If History Rhymes…

old woman shoe

History doesn’t always repeat, but if we are indeed witnessing a 4-year low in mining stocks then we can look at the last bottom and see if it will rhyme. Whether you use cycles or Elliott Wave, the general structure of moves remains similar:

May 30th GDX 2008 EW

May 30th EW IC

The important things to note are that the next daily cycle low (Wave 2 down) is likely to move below this point today, and that the next daily cycle (Wave 3 up) tends to be the most powerful. GDX almost doubled in that impulse move alone in 2008.

With the backdrop of the largest short position in precious metals of the entire bull market and historic pessimism, I wouldn’t put it past the worst performing asset class in the market to pull something unexpected out of their…shoe.

Good trading all.

Steve Chapman, TRI

8 comments on If History Rhymes…

  1. NJ
    May 30, 2013 at 9:50 AM (2 years ago)

    Hi Steve:

    I guess we have an alternate plan in case we don’t come back and visit today’s levels again and just grind up from here?

    • Steve Chapman
      May 30, 2013 at 9:55 AM (2 years ago)

      With regards to which instrument? Just clarifying your question.

  2. NJ
    May 30, 2013 at 9:58 AM (2 years ago)

    GDX….the above chart. in case we don’t get the rhyme and don’t come back down.

    • Steve Chapman
      May 30, 2013 at 10:02 AM (2 years ago)

      Miners are volatile enough that their retracements are significant even in a fresh intermediate cycle. The next daily cycle low is where to get heavy, but this one still provides a nice trading opportunity. I will explain different ways to play the intermediate cycle in the weekend report.

      Right now miners and metals are rebuilding their fractal energy after the impulse move. The shorts are on the wrong side of the move and praying it doesn’t keep going. Everybody I have read today is trying to short this move, and that is exactly what you want to see at a major low because it provides the fuel for higher prices. Bull moves happen when everybody keeps trying to short them.

  3. kreks
    May 30, 2013 at 10:48 AM (2 years ago)

    Hi Steve, if you have the time, it would be great to see a similar chart ‘projection’ for silver and gold (for those of us trading futures!). Cheers.

    • Steve Chapman
      May 30, 2013 at 10:53 AM (2 years ago)

      I will post one tonight for you.

  4. kreks
    May 30, 2013 at 1:46 PM (2 years ago)

    Thanks. Really I guess what I’m asking is, do gold and silver behave differently coming out of an intermediate bottom than miners? The action in silver the past two days, for example, has been very different to, say, miners.

    • Steve Chapman
      May 30, 2013 at 2:18 PM (2 years ago)

      Ideally, and I’m saying this honestly, we want to see the miners lead the metals. That is a very good sign that the move is for real and not a headfake.