Action And Reaction

It was a Fed Week and the Action (or lack thereof ) and reaction were somewhat expected. Lets look at our week in review. 

Thursday I mentioned that I found it surprising that the USD & CRB were both moving together Post Fed.  Was one faking it’s move?

Now lets take a closer look…

The Dollar reversed direction Friday, closing the week with a possible false break out.  If the dollar rolls over, it should be bullish for commodities.

USD  – A close up shows that the USD did close below the trend line.

The CRB did not reverse on Friday. Instead we got a bullish looking weekly reversal.

I had mentioned and charted a few commodities that looked like they had been bottoming.  I mentioned X, AKS, AA, FCX, MTDR, MDR, VALE, CENX, etc.  They  look fine after the Fed Decision.

AKS – Then & Now.

SPX –  The markets have had a strong run after the sell off in August.  It is not overbought on a WKLY chart and the MACD is shaping up nicely.  We do see a Doji candle- a candle of indecision, so we may pause or go sideways here.

  Lets zoom in on the daily . SPX had a strong run higher, partly short covering I imagine.  It could drop & rest for a bit. It is embedded on the stachastics (And can stay that way).  If it breaks down,  we’ll keep an eye on the selling, because…

IWM, IBB, TRAN)  – When I pointed this out they were still lagging, but IWM had a bullish set up.

IWM popped and hit another resistance.  We’ll need this to hold up or break out or this may still be in a downtrend.

IBB – This could be  bullish broadening wedge (Blue lines) .  If I draw a trend line from the June lows ( red line) , it is a downtrend. We’ll need to wait and see.

A quick look at a Tech Stock CY that I pointed out shows that we still see progress in some areas. 

That is worth watching , since some stocks are breaking down and others are breaking out.

$WTIC WKLY  – Bullish reversal.

$WTIC –  Also held up with the $USD pop after the Fed.

NATGAS  is getting interesting.  I wrote a public post under the “Blog” tab discussing support levels. The weekly chart has a bullish type candle pushing on resistance and high volume.

NATGAS DAILY – This could be the lows.  I’ll be looking for a break out next week.

GOLD, SILVER, & MINERS

I have been discussing a possible  long term  “CHANGE” in the making where Commodities start to bottom and run higher and the Dollar may roll over.  My main idea was that The Markets ( SPX, DJIA, NASDAQ, etc) would roll over , since I had been pointing out there topping action since the spring.  THAT can still occur,  or they can run higher with the commodities complex,  So far the markets are putting in a nice run higher, but earnings were very mixed and we saw some companies blast higher while others dropped quickly.

Let me show you something that I have been keeping an eye on for additional clues. 

I will show 4 charts below.   2 From October 20, and then how they have progressed since then.

SPX:GOLD –  Watching for a break down to see if  The SPX is still outperforming GOLD.  We had a break down

GLD:SPY shows a break out with Gold now out performing the SPY..  Would it hold?

SPX : GOLD – Heading into the FED MTG,  The break down was still valid even though the SPX had rallied nicely out of the lows.  Read the chart for the implications. 

SPX : GOLD NOW –  Even after the FED MTG and Golds recent pullback, we see a back test of the break down.  Gold can drop further and this would still remain valid , as long as the SPX pulls back too.  I think the SPX is going to pull back a bit.  Gold may find a DCL and move higher.

The above chart is a weekly chart.  It is bullish for Gold if it holds. 

GOLD – No matter if you count Oct 2 as the DCL  or Sept 11 – a DCL can come in this time frame and we’ve reached mildly oversold levels.  If Gold is going to prove itself Bullish, I would expect it to get back on its feet soon.  With OIL , NATGAS, and the CRB looking bullish, I am still thinking that GOLD SILVER & MINERS may be putting in a solid base at the lows.As you can see, GOLD can drop further .

SILVER– Silver has held up nicely, relieving its overbought conditions by going sideways.  A false break higher on Fed Wednesday and a drop to the DCL is likley upon us.  I’m watching the 50sma and lower trend line as possible support.

Lets look at the weekly chart of Silver.  The reaction on Fed Wednesday looked like we were going to see a break out higher.  Now the weekly chart has a topping type candle. We’ll monitor Silvers strength or weakness from here.  Sideways drifting down would be nice, but Silver can and often does drop fast.  That’s why we will monitor this pull back.

GDX WKLY –  Trouble at resistance.   NOTICE:  We had a drop like this in March and the next week reversed higher.  We need to look at the daily charts to see where we are.

GDX –  Big picture.  In the past GDX has dropped to the 50sma, bounced and rolled over  (Blue arrows). That was in the bear mkt selling.  Lets see if things act differently as this plays out.   A DCL should be coming soon.  Lets zoom in.

GDX – Currently the pull back is not severe. These are fib retrace numbers from THE lows of Sept 11, and the lows after a mild pullback at the end of Sept. 

GDX –  Bullish projection would be a drop to the 50sma or trend line and reverse to continue moving higher like we saw in 2008 after the lows were in place.  In 2008 GDX bottomed on the 50sma .

Reminder 2008 –  after the 1.5 months it went sideways for a couple of weeks and then only dropped to the 50sma. 

I will be traveling Tuesday Morning and life will be back to normal here from then on.  We’ll see what Monday brings and I expect to put out a report Tuesday morning and then I’ll fly be home Tuesday night.   Right now I am expecting that we will see improvement in Energy this week ,  while Gold, Silver, & Miners may be pulling back.   Natgas may have bottomed.  The SPX DJIA, and NAZ are worth watching.  They are overbought , but they can stay that way if we are getting a bullish surge to new highs.  I think they  are going to pause  and could be ready to pullback , as shown on the charts above.   We will monitor things as this plays out.  I’m interested in seeing the SOX, IWM,  and TRAN too- since they did not show strength.   Thank you all for being here. I appreciate all of you as subscribers/ readers here and I hope the reports  benefit you in your trading.

~ALEX