By: Jeff Cooper

Hit and Run Morning Stock Report: June 2, 2023

Metals Bottoming Pattern In Progress

As I have been flagging the last few weeks we were heading to the completion of this corrective pullback in the metals.

The first sign of that low in GDXJ was when it turned its 3 Day Chart up on Wednesday and followed through with authority on Thursday.

To recap, yesterday’s special report highlighted how May 24 is 90 days/degrees from the internal low of the prior swing low on February 24th .

See yesterday’s GDXJ chart below again:

Going into Thursday I could make out a small 5 wave rally off the low in GDXJ (and silver and gold).

Thursday’s follow thru on the heels of 5 waves up and after the turn up of the 3 Day Chart was a bullish development.

We tweeted Thursday morning that initial short-term resistance was the 38.80 region.

GDXJ struck 38.80 like a heat-seeking missile.

From that point it pulled back, turning its 3 Hour Chart down.

The normal expectation would be for a rally attempt following the turndown of the 3 Hour Chart if the agenda is immediately higher.

If we do see immediate further upside momentum, GDXJ has its work cut out for it:

Just overhead is the declining 20 hour moving average at 39.00.

Clearly 39 opens the door for Opex Pinball to 40 which ties to the 50 day moving average at 39.80.

I don’t want you to get overly emotional at the prospect of a major low and bull campaign but follow thru above 39.80 supports that idea based on the big picture structure.

I want to note one point about the larger time frame charts that supports that notion.

The larger time frame sets up in an almost textbook structure.

A clear-cut Angular Rule of 4 Breakout is on deck on trade through 44.50-45.

Underpinning the idea of a successful breakout is that it looks like a wave 1 played out from September to January followed by a wave 2 corrective pullback into the March low.

My take is that the rally from March to April was a wave 1 of 3 with the ensuing pullback into May 25th being wave 2 of 3.

If I am correct a powerful 3rd of a 3rd wave is in progress---just at a time when the vast majority---even dyed in the wool metals bulls---have been conditioned to book profits on the rallies….because that has been the correct posture for three years.

Third of third waves are the most dramatic; that being the case the expectation would be a momentous Rule of 4 Breakout.

Moreover, 360 degrees up from the September 2022 low of 26 is 50.

The takeaway is that GDXJ ‘should’ satisfy a 360 degree move.

By definition that means that a Rule Of 4 Breakout on trade above 44 will be triggered:

GDXJ must advance through 44 to get to 50 obviously.

That said, a monthly Rule of 4 Breakout and a 3rd of a 3rd wave suggests GDXJ will not stop after satisfying 360 degrees.

The aforesaid are more consistent with pointing to a full 540-degree run.

540 degrees up from the 26 low is 66.

Remarkably, 65.95 is the spike high in August 2020.

The bottom line is there is a lot of synchronicity pointing to a test of the August 2020 peak.

Is it possible that occurs as quickly as this August since markets often times plays out in threes?

3 years is 1080 days/degrees.

Notice how this is TWO cubes (540 degrees).

August 1st squares 66.

Is it possible GDXJ rips to 66 in August?

That’s only a few months away and seems like a stretch to say the least.

The takeaway is if such a move is on the table something dramatic is happening this summer.

An outsized move in GDXJ is consistent with my projection for GLD.

As noted months ago, GLD’s 150.50 low in November 2022 projects to 203.50 as 203.50 is 360 degrees up.

Importantly a rally to 203.50 triggers a MONTHLY Rule of 4 Breakout.

540 degrees up from 150.50 is 232.

The presumption is a monthly Rule of 4 Breakout will perpetuate a 540 degree target.