By: Jeff Cooper
Hit and Run Morning Stock Report: December 12th, 2022
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Precious Metals Set To Shine In 2023
“You can only win if you have the patience and discipline to stay in the game.” Anon
Back in the summer of 2011, the metals market was going parabolic.
For those of you who were not Hit and Run members or may not have seen some of my public posts at the time, we warned that gold could strike a major top in early September 2011.
Backstopped by the Fed’ Quantitative Easing, gold was ratcheting higher into September 2011 with some days seeing $50 rallies.
The “funnymentals” kept many of the precious metals bulls on the long side for several years..even in the midst of the 4-year decline.
However, I noticed in August 2011, that gold squared out with $1921 on September 8th. There was a Time/Price square-out on deck.
In other words, $1921 is/was square September 8th.
Legendary market operator W D Gann wrote that when time and price square out expect a change in trend.
What he left out is that while all important tops and bottoms are square-outs, not all square-outs are tops and bottoms.
It is the behavior of the price action at these junctures that determines the validity of these square-outs.
Speculation is observation.
Not all square-outs are created equal.
When price spikes hard, up or down, into a potential square-out, the odds favor a significant high or low.
When the price moves up in a parabolic fashion or waterfalls into a square-out, there is a strong likelihood of a major top or bottom.
In other words, it is the nature of the drive into a potential square-out that dove-tails with Buying and Selling Climaxes.
The square-out in September 2011 proved to be a top. A big one. Gold began a 4-year decline until it bottomed at $1045 region.
On the Square of 9 below, notice that 1045 is square $1921 and opposite the first week of September…the 2011 peak.
A daily GLD shows what looks to be an impulsive 5-wave structure off the recent 150-ish low.
My expectation is a pullback now. A wave 2 pullback.
A pullback should install a right shoulder of an inverse Head & Shoulders pattern.
A powerful wave 3 advance should follow in 2023.
My minimum expectation is 2000. Clearing 2000 opens the door to a projection that must be reserved for
Members of Hit and Run.
Using GDXJ as a proxy for the miners, it looks like a Gann W V Bottom is in place.
The left bottom of the W is in July. The right side of the W is in early September.
The V is the undercut low in late September.
GDXJ triggered an Angular Rule of 4 Breakout on October 3.
This is a breakout over a declining 3-point trend line connecting the 6/2, 8/10, and 9/12 highs.
Notice the momentum in impulsive fashion subsequent to that backtest in mid-October that played out in 5 waves. Bullish.
The presumption is for a pullback now which is consistent with the idea of a test failure on Friday at the 200-day moving average.
To wit, GDXJ closed over its 200 dma on December 2 with an outside up day suggesting continuation.
However; GDXJ gapped lower the next day leaving a Fantasy Island sell signal (a cousin to the Gilligan Island sell signal).
Then on Friday, GDXJ tested the prior high and reversed leaving another outside down bar.
A pullback is in order.
A pullback in GDJX targets 34 region. Below that opens the door to the RISING 50 day moving average.
Either way, given the aforesaid considerations, a resumption of the rally will allow us to turn more aggressive moving into 2023.
This is how combining Time and Price using the Square of 9 Wheel and Pattern as traced out by my Swing Method as defined by the 3 Day and 3 Week Charts allows us to take on greater risk.
In sum, in late 2015 we wrote 2016 would be a Golden Year..
7 years later, cycles and patterns suggest similar strength in 2023.