When the markets turn fast, we have to try to keep pace. Yesterday during the Fed commentary , The U.S. Dollar took a sharp turn, and Equities, Treasuries, Commodities and so on were shaking it up a bit too. Lets Start with the dollar…
The U.S. Dollar was due for a low , when you examine it using Cycles. I personally expected a break of the Oct lows and then a reversal, but yesterday we got what I like to call a “Yellen Candle”. Divergence in the MACD and an oversold Stochastics was hinting that a low was due, and now that it’s here , what does that mean? In Oct the Dollar rallied fast out of its Lows, and only paused briefly at the 50sma before moving higher. We may see the same here , but I do expect the 50sma to be taken out and the Dollar to rally higher. We will take it one step at a time.
While the Markets were rattled and initially sold off , they recovered a bit and showed some “buy the dip” mentality. GOLD/SILVER and MINERS, however, were hit hard on Higher Volume and closed near the lows of the day.
Lets look at $GOLD
If the Dollar rallies, it usually puts pressure on The Precious Metals/miners. Though they have been strong the past 3 months, they are due for a rest / consolidation at the least. I expect a bounce today or tomorrow, but taking it step-by-step, I remain CAUTIOUS , expecting further downside. I may be wrong, but look at that MACD Histogram. Weak. Above you see 2 possibilities going forward, but there are others too.
Past rallies like we have seen in Miners have also often “given it up” , like in Aug 2012 to Oct 2012. Even the Rally out of THE LOWS in 2008 dropped after roughly 3 months and then went sideways for a good period of time. THESE CONDITIONS can make it difficult to trade or invest profitably.
In the chart below…it is possibly trade-able, but “Buy & Hold” ? Notice that price in DECEMBER was roughly $31-$33 and for the next 4 months, price passed thru that area repeatedly. At the end of APRIL price was $31.88. We’ll take it a step at a time here too.
A bounce in GDX /GDXJ may look something like this ?? This is just a thought, a “test” of the break down.
It never pays to “tell the markets what they should do”, this is just what I see as possibilities based on past experience. I MAY BE WRONG and usually make quite a few adjustments as time goes on….So lets just let the Markets tell us what they’re doing, Step by Step