact dropped significantly yesterday so as to be now at a 1/10th decimal distance from the ATR limit rule that forbids our GDX models to short. Officially, a sell signal today would trigger a short signal, but both Pascal and I would advise to stay in cash – unless volatility explodes up intraday – because we are within one hair of a rounding up measurement error once again. For those who shorted successfully with the RT model, we encourage to take profits discretionarily if they feel so inclined.

The PM Money Flow touched its average at lunchtime but never came close to the porosity limit of -0.85% below the average. The low of the day was on Weekly S1 (84.61) which was conveniently waiting at last week’s lows. This floor price level remains the most important one to hold above this week. Clusters are neutral and Money Flow should be our only decisional guide. The failure to trade above the 5-day VWAP is a disappointment and the bulls have to start again from scratch a trend reversal pattern. Maybe a longer consolidation around a mid-point 5-day VWAP is necessary first.

Buying the secondary entry limit of 48.15 today might be a good reward-risk if you use a very tight stop. But don’t enter that position if the RT MF trades below its protection level (average – porosity), buy only if it stays above protection or reverses back up above average + porosity from the current protection level.
Billy