A Clearer Picture

The picture started getting clearer in many sectors of the market after the Fed Minutes were released Wednesday afternoon.  Lets take a look.

SPX / SPY – Looking for an overhead follow through and within the timing for a DCL. The 200sma acted as resistance.

Bullish Break through, I expect higher prices and will watch how the follow through plays out.

The USD  looks to be topping ( temporary )  and is late timing wise for finding its  dcl.  ( No chart)It could drop for a few days into a dcl.

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WTIC – Tuesday I pointed out that if you are trading OIL ,  you should note that in a downtrend, it struggles at the 10sma.  I believe we are trending lower at this point.

WTIC –  So far Oil couldn’t break above that 10sma again.

Despite OILS ‘lower lows & lower highs’,   Energy stocks have higher lows and higher highs.  Odd.   They are looking bullish and some are breaking higher after earnings. The XLE & quite a few Energy stocks remain bullish.  XLE flipped higher at the 50sma, but again, I thought we needed follow through here too with this Monday chart.

We have follow through.  I have mentioned  CJES, SGY, OAS, WTI, BAS, etc.  These are all consolidating and were all higher after the Fed Minutes. Are Energy stocks bottoming ahead of OIL? They seem to be experiencing accumulation at this  point.

I pointed out NATGAS as improving and bullish looking at the lows recently. I know some are trading it ‘long’, so I just wanted to point this WEEKLY chart out in case I dont post a Friday report.  To remain bullish,  I would like to see higher prices Thursday or Friday so that this weekly chart improves. Inventory reports are released on Thursday and usually affect the price immediately.

GOLD, SILVER, MINERS

For the sake of avoiding redundancy,  please read yesterdays report to know exactly what I was looking for heading into the Fed Minute release. We now have a bullish set up , HOWEVER  we do not know if this is an ICL ( Very bullish)  or a short term trade that could roll over as a 4th daily cycle.  A 4th Daily cycle could roll over in 5-8 days and then break the lows and ‘fail’.  THAT would make for a good short  (Dust) position.  A move out of an  ICL may run and then dip lower too, but it shouldn’t fail at the lows. It would put in a higher low and continue higher.  NOTE:  Lately MINERS have been tricky to trade coming out of the lows , because they bounce around a lot. Lets just look at the charts.

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GOLD –

We made a lower low early yesterday morning so we couldn’t get a swing low until today.  The lower low was on light volume, as though selling was drying up.

At day 33 , we should expect a daily cycle low  (DCL) .  THE JULY lows have been broken and many in the precious metals blog-o-sphere went short Miners or GOLD/GOLD ETFs.   A Gold price of $1074.60 puts in a swing low that will likely hold. We have that now, I expect a move higher here.

GOLD broke the summer lows,  but as mentioned in prior reports,  SILVER & MINERS did not.  That despite the fact that Silver has been selling intensely. 

SILVER – 15 straight days of selling.

GDX –  I pointed out bullish wedge break outs at lows, and the cycle count was late for a low to be put in.  We needed a reversal with the Fed Minutes.

GDX –  We have a reversal with a new low, so the soonest that a swing low can be put in place is today with a move above $13.58.  That is also a move above the 10sma.  Please notice that moves out of the lows can be  difficult to buy & hold,  since they dont always move straight up.  SEPT 11 was the last reversal type low, and the next 2 days were sideways and “looked weak”.

Intraday yesterday,  I watched the GDX  Bull Flag and posted this in the comments/chat  section. It was trying to break back inside of its break down.  Shortly after capturing this shot, GDX ran up to $15.58 – It succeeded after the Fed minute release.

GDX –  For those buying or trading this set up, This is what I expect “Roughly”.  I am thinking that yesterdays reversal was the short term lows.  A bounce or run possibly to around $14.50 is possible to start.  The 50sma is there and it is also a 38.2% bounce.  Then GDX may drop down and fail if it is just a 4th daily cycle.  If it was an ICL,  we may see that next dip as the 1-2 move of a 1-2-3-4-5 type move higher.

What do I recommend?  I recommend that you re-read yesterdays section covering how tricky this could be.  Is it an ICL or a DCL?  It may not be something that everyone should accept as a trade.  A 4th daily cycle could roll over in a week. You need to know you’re own risk tolerance and trading ability.  Even if this is an ICL and you decide to sit this out, you can catch the 2nd daily cycle higher and that is often the best %-Gainer.  So …

  1. You can buy today if we get a swing low or move above the 10sma on GDX.   With a tight stop, you could then  sell when GDX gets to the 50sma and watch for further clues.

  2. You could buy some Miners , use stops, and monitor them.  The Bullish side is that with all of the bearish sentiment and steeeeeep selling in Gold and Silver,  many miners are not even close to their ICL ( lows).  I am wondering if Miners are bottoming before the metals.

 3. You may choose to just sit tight for now.  Knowing what we are looking for, you can choose to either go long later for the 2nd daily cycle if this was an ICL or short if we get a 4th daily cycle that rolls over. Again, It is noteworthy that Silver & Miners didnt sell off to new lows this time around with Gold hitting new lows. We may be seeing signs of strength.

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I found several Miners that looked like nice set ups with yesterdays reversal and others will likely improve too.

For example SA  pulled back, but never became bearish.  It held the 50 sma through out all of that selling.  See 2 charts below.

This break/ re-test  out is bullish.  SA could run from $7+ to $10+  ( Why not buy strength like this? ).

AUY – Notice that it didnt continue to sell off this week with Gold selling off.   Sept 11 lows $1.40,  higher lows last week.

EGO – Higher lows than last summer.

IAG –   Oversold &  higher lows here too.

 There are more like these.  That means that many Miners are showing strength , despite the steep continuous selling in Gold and Silver.

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Also keep in mind that even though we have a bullish set up in the markets,  not everything has been bullish.   The markets ran back up to former highs, but what about individual companies?  It has been very mixed.  Some chart set ups and earnings reports are bullish, while others are not. Many past performers aren’t passing the earnings test right now and retail stocks got slaughtered, so its a case of choosing wisely.   Look at  (  XRT – retail etf) and many retail stocks like  JWN, FOSL, DKS, WMT, GME, DDS, URBN, etc.  THEY ARE NOT PRETTY.     Also looking  at some former high flyers,  we see that they haven’t recovered even though markets are at highs again.   See GPRO, MU, TASR, etc.     Bullish charts like VUZI, ANGI, XRX, VDSI, KNDI  show improvement after the sell off,  so again it has been a bit mixed. 

I will discuss more in the weekend report. Todays report discusses what I expect for the last 2 trading days of the week. Miners look bullish here , especially if GDX breaks above the 10sma and puts in a swing low.  Then we can review the weekly charts and see what the implications are there. As a trader watching the markets intraday yesterday, I took a position in Miners.  I bought a bullish intraday pattern and held on.  I expect a run higher, but as pointed out yesterday, I want to stay negatively biased by expecting a possible 4th daily cycle (unless the precious metals sector proves itself in the future).  Short term Bullish, but cautious.  Again,  if this is an ICL, a 2nd daily cycle out of an ICL will be a good trade.  I do think some of the Miners charts are encouraging, but we know how fast they can change, so lets at least stay cautious.  If you take a position, honor your stops.

~ALEX

P.S. Yesterdays report discussed Precious metals in detail too. It may be worth a review