GDX On Shaky Grounds – IWM Short - April 17, 2012

[Billy]

The IWM robot entered its short position at 80.03 with an initial stop at 81.63. That stop is located just above today’s daily R3 (81.61) and only a strong trend day through Quarterly pivot (80.28) and weekly R1 (80.92) could be a threat to the position today.

The odds are low to see strength in the near future since the 20 DMF keeps deteriorating at a fast pace, indicating that large players are maintaining their selling pressure. IWM could avoid a decisive breakdown below Monthly S1 (79.26) yesterday but it is likely to be retested soon. Below that level, there is very little floor support left before Quarterly S1 (75.90). QS1 becomes a serious target if IWM can’t recover Quarterly pivot (80.28). In this context and with bearish LT/ST robot settings, there are still good edges for entering a secondary position at the same limit of 80.03 as yesterday.



The Precious Metals Money Flow closed exactly on the 0% line and there is now only the EOD porosity tolerance (-0.150% today) left for protecting the GDX robot to sell its position at the open tomorrow. We’ll need to see the new LT/ST settings before deciding to short or stay in cash.

The RT model will reverse to a short if the -0.150% level is hit intraday. Due to the proximity of the MF average, too many scenarios and whipsaws could develop thereafter and we’ll try to keep you updated in the forum. It’s probably best to rely on the EOD model to avoid potentially shaky intraday RT signals.

The GDX robot found enough edges to advise a secondary entry today at a limit of 46.13. With the protection level now so near, make sure that the MF is still above -0.150% when you enter the trade.

Technically, GDX relative strengths vs. SPY and GLD have now crossed back below their 63-period moving average on all timeframes from the hourly to the 5-minutes chart. This is a very negative evolution that puts into doubt the sector rotation scenario. GDX has lost all the progress it made last Thursday which looks now like a “dead cat bounce” in hindsight. But the multi-pivot outlook remains excellent with a 31:8 total strength ratio between support and resistance clusters. This should put some breaks on any aggressive selling pressure.
Billy