Danger Zone!

Miners need to pick up the next few days or they threaten a bearish 20/50 cross on the longer term weekly GDX. If we close lower tomorrow then I believe we test the lower BBs before any meaningful bounce which is around the 50 level on the GDX. This will play out within the next four weeks. 50 had better hold. Remember…the much speculated FEAR/PANIC play for QE 3 may be in play here. Eurozone is truly in trouble and needs our QE so this may be the play. If so they cannot take this too far down.

If you use the $HUI which I like better the picture is more interesting. NEXT major support is 495. There is also a possible near term channel that COULD form if the $HUI turns hard at around 512 area. This would put us back into a firm near/int. term bull move on the miners. Again…a big announcement tomorrow would do that. BE AWARE and pay close attention to that possibility. Again that would have to occur within the next few days and breaking 495 and holding under violates that nearer term bullish scenario. Please keep an eye on that very closely.

Patience here with shorter term trades only now. Gold has a very clear channel touch and hold of around 1520-1530 for me to get very comfortable. That may occur with some very violent moves down. Let’s wait and see because the top of this channel does allow for a short term move if there is some major QE announced in the next few days for gold to go to 1734 as predicted by some. I call this all a danger zone to trade in. In other words a small core of miners and gold may be profitable short term but more than likely we get some pain near term. You can try and trade out if you get a fib retrace in the next few days. OR you can ride your trade. Sound confusing? It is…just remember…go to strong cash position with a bounce. I didn’t say sell it all…..just make sure you have strong cash. Watch the WEEKLY BBs too and RSIs for bottoms to TRADE.

Another strategy is to think about using the $XEU. The EURO is in a bearish descending wedge threatening the 139 area for a doomsday break. I would like to see another overshoot of the top of the wedge in the next few days for a buy before it breaks through 139 but I have to believe its going for 139 fast. Anyway its a crowded trade so expect some highjinx. EUO is how I’m playing it…….not a lot of movement which may be the game……they may just rip it right through 139 and keep pumping it down. Either way I’m in it for the long ride to hell. 135 is a big stop (maybe)then 128 will be a fight……then 119 for the final slaughter…..none of this will happen overnite.

Let me be clear where we are now. It is very doubtful that we are going into a calamitous crash. The Central Bankers still have plenty of tricks that will create a wild ride for traders. The tricks will all ultimately fail…but they will use them. Remember…they own the press now. Just rumors alone will make great short squeezes. Don’t forget the different breaking news BS during the last crash. Trichet should announce an emergency rate decrease anytime. They will float more rumors the Germany will support buying the Italian bonds. All BS but it will create havoc for the shorts. Alls of this will buy them time and thats really all they are doing. It provides you the opportunity to trade the technicals. Use the rips to sell and the dips to buy just don’t fall in love with any trades now. Sounds simple but its not. You have to have ammunition and right now a lot of traders are burned. All of you know how I feel about this market….Its going to hell…but how it gets there will determine if you and I go with it….so be very careful and don’t get too far on one side of the boat. gl to you

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