Warning Signs

When things start to look a little “off”, or maybe something just doesn’t  look quite right, it shouldn’t be ignored.  You may be seeing cracks in the armor and those cracks can,  in due time,  lead to further break down. Lets review some recent warning signs pointed out here.

In late May and early June we discussed the Dow Theory – warnings signs were present.

This was the JUNE 4th chart

TRAN NOW-

We’ve also discussed the wedges in the various indexes…

These 2 charts were in the weekend report, but I’ve been pointing this out for weeks

These 2 charts are the follow through ( yes, the Greek Crisis pulled the trigger).  The futures are Green and there is “Hope” of a solution and recovery, yes hope of a “buy the dip” rally again.  Warning: At this point it is wise to wait and see if this is just a back test of the break down  ( see Tran charts again).

Even the IWM IWC, and RUT , which had broken to new highs got ugly. It looks like an easy short, but it has NOT been easy to short this bull market.

USD-  Strong reversal back below the 50sma. Usually a bearish engulfing like this leads to further downside. This could have very big implications if we get follow through. An early failed cycle would have plenty of time before a low could form.

FXE –  The Euro actually has looked bullish since March lows and many thought that the threat of Greece leaving the Euro would hinder the Euro.  That looks like a bullish engulfing.

$WTIC-  Oil futures are up, but the OIL chart also has warning signs.  Energy stocks have staggered and I got stopped out of most 2 weeks ago or so.  I am out of everything energy except SZYM so far.  I am mostly cash , as mentioned in prior reports.   Sidenote:  Oil “Could” drop down to a 50% retrace and shake everyone out & then move higher,  but looking at the MACD & RSI? It could just fall back to March lows too.     That long consolidation should lead to a powerful move and if its down?  Shorting or    ‘SCO’ would be your trade (for higher risk traders).

GOLD SILVER & MINERS

  Monday Gold was up roughly $6  , Silver was up 1 penny, and Miners were down.   I have been saying that Cycle timing indicates that we are in a 3rd daily cycle and that more downside is probable.    I havent shorted it, because we have basically been going sideways for weeks .  I see no trade at this point.  Miners usually lead and they were down.  Anyone jumping in long yesterday may get hurt soon.   Those trying to trade Metals/ Miners in Yahoo blogs or other blogs or forums are  mostly frustrated.

Silver –   is actually showing an interesting divergence at new lows. I see this as a sign that Silver is possibly strengthening above $15.26??  We are above the November ICL.  The March ICL formed higher than the Nov ICL. Can silver form another higher ICL ? That would be amazing amidst all of this volatility,  but I dont want to get ahead of myself. I am watching many things at this time.

GDX – Miners were down while Gold was up $12+ at one point. You can see why I am not trading this.  A good buying opportunity will present itself in time.

  I am not trading very much right now.  When things arent clear ,  or when there are warning signs of more volatility to come, it can be best to sit in cash and wait for the next low risk trade.  Things are not crystal clear right now, but the Dow Theory does seem to be playing out here.  The TRANNIES and UTILITIES lead the way lower, and we are now seeing follow through in other areas.  Remember the charts in my weekend report too  ( I will post a few below)  –  possibly more warning signs of things to come.

If the markets are going to do a simple correction of maybe 10% this summer, traders can play it by going short or using TZA, SQQQ, DXD, SDS, DRV, SPXU, SOXS, etc . They have broken out & may back test.  Look those charts up if interested. Here are a couple of them

  I also had pointed out also that the VIX may  break out & back test and we could go short then.  I posted this

Well , we got this  explosive move instead.   This may be a bit more difficult to find a low risk entry.  I am watching to see how this plays out.  I would like to see the vix drop back down as the markets slowy rise and “test” their recent break down. Keep in mind that today may be the only day that we bounce,  this may be the end of the buy the dip teams strong efforts.  We could now see a summer sell off.

So today I am not really recommending any action, unless you yourself see trades that you want to take.  JUNO got a huge boost from the FDA approval ( see that chart) and there are rumors of KITE being the next to pop.   2 Energy stocks did well yesterday  ( BAS & CJES) – but how can I recommend them when the sector itself is in limbo?   I will be watching the markets to see how things play out after such a volatile Monday. Keep in mind also that this is a shortened holiday week. Markets are closed Friday for a long weekend.  What do you want to hold going into this weekend with the various threats to the markets?  Terror threats on the 4th of July / Puerto Rico adding concern along with Greece, etc etc .  Sometimes Cash IS King, patience pays off, and there is always another trade.

~ALEX