Precious Metals - February 20, 2011

As explained in the post of Feb 5, 2011, I have so far been correct about the turns of the PM market

We saw the top coming

We had a correct drop zone target area for the correction

We correctly speculated the low and the bounce

So far, amazingly, PM sector's behavior has been routinely predictable.

It will not always be like that, and, at some point curve balls will be thrown left, right, and center.


One important thing is to determine is the ongoing trends and risk levels across multiple levels. As I explained to my subscribers at Market Time Premium, now that I have gotten into position nicely at the most recent low, my job becomes one of position management. A correct entry means nothing without a proper exit. We are not doing what we are doing to pick turns and curves, we do this to make money and a good entry is just a beginning.

This is my current trend table for some popular PM ETFs



There has been a lot of improvement in the sector as far as short and mid-term trends and stages are concerned. The sector is not completely out of woods but it has take good steps in the right direction.



At Market Time Premium, I employ a variety of techniques to study, analyze, and characterize price behavior of the market.


I am an avid student of market breadth and am constantly thinking about algorithms and indicators that may allow me to have a proper characterization of market internals.

Within my tool set, I have the following

Objective Elliott Wave (OEW) Trend Indicator


Objective Elliot Wave (OEW) is an enhancement to traditional Elliott Wave. OEW was invented by Tony Caldaro of http://caldaro.wordpress.com. In addition to observing all rules and guidelines of traditional Elliott Wave, OEW has rules that help objectively determine the end point of significant waves. That is a powerful thing to have as it removes the subjectivity of wave end determination that has always been a weak point of traditional Elliott Wave

Based on that, I have developed a breadth indicator that determines percentage of stocks in mid and long term uptrends in a market


Market Alignment Index (MAI)

Long time readers of this blog know that I am keen on the study of a market posture. I like to know the market alignment and understand if it is negative, neutral or positive



Using a complex study of price and a host of indicators, I have developed an algorithm that would produce a bounded oscillator ({-100}-0-{100}) to conveniently display the market's alignment

This is breadth chart of gold miner ETF, GDX with the above indicators




The first indicator panel contains the OEW Breadth Indicator. You can see how nicely it got oversold into a state where almost all ETF constituents were in confirmed OEW downtrends. That was a condition that prompted me to be on guard for a possible bottoming process and at least a bounce.

In the bottom two panels of the chart above, I have Market Alignment Index (MAI) for weekly and daily prices. You can see that while the daily MAI got seriously oversold while weekly MAI stayed positive through the process. This means that the weekly posture of GDX maintained its positive alignment while the daily time frame was correcting.

Daily MAI is now neutral. Meanwhile, weekly MAI has improved. This has been a good bounce. There has been a lot of improvement with price and market internals in the PM sector. But it can be better, it must be better.


So, while I am encouraged by my good entry near the lows and the behavior of the PM sector, I am not complacent.

At Market Time Premium, I study and define my risk levels across multiple time frames.

I approach the market from larger time frames to smaller time frames. But, knowing that change happens at the margin of smaller frames, I define and monitor my risk levels from smaller time frames onto larger time frames.

For detailed multi-frame analysis, and annotated charts, subscribe to premium content at

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