Hot Air

When I think about the markets right now,  it is Dec 30and we have 2 full days left for the markets to trade in 2014.  I’m thinking that we are seeing a little hot air balloon action, where things just keep floating higher on light volume.  Maybe people dont want to sell now and have to pay taxes this year on their recent gains, but what will they do in January when they can take some profits and not have to pay taxes on their gains until 2016?  Will they lock in some gains? 

Lets take a look at the SPX

Notice how we hit that upper trend line this summer in JUNE and just rode it higher for a couple of months, will we do that here?  ...

AUDIO  ,   http://www.screencast.com/t/xprVNmQUUyrb

Holiday weeks usually have light volume,  but you still don’t want to see markets rising on light volume , especially if they are breaking out to new highs.  It usually calls for a pullback. 

In the above chart ,  you can see that the SPX  is again at the top of its rising channel ,  and it can just keep riding it up higher,   but also it is wise to recognize that this light volume rise is likely to pullback soon if things dont change.  There is nothing wrong with a healthy pullback ,  we’ve had many in this Bull Run, but sometimes it’s best to  tighten stops and take a chance getting stopped out near highs and maybe re-enter when we reach lower targets if conditions are right.

The QQQ actually  looks a little tired on this recent recovery run up, compared to prior sell offs and recovery s. If there is any profit taking in January  I am thinking that GAP might fill  and that High Volume Candle gets tested. Its already overbought and the MACD is a bit lower than at prior highs.

SO for Tuesday and Wednesday,  we may just keep drifting higher without any selling conviction,  but I am watching the VIX and the volume drying up ,  and we’ll just have to see how things play out in January when the volume comes back into the markets.

Now a review of the dreaded GOLD/MINERS    

Actually, I say that a little tongue in cheek,  they dont look bad,  they just feel bad, right?    Patience in the markets is a virtue,  but we all want gains NOW and we dont want to hold positions on down days because ‘fear’ creeps in and we fear the possible sell off  that the metals and miners have us accustomed too.    Honestly though,  things in the metals and miners look bullish to me, even if its taking longer than expected.  Let me show you a comparison to another ICL that we had where it took MUCH longer than expected  to rise off of the bottom,  and the dip down went lower than many expected.   The rise higher was breath taking if you rode it up.

I showed this chart yesterday,  look at that cycle in 2012 on the left. LONG & DRAWN OUT. 

Lets zoom in….This is GOLD in the summer of 2012.  This cycle was so stretched  (I have no idea why,  but it seemed to last forever)  2 months later we were still near the lows!! Look at that blast off though  when it finally got going.

This is GOLD NOW.  This looks MUCH BETTER than Gold 2012 if you ask me.Even if we drop to that trend line $1160 area. It would extend this cycle to day 36. A pop above $1200 would be bullish , and we are likely on day 5.

This is a close up of GOLD RIGHT NOW / 4 hr chart .  A drop below $1170 extends the cycle count to day 36, but a POP above $1196 would have bullish implications.

I wanted to show you MINERS during that 2012 bottoming process.  It too was brutal at the start and breath taking in the run up.

GDX 2012  – Notice ICL in May, to lows in mid July.  And it dipped deep like GDX is now.  People said it  “LOOKS SO WEAK”   ( But look at that launch)

CYCLE WISE  =   that was a long wait  & a deep dip down!   ( But what a rally)

GDXJ 2012 –  dropped to day 39! You have to ask yourself,  if I bought this on day 30 and sold on day 39,   would I have gotten back in on day 8?

I showed this chart in yesterdays report and said   (On Audio,  not sure if I wrote it down or not)   ” We could dip down to the 10sma and fill that gap.”

I drew the magenta line down to gap fill , then higher

Here we are as of yesterdays close  (Gap fill, tag 10sma).  We could be done and ready to fly,  but id 2 more days of tax loss selling occur, we could just dip to a new daily low in the 30’s?  IT still looks bullish to me ,  look at that MACD.

SO-  I hold positions and in January 2014  (After tax loss selling in DEC 2013) it paid off nicely.  Buyers were entering to buy their mners on sale and we rallied for weeks into Feb.  I am NOT saying that you have to buy now,  but I am repeatedly showing you various bottoming processes through out GOLDS recent lifetime,  to help you see that when it DOES get going,  it can rally for 4-6 weeks and you will want to take a position then.  I am just showing everyone this process over & over in many time frames and many different situations to  help you to go long when that time comes along and you feel more comfortable.   It is NOT easy at lows.  I used to be in a few other blogs / Forums,  and we always look back and say  ” I would buy that low with no problem!  The ICL was in, its just a matter of time for a good rally. ”   “In fact,  I will but the next low with both hands!”    And when that low comes,  it is NOT as easy  as it sounds.

I am trying to prepare everyone to know what to look for when a rally happens ,  because many Miners run ip 100%.  Thats HUGE! I will chart up individual miners when that time comes for good entry and even sell points. I thin January ‘Might be”  a time of profit taking for the stocks that ran up big in 2014 and maybe some buying in Miners like  jan – Feb 2014.  We are overdue,  aye??

IF you  re listening to AUDIO..you can tell that I am sick. I may not be in front of the computer all day to answer questions,  but please ask & I will get back to you when I am able.     (As I write, GOLD just popped strongly,  we’ll see how things play out.  )

~ALEX

GOLD UPDATE