Peace Of Mind

There are times in the markets when the next short term direction is a little hazy, though the longer term view seems fairly certain.  Lets face it, when one is invested , any uncertainty  can cause one to get anxious while holding positions, especially if there is any volatility. So what can be done to find peace Of Mind under such circumstances? Lets review the various markets and then answer that question.

QQQ– The 1st target in the Nasdaq was met  ( 5000) , and now a  drop is likely.

The Nasdaq has plenty of room to drop, even just to “test” the recent break out, but notice the SPX…

SPX – Was not as strong as the Nasdaq and actually doesnt have much room to drop. It is already at the 50sma & Support, so further dropping down could indicate weakness and trouble. The MACD has crossed down.   I think the selling could take us to the blue dotted line or even the pink support area.  FOR PEACE OF MIND, I wouldnt be long this market , and if I owned / traded any equities,  I would watch them Very closely.

I mention this because in the weekend report I pointed out a wedge and weaker looking SPX.  With room for MORE DOWNSIDE, the markets could be putting in a short term top here. 

GOLD –  Pre market Gold dropped and put in a lower low, and then reversed to move $ 10 higher from that low . THAT eases the parameters for a daily cycle low.  Personally ,  I dont think that anyone buying the recent swing lows last week profited.  For peace Of Mind, I cannot recommend Long positions here.  I am expecting this cycle to rise and roll over rather quickly,  Hopefully  into  a real meaningful low  (ICL) .   See the run up in OCTOBER?  That could happen here.

SILVER– I actually think Silver looks bullish and showed this chart yesterday.  It hasnt changed , except it too has a slightly lower low.  It looks like SILVER hit near $15.58ish. Still on that blue line.  This too could break out & roll over  ( A ‘Test” of the break out).

GDX-  notice the sell off way outside the B.B.’s I got 2 buy signals yesterday, but for Peace Of Mind at this point, I wont recommend any buying here.  Yes we are likley to bounce and it could be a DCL  (Daily cycle low), but look at the 2 purple arrows on the left side.  Looks VERY Similar to now & it bounced for 1 day  and dropped for 2 more into the real ICL.   If you bought today, and we got that 2 day drop, would you have peace Of Mind and confidence?  Yes, I think we are near or at a point that GDX/GDXJ will bounce, but it may not be a safe place to trade.

$NATGAS-  It still seems to be bottoming here.  I do not expect a major break down,  but I realize now that I am starting to hate the bottoming process as a letter writer.  In reality,  I have made most of my best %-Gaining trades after a sell off / correction  and then taking trades rising off of the bottom.  It can take patience but it also can really pay off, even if it means you get stopped out a couple of times.  Why?  Lets say you get stopped out for a 5% loss, then it happens again.  Then you re-enter and your stock has bottomed and runs from $3 to $6. 100% gain vs two 5% losses.

NATGAS- struggled at the 50sma. Not showing strength at this point, just chopping around.  I traded UGAZ a couple of times, made money / lost money…But NATGAS just isnt acting as expected.  It isnt climbing higher, so For Peace Of Mind? Wait for it to finish this process.

$WTIC  –  Oil looks like it is bottoming and looks fine, but I was surprised to see OIL up yesterday and quite a few energy stocks dropped.  Honestly,  it looks fine, but I now have to wonder….”Is OIL going to break higher –Green line ,  or will it just  double bottom  – purple line?”

I expected a POP then drop, but with NATGAS languishing around and ‘time’ for what would be a daily cycle low in OIL running out? The POP needs to come sooner than later.  The longer we go sideways, the more uncomfortable I get.

For the ENERGY STOCKS ?   I would think it is linked to the path that OIL decides to take.  Some have had nice run up, but recently are dropping down.  GDP had a great run up, but after an offering? Broke below the 50sma.    EXXI   had a nice run up, and is still above the 50sma. Will it stay there if OIL double bottoms.   THAT is our new issue that the markets have presented.    I do not hold them any longer if they traded above the 50sma for a while, and then close below it .  I may re-enter, however,  if they re-strengthen.

Let me show you Some ENERGY STOCKS ,  and show you what I am thinking.

First a Lesson:

Weeks ago FXEN ( and REE, MCP, etc )  took off and people asked at  $2.50  “Should I buy?”.  The answer was “No, never chase a giant move.”   They often pullback and you can lose a lot,  but buying a pullback can be a low risk trade.

This was FXEN  Feb 25 –  Still not a buy. see the stochastics & past run up & drops?

FXEN today-    see how it dropped as expected?  Now it could be a low risk buy at the 50sma,  but  With OIL getting ‘late’ in its daily cycle? It  possibly may double bottom, it may be best to wait.

EXXI-  Acted correctly off the lows, it ran 100%.  Broke above the 50sma, then tested & ran higher.  This is what I expected in ENERGY

EXXI Now –  It ran the 2 legs higher, will the 50sma hold for another leg higher?

BAS-  still looks fine, but what if OIL double bottoms?

REXX -Still fine above the 50sma, but what if OIL double bottoms?

AXAS- actually I would have sold it under the 50sma , and it recovered

SO here is what I am thinking with the ENERGY SECTOR.  IT may have bottomed .  It may continue to bottom, or it may run higher in a second daily cycle. I think OIL may have seen its yearly lows already or a double bottom may slightly undercut for a shake out & yrly lows.

Everything in the market seems to revolve around “Timing”.  The OIL lows were a great time to buy Energy stocks and we caught the lows.  Some broke above the 50sma, tested it, and even ran higher for a 2nd leg up  (EXXI  for example) . Some Energy stocks also bounced around and were weak  ( WRES, I owned it ) .   In Energy I called for the first buy at The lows–  if you bought then and have held on all along,  you likely are still profitable, but have given some gains back  (Like EXXI & GDP  selling down the past few days).

  IF you decided not to enter until the 2nd buy (  “Buy a break above the 50sma when it gets back tested and holds” ), you may have seen your stock run up & return to the 50sma like REXX, BAS, AXAS, etc

  Now the question arises – OILS cycle is getting late, it is likely to drop to a daily cycle low.  How will this unfold?  How low? We dont know. It could go sideways, it could break out in  strong bounce & just drop to test that break out  (See oil chart above),  It could double bottom.   I dont know where each of  you specifically entered your energy plays if you own them? I dont know if you are lightly trading them or trying to hit one out of the park, but you may want to lighten up .  I have.  REXX, BASS, etc are returning to the 50sma and that could hold as support  and then they may rise again, but also it could give way into a daily cycle low of their own and try to break out higher again later.

For your own Peace Of Mind…  do what you feel you need to do if any of the above scenarios play out.   What if  OIL breaks out higher and then drops like the green line in the above OIL chart ?  Should you Lighten up in case it drops, or get out entirely until ‘timing’ is clear?   What if You own nothing and want to buy a little at the 50sma if it holds, or buy a little AXAS because it recovered?    Some may want to Sell until OIL breaks out higher, because what if this is a giant bear flag forming?  ( I dont think so, personally)

I hope this helps.  I am watching GOLD/SILVER rise as the dollar rises.  I am seeing MKTS fall as the dollar rises.  I dont see the same correlation that we had at other times.    The dollar is strong & other markets are doing their own thing pre mkt.  OIL is getting late in this first cycle and has not run a lot higher off its lows,  like many of the energy stocks did.   It may do so on the next cycle, but I always lighten up to be safe at the end of a certain time period. Best wishes and I will look for trading opportunities as things unfold,  but sometimes having a CASH position saves money .

~ALEX

I will go back &  fix typos now ,  I want to get this released pre mkt : )