Oh That Light Volume Trading
We had a little bit of selling & volume in The miners today , so instead of a morning report Tuesday, I wanted to post some thoughts tonight. I started getting some questions about things as the day went forward. Nothing wrong with that, it is expected. I had mentioned possibly seeing light volume holiday trading and by noon, we had some selling in Miners. I posted this chart Mid-Day before the selling really started to escalate, to point out some similarities to a prior sell off .
Selling increased from that point on, so what Now?
Lets take a closer look at all things cycles and technical analysis …
AUDIO 12 minutes
http://www.screencast.com/t/1y5uqYhl7
At this point, nothing has failed, but I do get emails and comments where people get very bearish, afraid, or even say that things are falling apart. To me, it could be , but until it fails, its still in tact. ( Let me say that I’m not getting too many emails…maybe 4 or 5 this time on that subject , and I’m not complaining…it helps me to see how others see things). All I can say is that “NOTHING is broken yet…except expectations” . Expectations when people enter a trade is for it to go UP. Right away and maybe fast . I like that too, I expect that also , but often we might get draw down or we buy, it runs up & falls back to our buy point . Its that emotional feeling of , “I had gains, I should have sold, now we’re dropping!”
I admit – IT – IS – FRUSTRATING!
So lets address where we are, what to look for …from scratch.
GDX – Sell offs do happen, see the red arrows are similar, nothing has ‘failed’…yet.
GDX has had prior sell offs that were steep & scary (red arrow) , they often turned upward the next day (green arrow) . Even gapped open higher.
GDX WEEKLY – Its easy to see that sometimes the dip from the first daily cycle is deep ( see Aug 2013 arrow 6 weeks after the lows ) and if Dec 16 was our Daily cycle low – this one was near the lows too
As a review- You look for that Daily Cycle Low around days 24-28 & we had a reversal there DEC 16 & that was day 28.
BUT……WHAT IF THAT LOW IS BROKEN?? What if tomorrow we dip even lower, below this day 28?
It COULD BE that GDX is now on day 32 , will actually find its DCL on day 33 & possibly GOLD will too. I dont like that scenario because it really makes Miners look weak, with GDXJ already breaking below its ICL ( Juniors did that in 2008, $HUI , $XAU, GDX didnt). It feels like grasping at straws if that happens, but it could play out that way.
The reason I bring that up is because I also thought this reversal last week in GOLD (Blue arrow) would prove to be the Gold DCL. It either failed today, or it was not the daily cycle low in GOLD because it did NOT break above that overhead trend line and did NOT CLOSE ABOVE the 10sma (Which often confirms a DCL has been put in). So it actually looks like its going to be a late daily cycle low this week near day 31 or 32?
The technical analysis side of things in the chart above tells me that GOLD is weakening and I actually dont like the way it looks at this point. It needs to reverse quickly .
ALSO note that Technical analysis shows that GOLD can drop further. Even that and a reversal would be ok for GOLD.
However, looking at a weekly ? In my opinion, If GOLD doesnt get back above $1179 soon…it is breaking down & failing
SO FAR- SILVER actually still looks ok (so Far) and so do many silver stocks
Right now I dont love the technical analysis of the GOLD CHART, because its not oversold and the MACD & RSI look weak. GOLD needs to move higher and at least bounce around sideways to alleviate that. A ‘sell down’ from here could break Nov ICL lows and then its a FAILED ICL & time to go short. The selling would have weeks of downside.
There is 1 more scenario for GOLD , but it is too confusing . For now, we need GOLD to move higher and we need Miners to do the same by weeks end I.M.O. Gold has some room to drop, but needs to reverse by the weeks end , and Miners dont have much room to drop.
Lastly, here is something short term that looked slightly encouraging. I was watching GDX / GDXJ into the close , as I often do. Here is what I saw. Last friday we saw high volume at the top , Stocks were overbought on short term charts – 5 / 15 / 30 minutes time frame – & many stocks reversed and dropped on high volume into the close . If that caused a sell off, this was the opposite. They were a little oversold & trying to recover near the close
GDX 5 minute
GDXJ 5 minute
GDXJ 15 minute
By request from 2 different readers.
FCX – overhead resistance, may stall here
Believe it or not, $NATGAS could even go lower.
Thanks again Alex. I know I didn’t email you but swear that 2nd paragraph could’ve been me…sadly (or maybe happily?) got stopped out of a number of positions yesterday but there doesn’t seem to be any sustained trend at this point in the PMs. Tuff stuff.
G-Morning Deshy
Trust me, the part that I wrote about ‘nothing broken except our expectations’ and -“Frustrating!”- was how I am feeling too. Like I said, its not that anything really broke down , but heading back towards lows & knowing the Metals & Miners and how quickly they can fail…I understand the concerns and feelings of here we go again.
The move to the upside in a second daily cycle should be a powerful rally, because of the timing of the ICL being some 30 days ago and the fact that it was right translated. We should go to new recent highs. I wanted to focus on an area that is due for some great %-Gains . At the same time, I look at other areas of the markets and see some of the nice %-Gains in the energy bounce and other stocks after that recent sell off and it makes the waiting game that much more difficult.
And then that $USD. Ugh. : )
Alex- today was pretty ugly and with possible tax loss selling feels like cycle destined to fail. I stopped out of most of my trade. No matter how good the setup all bullish scenarios seem to end in same place all while spx keeps chugging.
Exactly, felt same way. It just doesn’t matter if the setup is good right now, it just can’t get anything going. I am not waiting for new lows, ejected out of what I could already. I kept position sizes much smaller this time, wasn’t going to get burned that bad again.
Was giving myself a hi-five at lunchtime then we got hammered in the afternoon. That was soul-crushing. 🙁
And that was all on a $4 drop in spot(that it recovered quickly AH).
Does anyone know if today is the last day for 2014 stock loss selling?
By IRS rules you actually have until Dec 31. Last year most selling in miners seems to have ended on the 24th, but that’s just 1 year of data. Institutions are largely closed next week so big boys should be done. So, by rule next week is in play, but practically speaking most dumping for tax have likely done so by this week.
Thanks for the clarification Cason. Happy holidays!
Sure! Alex has the best advice by far but if we see a way to also help one another, we should! Trying my hand at all oil play, will let you know how it works out. Much like miners, up big one day, down big next which makes it tough to make profits more than short term. Merry Christmas!
The year end selling does go until year end, BUT…You cannot repurchase what you sold for a month after selling
I hate that rule. I am awash in wash sales. Sheesh.
I am doing a small write up now (Someone emailed me and asked if I was, but when I tried to reply, the email address wouldnt accept the reply).
Too bad miners were up today, based off of others’ comments think most of us have been stopped out at this point. Really hard to trust right now, especially on holiday volume. Thanks for all if your hard work, Merry Christnas!