When a market is in an uptrend, the reactions (backups) only serve to strengthen a market. Of course the trick is we need to judge the trend correctly. My belief remains that the $ is in a bull market, and thus the backups (strengthening) are the potential opportunities to get long. And like usual, I screwed something up. At 08:51, I meant wildly bearish on the $, not bullish.
US$ Video
About traderscott 1146 Articles
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.
To repeat for 100th time – the Fed is very confident. Wall Street economists are very confident, because the Fed is confident. But the main reason for these clowns’ confidence, is because the of the venerable Dow Jones Industrial Average. That is what all of this is about. We have become obsessed in this world with stock market prices. All of the confidence comes from there. That is a very concerning situation.
This guy has been prognosticating with his stupid cup-and-handle formation for the last 5 years. Timing a top again in silver? We heard the same thing with the “strength in silver” at the 2/27 highs in silver. People were coming up with all kind of weird theories for silver’s “strength”. Coil formations, and breakouts and relative strength. This kind of talk is not bullish.
http://kingworldnews.com/james-turk-mega-cup-and-handle-formation-has-silver-price-set-to-explode-higher/
A Turn May Finally Be At Hand
James Turk: “I’d like to begin, Eric, by noting that based on their Comex closing price in New York, spot gold and silver last week rose by a spectacular $29.10 and 49.6 cents, for gains of 2.2% and 2.9% respectively. Jumps of this magnitude over such a short period of time are rare, so these results from last week are important events that deserve our attention…
Importantly, this strong bounce from the lows suggests that a bottom has been made in both precious metals, and that as a consequence the short-term trend is again turning higher.
There are a number of related events that provide additional evidence that we have seen a short-term bottom.
Gold Setup Positive
First, there is the change in Comex open interest. A lot of spec longs have exited and/or moved to the short side. While some of last week’s bounce may have been a result of short covering, the relatively low open interest at present, particularly for gold, indicates that there is a lot of potential buying power on the sidelines.
Then there is the fact that gold closed lower 9-days in a row into the sub-$1,200 low reached earlier this month. But that huge weight of selling pressure could not push gold – or silver for that matter – down to the low price reached this past December.
Then there is the upside follow through we have seen today. It is of course always good news when we see some follow through like this. Even though the price rises today in gold and silver are modest, it is welcome news. After all, we can’t expect to see the big gains like those last week repeated every week.
The Big Picture
So let’s turn our attention to the big picture. The unanswered question is whether this month’s short-term bottom will develop into another important long-term low? And I say ‘another’ purposefully.
Given that the lows made by gold and silver last week are above those made in December 2016, which is also above the December 2015 lows, it is clear that the precious metals are in long-term uptrends. Therefore, any and all reversals to the upside like the one last week should be considered as resumptions of the major long-term uptrend. It is impossible to confirm that the low is in place because no one can predict the future, but we need to give the precious metals the benefit of the doubt.
Of course only time will tell what price gains will be achieved in the long-term. Though the following chart is illustrative just for silver, I think it is important for both both precious metals. While this chart maps the upside potential for silver, which is one of the most undervalued assets on the planet, it also sends a positive signal for gold.
The Massive 47-Year Cup And Handle
I’ve presented the above chart before, so it is familiar to KWN readers. The message from this chart is very important. What we see here is a major basing pattern. It is conveyed by a multi-decade ‘cup-and-handle’, with the handle now being formed. The good news it that the downtrend in the handle has been broken, meaning that the next major upside target for silver is the ‘rim’ of the cup at $50.
So silver has turned the corner. What we need now, Eric, is just a little more upside action. It is only a matter of time before that happens, and after last week’s strength, I expect that we won’t have to wait long.”
Hi scott,
Great video and very useful. Would be grateful to hear more of your thoughts on Euro/ USD targets for May or the parity target you mentioned……I also expect the USD to strengthen but for a parity target one would need a banking crisis in the EU…..a nice EU crisis and Trump to be successful in his approach……all possible but is this your thinking ?
And if so this is a great trade in the making ….would appreciate further thoughts and possible trigger points if you are also monitoring this.
Thanks,
Aamer
Before I start working on the Euro targets, I need to see where the high will be. I’d like to be in a trade already, before people “figure out” that the high is in. I gave the general targets in the video – 1.087, but also the 1.083 for a minor resistance. Getting this exactly right with the real time weirdness in markets is not at all easy and stay focused, not swayed by price alone. To set up a good short, for me it’s an upthrust thru resistance, and with “bullish news”. Remember the news follows markets, it doesn’t lead. When the bearish stories come out, the high is almost always in. Yes, a banking crisis, elections, etc. Doing this business pretty well, we’re already in the positions well before the news catches up.
Quick question about COT reports. Between the cumulative total long/short position and the change from previous week. Which of these should I focus the most when reading a report?
The total net position is most important, the change is interesting for an overview of what they did in the price changes.
Many of us follow NUGT and JNUG – Drixerion is doing another reverse split for some reason:
Direxion Announces Reverse and Forward Share Splits of Fifteen ETFs
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NEW YORK—February 28, 2017— Direxion has announced it will execute reverse share splits for eight of its exchange-traded funds (“ETFs”), as well as forward share splits for another seven ETFs. The total market value of the shares outstanding will not be affected as a result of these splits, except with respect to the redemption of fractional shares, as outlined below.
Eight Reverse Splits
Direxion will execute reverse splits of the Direxion Daily S&P 500® Bear 1X Shares, Direxion Daily Gold Miners Index Bull 3X Shares, Direxion Daily Junior Gold Miners Index Bull 3X Shares, Direxion Daily Junior Gold Miners Index Bear 3X Shares, Direxion Daily Semiconductor Bear 3X Shares, Direxion Daily Regional Banks Bear 3X Shares, Direxion Daily Russia Bear 3X Shares, and Direxion Daily S&P 500® Bear 3X Share. The splits are effective at the open of the market on May 1, 2017.
A summary of the eight ETFs undergoing reverse splits is as follows (please note the CUSIP changes, effective May 1, 2017):
Fund Name Ticker Current CUSIP New CUSIP Reverse Split Ratio Approximate decrease in total number of outstanding shares
Direxion Daily S&P 500® Bear 1X Shares SPDN 25490K216 25460E869 1 for 2 50%
Direxion Daily Gold Miners Index Bull 3X Shares NUGT 25490K570 25460E844 1 for 4 75%
Direxion Daily Junior Gold Miners Index Bull 3X Shares JNUG 25490K554 25460E851 1 for 4 75%
Direxion Daily Junior Gold Miners Index Bear 3X Shares JDST 25490K141 25460E877 1 for 4 75%
Direxion Daily Semiconductor Bear 3X Shares SOXS 25490K778 25460E836 1 for 5 80%
Direxion Daily Regional Banks Bear 3X Shares WDRW 25459Y124 25460E802 1 for 5 80%
Direxion Daily Russia Bear 3X Shares RUSS 25490K786 25460E828 1 for 5 80%
Direxion Daily S&P 500® Bear 3X Shares SPXS 25459Y371 25460E885 1 for 5 80%
As a result of this reverse split, every two, four or five shares of a Fund will be exchanged for one share as indicated in the table above. Accordingly, the total number of the issued and outstanding shares for the Funds will decrease by the approximate percentage indicated above. In addition, the per share net asset value (“NAV”) and next day’s opening market price will be approximately two-, four- or five-times higher for the Funds. Shares of the Funds will begin trading on the NYSE Arca, Inc. (the “NYSE Arca”) on a split-adjusted basis on May 1, 2017.
The next day’s opening market value of the Funds’ issued and outstanding shares, and thus a shareholder’s investment value, will not be affected by the reverse split. The table below illustrates the effect of a hypothetical one-for-two, one-for-four or one-for-five reverse split anticipated for the Funds, as applicable and described above.
More information can also be found at this Reverse Split Q&A.
1-for-2 Reverse Split
Period # of Shares Owned Hypothetical NAV Total Market Value
Pre-Split 120 $10 $1,200
Post-Split 60 $20 $1,200
1-for-4 Reverse Split
Period # of Shares Owned Hypothetical NAV Total Market Value
Pre-Split 120 $10 $1,200
Post-Split 30 $40 $1,200
1-for-5 Reverse Split
Period # of Shares Owned Hypothetical NAV Total Market Value
Pre-Split 120 $10 $1,200
Post-Split 24 $50 $1,200
Seven Forward Splits
Additionally, Direxion will execute forward splits of the Direxion Daily S&P 500® Bull 3X Shares, Direxion Daily Latin America Bull 3X Shares, Direxion Daily Small Cap Bull 3X Shares, Direxion Daily Russia Bull 3X Shares, Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares, Direxion All Cap Insider Sentiment Shares, Direxion NASDAQ-100 Equal Weighted Index Shares.
A summary of the seven ETFs undergoing forward splits is as follows:
Fund Name Ticker Forward Split Ratio Approximate increase in total number of outstanding shares
Direxion Daily S&P 500® Bull 3X Shares SPXL 4 for 1 300%
Direxion Daily Latin America Bull 3X Shares LBJ 4 for 1 300%
Direxion Daily Small Cap Bull 3X Shares TNA 2 for 1 100%
Direxion Daily Russia Bull 3X Shares RUSL 2 for 1 100%
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares GUSH 2 for 1 100%
Direxion All Cap Insider Sentiment Shares KNOW 2 for 1 100%
Direxion NASDAQ-100 Equal Weighted Index Shares QQQE 2 for 1 100%
As a result of these share splits, shareholders of each Fund will receive two or four shares for each share held of the applicable Fund as indicated in the table above. Accordingly, the number of each Fund’s issued and outstanding shares will increase by the approximate percentage indicated above.
All share splits will apply to shareholders of record as of the close of NYSE Arca, Inc. (the “NYSE Arca”) on April 27, 2017 (the “Record Date”), payable after the close of the NYSE Arca on the payable date, April 28, 2017. Shares of the Funds will begin trading on the NYSE Arca on a split-adjusted basis on May 1, 2017 (the “Ex-Date”). On the Ex-Date, the opening market value of each Fund’s issued and outstanding shares, and thus a shareholder’s investment value, will not be affected by the share split. However, the per share net asset value (“NAV”) and opening market price on the Ex-Date will be approximately one-half or one-fourth for the Funds. The tables below illustrate the effect of a hypothetical two-for-one and four-for-one split on a shareholder’s investment.
2-for-1 Share Split
Period # of Shares Owned Hypothetical NAV Total Market Value
Pre-Split 100 $20 $2,000
Post-Split 200 $10 $2,000
4-for-1 Share Split
Period # of Shares Owned Hypothetical NAV Total Market Value
Pre-Split 100 $40 $4,000
Post-Split 400 $10 $4,000
Redemption of Fractional Shares and Tax Consequences for Each Reverse and Forward Split
As a result of the reverse or forward split, a shareholder of a Fund’s shares could potentially hold a fractional share. However, fractional shares cannot trade on the NYSE Arca. Thus, a Fund will redeem for cash a shareholder’s fractional shares at the Fund’s split-adjusted NAV as of the Record Date. Such redemption may have tax implications for those shareholders and a shareholder could recognize a gain or loss in connection with the redemption of the shareholder’s fractional shares. Otherwise, the reverse or forward split will not result in a taxable transaction for holders of Fund shares. No transaction fee will be imposed on shareholders for such redemption.
“Odd Lot Unit”
Also as a result of the reverse or forward split, the Funds will have outstanding one aggregation of less than 50,000 shares to make a creation unit, or an “odd lot unit.” Thus, the Funds will provide one authorized participant with a one-time opportunity to redeem the odd lot unit at the split-adjusted NAV or the NAV on such date the authorized participant seeks to redeem the odd lot unit.
The frequent reverse split of leveraged and inverse EFTs demonstrates huge decays of those ETFs with time. Notice the reverse splits on both JDST and JNUG. It does not matter whether you guessed correctly on the direction of gold and miners. You are always going to lose if you buy and hold them sufficiently long.
Exactly – short term trading ONLY.
Given the huge decay of 3X ETFs, in general, and JDST and JNUG, in particular, I am always curious if short them is way to make money. The Jr. miners are especially volatile, the decay of JDST and JNUG should be faster than many other 3X ETFs. The biggest risk is the movement of miners temporarily work against the short and one suffers margin call. One way to reduce the chance is to short equal dollar amount of JDST and JNUG. The magnitude of whipsaw will be somewhat damped while the rate of decay is not. The biggest risk is that one gets in near the bottom (or peak) of the miners and the rally is as sharp and persistent as the one from Jan 19, 2016 to August 10, 2016.
Your strategy in general is valid. People just need to look at a chart of DUST over the last five years.
If one can survive 5 years without margin call, one will definitely make money. However, since one probably needs to set aside 5-6 times of additional capital (or securities not correlated with gold) to avoid margin call, whether or not the average annual return is acceptable is another question. Once 70% of decay is captured, it may no longer be worthwhile to spend additional time to capture remaining 30% of the decay. Instead of shorting equal dollar amount of JDST and JNUG, one can adjust the ratio slightly based on the move of miners in the previous few years. Since miners are still about 65-70% off from their 2011 highs, one can short more (in $ amount) JDST (eg 65%) than JNUG (eg 35%) if one initiates the short tomorrow.
The Bloomberg column listed below has some good brief description of the decay mechanisms of leveraged etfs.
https://www.bloomberg.com/view/articles/2017-03-23/sec-may-regret-the-day-it-allowed-leveraged-etfs.
Good article, another reason to always wanting to be short these products over a long time span. They are however fantastic for short term trading. I rarely do futures trading anymore, specifically because of these. You combine the leverage of NUGT, plus a day trading buying power, and voila. Of course there’s the upside and the downside to the increased leverage. And if you hold overnight, you have to have the cash to cover the extra daytrading margin.