Tricky Track

In an earlier report I asked, “Are we still on track?” It would take time to know for sure, but things are still playing out well in some areas, yet a little trickier in others. Lets look at charts.

SEPT 2 –  I pointed out this topping action and said to expect volatility, possibly even sideways for a long period of time.

I want to point out what I am looking for next…

I have been saying that I expect a back test of the break down above.  I also expect a test of the high volume candle low from the recent drop. The question is, which one will come first?  A test higher and then a drop?  Or a drop to lows, and then a test of highs?  We may only know after the FED MTG this week.

SPX – Sept 11

Look at the volatility from 2011. This is a WEEKLY chart of the SPX 2011. You see

1.  A sideways move for weeks after the 1st drop

2. Then a test of the Lows 8 weeks later  ( Stop run style & reversal)

3.  A run higher through October

This type of volatility can be quite difficult to trade.

  In 2011 the lows were tested and eventually price continued higher after that double bottom.  At other times ‘tops’ formed and the run higher back tested the break down and eventually rolled over. I am thinking we are seeing that process now (As mentioned in more detail in last weekends report) similar to the 2008 top view shown.  

For now I expect volatility and things will become clearer as time goes on.

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USD –  I have been saying for weeks (& months) that the dollar has inner signs of weakness and I still see that. I am thinking that the Dollar is going to roll over and Commodities  will rise.

CRB WKLY– This looks very bullish to me

CRB DAILY – Bull Flag?

WTIC –  Goldman Sachs called possible $20 oil. Oil dropped $1 , but it is not a chart breaker.  Lets look at USO.

On Sept 1 I used this chart to point out that we could get a pullback to Fib #‘s for 50% to 61.8%.

SO far $14.16  held up. Fridays drop was normal.

GOLD, SILVER, & MINERS – Keep in mind the FED release Thursday

This is where the tracks get tricky.  Many feel that Golds drop was a deal breaker, but the Gold chart remained within what I had drawn.  The Miners broke to new lows and THAT was disruptive to our forward thinking, so I’ll look at that.  I was stopped out last week with losses in Miners and Energy stocks, so we will try to examine things with an open mind and with a view toward finding out what is really going on. Unemotional to remain clear. Losses are always a part of trading, we just need to be sure that the gains are bigger than the losses.  Lets look at charts.

GOLD– I did point to $1095 area with a few chart, this being one of them.

GOLD as of Friday – $1097 lows and a reversal candle . I’m pointing out what could be considered a safer entry.Gold on Day 34 is due for it’s Daily Cycle low.   **I will add thoughts about buying on Fed Mtg Wk at the end of the report.

GOLD WKLY – We look for a close above the 10 ma.  I’d like to see a MACD cross upward too. The weekly chart is less bullish looking, but that can change.

SILVER – Weekly chart looks like a possible double bottom.

SILVER DAILY – Silver sold off Friday and recovered strongly. The MACD has just started to cross above. Bullish.

GDX WKLY– The difficult part of our trading is that the above chart of Gold & Silver are fine, but some Miners in GDX broke to new lows again.   There is a weekly reversal with divergence and that is usually bullish. For a buy on the weekly using this T/A – you want a close above $14.41 and you’d place a stop below the 10MA on a wkly basis.

GDX DAILY- Nice reversal ( shake out) Friday. A break above the 10sma has not happened since Aug. We may get one this week above $13.54.  It is a buy, but use a stop below that 10sma. ** Again, we will discus FED WK buying later.

GDXJ – The juniors are actually performing better.  While GDX broke to new lows 2 x recently, GDXJ did not.

Many Miners reversed higher Friday too, also looking like we might get a run higher.  With Gold on day 34, it is due for a move higher cycle-wise.  The Miners may be ready to join in. Lets just look at a couple of charts.

EGO broke to new lows, but that reversal looks like a shake out. It has not regained the 10sma since mid August. It may do that here. At new lows, the MACD is turning up.  Its a buy with a close above the 10sma and a tight stop.

NGD – Good company fundamentally and the chart set up is good. I pointed it out in Aug. After double bottoming, it made a higher low Friday and a strong reversal above the 10sma  ( 13 shown) .  

NG–  This is a stronger Miner.  Notice that it bottomed on July 20 and never revisited the lows. It remains above the 50sma.

RIC had a very strong reversal Friday and it is a leading Miner.  In this bear market that Miners have been in, RIC has only pulled back 50% on the weekly chart. This Miner has done this in a bear market, what will it do if a Bull market reemerges? 🙂

So lets discus buying this week. The volatility is high and every sector has had tremors rippling through it day after day. We have an important Fed Mtg this week and everyone and their uncle are guessing what an interest rate rise or hold will do for the SPX/ DJIA/ USD/ Gold/Oil/MINERS/ etc etc etc .  All I can say is that we do not know what the decision will be.  We do not know how the markets will react.  

I am seeing signs of a bullish set up in Gold, Silver, and Miners  now with Fridays reversal.  Can they POP and run for a few days and die with the Fed?   Yes.   Can they POP tomorrow,  go sideways for a few days and then TAKE OFF HIGHER after the fed mtg Thursday? Yes.  DO I know what will happen?  No.  SO should you take a trade?  You have to make those important choices based on your own circumstances.   let me just mention a few factors to consider.

1. Position size.  Maybe you just want to take a position because the set up looks good, probabilities are in our favor since the timing is right cycle wise with Gold .   Nobody said to go ‘all in’ or use leverage and risk getting our heads handed to us later.

2. Since the Fed decision is due out Thursday, you could wait and see what happens. Staying in Cash will guarantee you that you do not lose money.

3.  You may decide to just take trades for a couple of days.  A set up Monday may be sold Wednesday or Thursday.

4.  You are in front of a screen all day, so you can closely monitor your positions.  IF NOT- You use & honor stops and keep position sizes small.

5.  There may be other factors that help you decide whether to take a trade during what could be a more volatile week due to the current circumstances. Think it through.

Keep in mind that during the last Fed meeting data was mysteriously released  at noon instead of 2 p.m. as scheduled. That had some scrambling and it was never called out as a big concern.

In Conclusion: I had been hoping that by the time the Fed decision was here, Gold would have ran the second daily cycle higher and at day 13 or 15 it would be a sell signal this week.  Now it seems that at the start of the week, Gold is on Day 34 (late) and is due for a low.  We may be seeing a buying opportunity in Miners at a time when they have been weak and we have a situation at the end of the week that could be bullish or derail things. Its an unfortunate set of circumstances.  I didnt want to be positioned heavily at the Fed release, but with this set up & timing,  we could see GOLD, SILVER, and MINERS rocket higher right after that meeting too.   If last Friday was the lows ( reversal), Monday would be day 1.  Day 2,3,4 could be slow and then a rocket launch after.   From here, its going to be just taking it 1 day at a time.  Lets see what Monday brings our way. I’ll be watching commodities, Oil & Energy, and Precious Metals for signs.  Thanks for being here.

~ALEX