Iconoclastic Fury! (UNG, GDX)

You don’t read McAbby because he’s some kind of millennial wuss.

You don’t read him because he hands you a line and makes you feel good about yourself, or because he holds your hand through a losing trade that you believe will eventually turn around and deliver some long-dreamed-of payday that will likely never come.

McAbby is no feel-good newsletter writer who flatters and connives and wedges open a place in your weak hearts and soft minds the better to manipulate you and sell you some bag of toys.

mcabby102

Oh, please, friends.

Enough.

We pride ourselves at Bourbon and Bayonets on being the wildest, off-the-wall financial and market commentary on the net – that’s still committed to revealing the truth as ugly and disheartening as it first appears to be.

Our motto at B&B is –

99% Truth is 100% Lies

 

And we strive daily to live that truth, wherever it may lead us.

We therefore begin today’s missive with a brief but trustworthy discussion of the Market Vectors Gold Miners ETF (NYSE:GDX), one of the goldphile cult’s most popular ersatz gods.

For some reason that stems from the bitter misery of these all-too-bilious souls, GDX still represents the hope of a turnaround in the fortunes of that fast diminishing metal.

Have a look at her chart –

gdx102

The chart is negative.

1. Both RSI and MACD are sub-waterline, but the former hasn’t yet touched the extreme oversold 20 level (in black), a development that would likely stir up some buying.

2. All the major moving averages are trending southward and with continued negative progress should be ‘unfurled’ completely by this time next week (in blue), an all-out bearish occasion that would invite additional selling.

3. And finally, the aforementioned support line at $22 has been sundered (in red).

Until just days ago, the hope had been that GDX would put in a ‘double bottom’ here, bouncing off support at $22, the level that marks the last retracement low registered in late May.

But now that GDX has cracked below that line, hope has been dashed that the miners will lead bullion back to the ethereal realms. Instead, the next test-line is the all-time bear market low of $20.24, just a few percentage points below her current price.

If the miners are, indeed, leading bullion, it’s a death march, back toward their birthplace in the center of the earth.

funny

The arrows are all pointing lower for gold, silver and those who shovel them out of the dirt.

Keeping with the Commodities…

 

On the other hand, we want to put in a good word for natural gas here, a commodity we believe is in for a boost as the gales of November come early.

Many had thought recent chart action spelled doom for gas, but we say there won’t be any Edmund Fitzgerald sinking pattern here. Rather, we see a basing figure, and expect good news as a colder than expected winter falls upon us.

Have a look at the chart of the U.S. Natural Gas ETF (NYSE:UNG) –

ung102

After a deeply oversold RSI reading in mid-July (black circle), UNG has moved sideways in a tight range that’s persisted for two and a half months (in red).

At the same time, however, both RSI and MACD have diverged higher, with the latter scheduled to break above her waterline before the weekend, a development that should trigger bullish inflows into the stock and, potentially, force a break above the upper end of her range at $22.40. With that hurdle passed, additional funds will likely also be committed to the stock.

Not being the type to dive into the icy waters prematurely, however, we might suggest buying a PUT and CALL at the extremes of the range and let nature take its course. Just be sure to buy enough time to let the trade develop.

And consider, too, this weekly chart for gas, which is currently showing a meaningful ‘scoop’ in price by the all-important 137-week moving average.

ung1022

This is the first time since the spring of 2008 that UNG’s price has ventured above her 137-week moving average, and with that same MA in the process of transitioning higher and scooping price, we have every reason to believe the next break will be bullish.

The ‘scoop’, incidentally, offers great support at UNG $20.50, the selfsame lower end of the trading range shown in the daily chart above.

Many happy returns,

Matt McAbby, Idol Smasher, Normandy Research

See what people are saying...

  1. tradermacq

    Just to clarify, the recent all-time low for GDX occurred in Oct 2008 at $15.83, whereas the $20.24 occurred much more recently in Dec 2013, still a good support target.
    Cheers

  2. FRANK BURY

    Lets wait until it crosses over the years average.

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