This Bounce Bears Watching

July 25 –   As I write pre-Mkt, a bounce is unfolding.  Many people feel that they always need to be “In the trade”. Sometimes during the strugglesome periods and possible turning points, its best to either hedge positions or just step back and watch how it plays out. If you follow my series of posts on this web site, I was BULLISH Metals & Miners at the end of May.  I caught the lows.  I was Bullish through June and into July, but recently things have changed a bit- with a “Shake out”.   Review my posts –  you’ll see that I started warning of weakness,   but still a bullish recovery possible.  Then it went to a baby bear. Then a battle of Bull vs Bear is becoming more evident. Now?  I expect a bounce….but this bounce could just be the Bear playing around or is the Bull going to take over?  QUICK review -To the Charts…

July 15-   I pointed out the steep sell off in Gold needed to bounce, was that a Bullhorn forming? –

GOLD – is this still just a Bullhorn ? Notice Gold bounced off of the 200sma, closed above the 50sma. Now a bounce?

Yesterday I mentioned that I was watching for just that, a possible drop to the 200sma.  I thought that price could drop down & “Run the stops”.  It would have to drop below the $1292 area, possibly break below that & the 50sma,  and bounce off of the 200sma.  I even said that you could BUY That with a tight stop below.  I posted this in yesterdays posts …

SO it happened Exactly as I thought, I must be ecstatic, right?   No.  I think this bounce really needs watching , because on some levels of technical analysis and Cycle work….the action Broke down the bullishness and hints at Bearishness.  The bounce would thus “Suck in more longs, and pull the rug out from under them”.  Under those conditions, one would watch closely and possibly with the idea of ‘shorting the bounce”.  Another reason is…

I thought SILVER looked ugly  (So Far) . I thought USLV broke out, with little resistance overhead and a large gap. So lets see Silver.   AT one point it looked this impulsive & Bullish.

You have to admit – Now it looks like the TWIN of the topping process that occurred in February  (Chart below) .  I look at the technical indicators and see continuing weakness. THAT needs to change or you can forget about Long positions. Silver moves  SO FAST, that I would forget about them now anyways.  Yes, we could get a nice bounce,   but  since this can drop like its falling off a cliff when it gets gong to the downside I would remain cautious unless you are in front of your screen all day .  Notice the similarities below…

Silvers drop stopped at the 200sam, and the 50sma is climbing below it, but Silver needs to get all the way back up & above that Orange line to even begin looking better.  It even did that last time in Feb, but it was a head fake.  The Tech indicators are weak to bearish.  A bounce may be all we get.

GDX held up well, GDXJ took a bit of a beating,  but BOTH broke below the 20sma and I did NOT want to see that . I dont want to “CLUTTER” the GDXJ chart with too many “THINGS” that make it weaker & more bearish than the prior run up, but you do need to see what I am looking at.  I see a BIG difference now in how this is acting.  The 20sma was not broken last time and the MACD stayed strong. Compare now to then.

Can this recover?  Yes. In June 2013 the dip was Steep and the Rally back for the 2nd leg up was just as STEEP, but what I am seeing here simply  leads me to believe that you will need to watch this bounce and decide whether to go long? Did you buy a position at the 200sma like I pointed out yesterday?  Then should you  stay long?  Cut longs?  Go short as we bounce?   There are many ways to come to those conclusions…look for weakness to continue as we bounce.  Is it a weak bounce?   Also look for strength to come in.  If it doesnt, this will fall apart.

In the future, maybe I should do some tutorials to help readers see what Exactly I look for in making these decisions. I use many time frames for myself.  For example – How big of a bounce is expected  if its just a bounce?  I often use Fib #’s  and support / resistance areas.  And if the bounce  is  stronger than expected ,  how can that indicate that maybe the long side is returning?   I know many readers write to me on Stocktwits,  BBT,  and twitter and even have my personal email from the past interactions, so from this I know that many of you already have these skills .   For that reason, I am just hear alerting you that

1.  I noticed signs of weakness a while back.

2.  I have seen continued weakness & bearish signs too

3.  We are seeing Bearish follow thru and it may continue deeper than many think if things dont recover

     soon and start to show signs of change in this bounce, so…

4.  This Bounce Bears Watching! 

Have a great weekend all, thanks for checking in!

~Alex