Thermite-level selling at 17000 going to make it hard to approach that level without further lows.  Short-term lows extended the megaphone top lows from last year's Ebola plunge.  Now we have a 2000 pt. trading  range for the banksters to get back into the vol premium game.  Projecting today's lows as a low for the right shoulder and a bounce to about 16,900, then a 100% extension takes us to the 14000 level targets give or take.

100 fib retracement from 3 year rally and 161 from 6 year rally coming into play not too far below around 1900 give or take.

2 fan projections  from the upleg starting in nov 2012 both overlay pretty well and show fan support at  about 3920 - 3925 on the /nq.   which is about another 100 pts down.   Dow no major support until 14200-14400, maybe 15800 or 15200 on the way there.

This is a pretty good illustration of how real breakouts occur.  Completely fake but sharp enough takedown near highs and then a vertical blast right back through.   Don't really see a gap at $3.80, just a bit this a.m., very good chart structure overall.

Guyana was in our original basket at the start of the year and has done nothing to disappoint.  Last I checked, they had to do their last fleecing / fundraising last year in the mid $1's and have about a $750 COP.  The fact that they continue to go up while the $1100 area on gold keeps getting tapped shows that smart money shows these guys should be in the clear unlike so many others trapped in debt raising death spirals.

10 stocks for fall model fund in watchlist (2nd chart) Kirkland doing its thing pretty much on cue up 15% or so.   Others I mentioned in the related post ... Torex doing very well, great chart reversing the entire year of trendless junk.  PG.to solid.  You'll find a little more volatility here and there, but some of these look like "have and to hold" type picks moreso than any time in the last 5 years.

These are the among the top performing YTD PM stocks.  They are net positive (or close) on 3 time frames (Christmas eve to present, spring lows to present, and 7/20/15 smackdown to present).  They are CRJ.to, Klondex, GUY.to, KGI.to, NG, and Newcrest.

Others doing well, especially recently, are DGC.TO, PG.to,  TXG.to, SMF.to, MVG, ASR.to, and perhaps GOLD for a little more large cap flavor.   Plenty of these have already filled the most recent gap.

You will note on chart 4, the KGI chart, that we've seen 50% rallies each of the previous 4 years about this time after the usual summer round of naked shorting.  Given an outperforming set of high-beta PM stocks and a timely entry point, one can likely make money.  A lot of money.  And then lose even more if you overstay you're welcome.  But that can be handled by choosing your exit point beforehand and picking a good fundamentally sound set of stocks.

Several of these charts are outright bullish due to their low COP structure, and others are decent development projects.  A few have at least managed uptrending regression channels.

Claude continues to rip, Kirkland strongest of the more traditional juniors, pretty much the same crowd getting a bid

With the reversal buy signal on the GDXJ, we'll pop our head out and see which issues are actually still green from 2/20/15 , the bottom of the fake-o dead cat bounce a couple of weeks ago, till today.  The far right column on the scan screen grab is the pct gain over the past few weeks.

A few have been screaming out of the PDAC meetings, some developers have been largely immune, and some of the best earnings plays have held in.

Claude resources has been added to the portfolio.  Spectacular breakout has held up during the meltdown for this Saskatchewan hunt and peck small miner.  They ran into some high grade and should be set for a year or two (chart is a few days old but similar). 

Eastmain ER.to has been on a scream all week, spec play.  BAR.to  had a big run and gave it back but didn't collapse - it's more of a driller.

LYD.to had lots of volume and was green late last week.  We added to our position there. TGZ.to filled gap in its big runup and finished strong this week near highs.   CNL.to also had a big run last week, and we added some there.  It go whacked this week, but rebounded today.  KGI.to looks magnificent,  PG.to still near highs, little less beta, and BVN is low beta but very strong lately.  MVG was green, best of silvers, which were better in general.  PPP looks ok, did better than most the past few weeks.

We have 10 days to March options expiration and FOMC, which makes it about time to run the other way and drain off some of the put credit out there.   We didn't get some of our bearish high delta put spreads back on in time for the jobs report scam, but the May 28 long puts have been getting the job done and trading at 1.0 delta from about 23 down.  We're going to try to book profit and roll those all the way down and start over at the 20 level.   This fake account has had some problems executing options trades the past few days .

The 28 May long puts were around 35 delta at GDXJ 30.7 (Jan 30, 2015),  50 delta at GDXJ 28, and about 100 delta at GDXJ 23.   We have moved to this sort of portfolio setup to deal with the outrageous overnight dislocations and naked shorting abuses in the PM sector.   Had we reallocated a bit more conservatively the past month, especially the last three weeks, we would have made a nice percentage gain on the overall portfolio, while maintaining (and adding to) some outperforming longs.  For instance, with no other actions taken,  a fully hedged portfolio ($125,000 at GDXJ $30.7 hedged with 40 GDXJ 28 May puts) would have stopped drawing down and started increasing in value once the percentage of stock held (for instance 60% long stock) when the delta of the puts hit the value of the pct long stock.  As it is, we're still up 5% instead of being completely blown out at the lows. 

BVN got a bid after earnings, green today. Watchlists I have from the ETFs and canuck markets have about 18% of the issues above sector highs from 1/19/15, so hedgers have been at work.  BVN, ABX, NEM, SBGL, best of the bigs. GG thrown back by the wall of worry.

Klondex, Teranga, Kirkland, Balmoral, strong in the juniors, not buyable, in these patterns, however.  

We closed the short put leg of the GDXJ bull put spreads Friday after 4 days up gave us about 60c on those (15 lot).  Will look to sell those again on the dip.   Partial positions on the weekly bear call spreads are slightly positive now, will look to close those if gaps below fill.

GG at least taking a look above selloff resistance, getting some cold water in the face.   Scans of the past 10 days since we have muddled around show PPP doing pretty well down there on volume.  We added that to the portfolio as a better r/r than some of the previous leaders.  Also added 1/4 lot GDX bull put spread 21/20 to offset our 1/2 lot 21/22 short calls in case we continue higher. Not too excited to chase these gaps long, looking at Terranga, Kirkland on any dip as strong stocks to hold.

Bounces in GDX during the selloff have been 7.5 to 8.5%.  We're at about 6.25% on this bounce, 8.5% projects to the gap at 22 flat.  Trading range for /gc goes up to 1235, but we'd need to recapture the 4 month fan area to reassert a rally, otherwise likely to fan back into the range.

In an earlier note, I showed that a 60% stock / 100% long OTM put at the rally highs could have us well on the way to a net bearish portfolio).  With the sector fluctuating at a neutral 50% fib retracement range, we are faced with whether to press bearish positions, harvest credit in long protective puts, or rebuild long stock.  A few stocks continue to make new highs, but more have been shorted back down or gapped down on earnings.  The metal is also out of its bullish configuration.  The slight sector rally has reasserted a bullish fan to bullish wedge configuration which could drift lower into next week, with perhaps a sharper move 10 days before options expiration.

Our current focus is to evaluate that stocks that (the rally, look at outperformers for the past few weeks (TGZ.to etc.), and use more neutral strategies such as legging into shorter-term butterflies (bull spreads on the dip, bear call spreads on a lift).

We have some interesting strenth in a couple of jrs as Kirkland raised a bunch of money and brought good-guy bankster billionaire Eric Sprott (he made all that money at Cannacord's expense, of course) as Chairman.  They haven't looked back as they surged too new highs.  Terranga also had a well-received update the past couple of weeks and has gone vertical to new highs.  GG weakly gapping into earnings gap down area and it's not going too well as expected.  Successful ascent of this area would be pretty bullish up to another another point on GDX.

In scanning the past month of sideways action in the GDXJ, leaders liekNG , HL, others look gassed. We continue to like silvers like ASM, SVM, which are green over the past month.  AKG is acting well low in the base, and   TGD looks cheap after acquisition related dump.

Filled on 1/2 lot short GDX weekly (8 day) bear calls late yesterday, a little early

Since we didn't splash down, we went short term moderately bullish by putting on our usual weekly 1pt spreads to take advantage of this little slack area back up to the 9dma on the weak stocks that got hit last week.  Averaged 26c on the  on the 20/19 put spreads on Mon and Tues, closed at 11c, 40 lots, so not too bad for a pretty bad trading environment.  Overhead gap at 21.25, likely resistance, so we will try to fill a bit higher with a half size of GDX bear call spreads. 

A lot of talk about how great NEM is doing, but unless the GG's of the world can get through their 9dma and resistance from last Thursday, the main trade looks to me as continued downside for most of the sector.  SBGL stalling right at the resistance set up from last Thursday.

That dip to 1190 on /gc looked like a buy signal, SBGL green today.  Ugly with lack of volatility , but there appears to be enough slack for a bounce trade on a lot of pms, but lots of overhead 5-7% higher, very vulnberable underneath.  Raised more cash yesterday.  Sold other 1/2 of GDX weekly 1 pt bull put spread and 1/4 lot GDXJ 25 / 21 monthly put spread.  Update: those were some nice entries there a bit ago, MVG, AG, GOLD, GDXJ in general .... adding some TAHO / RIOM and ASM to the port.  Kind of in the middle of no man's land with easy whiipsaws either way, but the easedown the past day or so hss made the upside more attractive short term.

TRIM - The chart below is marked up to show the rebalancing points I suggested in the previous note.  In particular, when in the upper half of a likely rally range (loosely defined by previous long-term support / resistance and typical rally magnitude), moving 10% to 1x physical gold or fiat at each 10% marginal increase in the index would get one to the 60% long stock / 40% fiat levels we suggested would be necessary to avoid almost all negative effects of a drawdown.  I marked those points with the green arrows and approximate dates on the upper left. 

TRAIL - At the same time, one would "trail" by rolling up, and perhaps out in date, on the OTM long puts.  The most overbought and opportune times to do the t & t , of course, do not always correspond to exactly 10%, so one may have to bite the bullet and do another move than one would like to keep protective puts nice and tight for the inevitable sharp pullbacks.  I think I moved 4 times and had over 5 points invested in the long puts in portfolio so far.  However, the long puts currently in play (May 28) are at about 4 points in value.  Moreover, we are able to use the sharp pullbacks to our advantage and sell shorter dated put spreads to recover this protective put cost (legging into diagonal - indicated by shaded green box areas).  I'm pretty sure we're net profitable on them to this point.

For instance, I don't show it on this chart (it is a bit idealized, showing moves of 10%), but I believe we had moved the puts to the 26 level on the first move up to 28 (1/6/15 or 1/12/15 for sure).  The  first several sharp moves back to 26 gave great opportunities to sell the Feb 25 / 20 bull put spread, for about 1 point.  Using live stop loss orders of 10% would have knocked out long positions on 1/14/15 and 1/26/15.  The rinsedown on 1/8/15 was also about 8%. 

Using protective puts actually adds value on those pullbacks and gives one a relatively conservative "buying" opportunity by selling the short put spreads below the now near or in the money long puts.  Note, at those points the index was trading at or above the 20 dma, with strong buying in place.  That is not the case currently, with all the earnings gapdowns and short-term ma's negatively aligned.  To me, we actually crossed a significant inflection point mid-day Thursday, with very bearish short-term implications unless we take back that area with a higher low (SBGL chart below).

SELLING WEEKLY CALL SPREADS AND USING OTHER BEARISH OPTION VEHICLES

These decisions are a bit trickier, but we can study the historical data to see how far away from certain moving averages (9dma, for instance) the index tends to get at its most overbought points.   Looking over the last few years, it appears the GDX is at an extreme at around 10% above the 9dma, and the GDXJ would run about 13%.  Typically, waiting that long wouldn't trigger many trades, but using 1/2 positions would allow for a profitable scale-in at, say, starting at 5-7% above the 9dma for the GDX.  Should both those positions go to max loss, then a more bearish trade such as the costless collar or ITM put would be favorable, along with higher levels of profit-taking.

GDXJ 2015 Model Portfolio 9-week review - 

1) Initial stock selection was pretty good, with the 50% allotted to GDXJ type stocks mostly well-outperforming.

2) The initial mix was lower beta (some royalty stocks and 2x ETF) than the GDXJ since it was all plopped in at once.  Thus it underperformed overall for a few weeks.

3) The subsequent decisions to roll to higher beta did not work as those stocks have been mixed and mostly sagging lower in the past month.

4) Cash levels were  too low to avoid the current drawdown of about 10% (24% max increase to current 14%).  In part, we were looking for a longer-term run into the March or May FOMC meetings, typical time frames for peaks  in many years.  This may still happen, but, hey, if you're a bankster, why go to 33 on the GDXJ from 30 when you can go through 25 first.

5) Some weekly options plays were put on too aggressively, negating our ability to fully capitalize on the sharp pullbacks.

6) Using seasonality (pre-Santa Claus rally) to start with a fully long, yet largely hedged portfolio was key.  It would be very easy to be losing money on pm stocks this year if one had waited to chase it after waking up from a New Year debauch, etc.

You will seldom see a gold bug talk about using option protection, much less for what time frame and strike. I've looked at some options price history during this quarter's pm rally to find the breakeven point at which one could expect to start making money during a selloff using a long stock - partial cash / long OTM protective put strategy.

Long May GDXJ 28 puts put on right at the top on 1/19/15, about 10% OTM and 30 delta, were going for around $3.10.  The first time down to 26 on 1/29/14, they were 4 to 4.40, so, say $4.10, or 1 point gain.   A 100 pct hedge with long puts would have been up $4000 at that moment.

Assume the portfolio was worth $125,000 at the top.  The index sold off 15% (30.7 to 26 or so).  If one's portfolio was 60% long / 40% cash and the stocks outperformed a bit , say, down only 7.5%, that's a $5600 drawdown. 

If one had also placed a 100% weekly , 1 point bear call spread on the GDX (50 lots or so ) at the top on 1/19/15, that would net about 30c credit.  If the short spread expired worthless, that's about $1500, which, in addition to the $4000 of the long 28 GDXJ puts, is about $5500, or essentially breakeven with the drawdown of the 60% long stocks.

This strategy would not completely cover further losses in a continued selloff as you would have reached max gain on the call spread and the long puts would only be about 55 delta.   A more aggressive strategy such as a 100% front month costless collar (25/21 Feb GDX) right at the top on 1/19/15 would have been up almost a full 1 point at lows on 1/29/19, an increase of an additional $5000, and the portfolio would already be making money as it went lower (up $9000 on the hedge, down $5600 on the stocks), with rapidly increasing profitability as the delta on the puts rose.

Assumptions - 1) Stock pct drawdown  -Having looked at the high to low of a few stocks in the GDXJ 2015 Model Portfolio, during that 10 day selloff,  they averaged about 8.8% drawdown (NG, SBGL, SMF.to etc).  The 7.5 % drawdown figure isn't totally unrealistic.

2) Trade location on the protective puts and other hedges. - Moving protective puts is an expensive proposition, and if one is following a rule of moving the "stop loss" / protective puts up when the index reach marginally new highs, you'd probably leave a few percent on the table if the index moved to between 10 and 20% above your put location after your most recent move.   From 10% above on down, the assumptions appear to be valid, at least within a relatively short time frame before the puts decay.  

Putting on weekly bearish weekly call spreads in 2 steps across a typical trading range should net at least part of the gains.  Collars would probably be put on a bit lower than expected apex of the rally, with the expectation of raising maximum cash and booking a loss on the collar should price get to the apex target.  Typical GDXJ rallies can run 35-50%.  Raising 10% cash each 10 pct increase between 60 to 100% of an expected range, along with increasingly bearish hedges, would put one in a position to achieve the above outcome in a drawdon after a rally such as we've had this year.

The character of the pm flipped decidedly negative Thursday into Friday.   Long-term strong stocks like SBGL have taken out their pullback lows in a distributive and rollover pattern.   Fake strong stocks like CDE and other South Africans were completely taken down on (no) ernins reports and now face heavy overhead resistance.  If there is a sector continuation move in store, earnings reports are shrugged off regardless of content.  This now seems pretty obvious that it's been the usual arbitrage , short the weak stocks, and hold up a few strong ones to give some appearance of strength before the whole rally collapses.  You'd be hard pressed to find one of these post-rally, options pinning / shelf patterns in HUI that doesn't end pretty badly once the 20 dma turns down.

I have regularly scanned price movement from the 1/21/15 highs, and there were a bunch of stocks, including a handful in the Model Portfolio that were were trading above those levels.  That changed Thursday.   About the only things left that would give an appearance of bullishness are NEM, ABX, HL, GUY.to, but these are morphing into just retests of resistance.

We are at 30% cash, and will likely flatten or move to PHYS our  additional   major holdings in the Model Portfolio and raise that cash / 1x PHYS level to 50% or so.  We slapped on a bearish iron condor on NEM, 10 lots of bear put spreads GDX 23/19 March for a trading short, and have a 20 lot short March call spreads 21/24 on the GDX.

We were able to expire worthless our 25 short GDXJ Feb monthly puts, and exited the short 25 March GDXJ we had on at a slight profit.  The 30 lot of GDXJ May 28s remain in place 58 delta, and we left in place 35 long March puts from the short March 25 put spreads around the 22 strike. We also left on 20 long puts of GDX 19 strike from (5day) weekly bull put spread we had on last week.    So we're pretty well positioned to capitalize on an accelerated decline into the 19.50 and 18.00 area gaps on GDX, depending how nasty the banksters want to get.

Collapse very possible with all the bad news.  Might end up net bearish by the end of the day.