Interesting Mixture

From the time of the Fed Meeting to the Jobs report Friday,  we have had a lot of action in the markets.  Action in the markets is what draws our charts, and we have an interesting mixture of charts to examine this weekend, so lets get to the 36 charts that I have prepared  🙂

Lets start with the $USD WKLY.  Nov 4 this looked too legit to quit, but we had to wait for Friday to see if out Dollar break out was real.

$USD – legitimate break out. This could have major implications.

Lets look at the Dollar on a daily basis…

 

Cycle wise the Dollar has formed as right translated. On day 16 we should expect a drop soon to a dcl., but now being right translated we’d also expect the dollar to make new highs after a dip.  Note: Before this move –  the USD formed as a failed daily cycle, breaking below the Sept daily cycle in Oct.  That means that the Dollar should not have moved higher at this point.  Fed intervention could be causing these unexpected changes.  I can’t view Cycles as reliable for indicating future moves, because we are seeing them  breaking the rules and cycle theory. The dollar ‘failed’ in Oct by breaking the Sept lows , so it should have remained weak with only 2 daily cycles.   It is as though we got an ICL in August and 2 weak daily cycles later we have another ICL with a strong move? (Ugh). 

 

Keep in mind that with a strong dollar,  we should expect commodities to have trouble.   Are we seeing that?  We will examine that area shortly.

Using technical analysis, if the dollar breaks out to new highs soon, we could get this measured move. Lets see if future FED intervention disrupts this pattern.

While the dollar has been in a Bull market from 2011 to now, The markets have also been in a bull run. So if the dollar is going to go to 120,  The markets may enter a blow off top phase  (MAYBE), so I will review that again here too.

This is an example of a blow off top in Nasdaq. It comes after a major sell off / shake out. Please note the “Pause” when it reached former highs.

 

Lets zoom in, the pause as it reached former highs is pointed out, and we are there now too ( approaching former highs). So here it did not drop & close below the 8 & 10sma for more than a day.  We should watch for that kind of strength.

SPX – So far, this market looks as strong  as the NASDAQ was in 1998-9.  Again, we could pause near former highs, but it didn’t drop a lot in 1998.

Scroll up 2 charts and please note on the Yellow Nasdaq 1998-1999  that the NASDAQ was back at former highs by Dec 1998.  Important to me was to answer my own question, ” How was the TRAN doing back then, because it is lagging right now?”

The TRAN was lagging then too.  When the NAS was at former highs in Dec 1998,  the TRAN did not recover yet.  When the NAZ went parabolic 1999 into 2000, the TRAN actually double topped & fell apart.   THAT is important divergence to take note of if you ask me.  It didnt matter that the TRAN was lagging.

 

TRAN NOW –  Not at former highs, so it is also lagging, but looks more bullish than not.

SO we have a strong dollar, but at this point the CRB and OIL are not acting as weak as the dollar is strong. Gold is.   Is there a change of character where OIL & The CRB will perform well with a strong dollar?  It will take a little more time to know for sure, but lets look at hat we have so far. 

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 CRB – Longer term the CRB WEEKLY has strong  bullish divergence . On a weekly chart, however, it can take Months to resolve in a truly bullish manner.  

    NOTE: I see people showing Bullish Monthly divergence in GOLD or OIL and so on, and getting excited about a turn around.  I dont think they understand that Bullish Monthly divergence in Gold or OIL, etc can take 2 yrs to resolve bullishly. This is a 1 year bullish weekly divergence and no break out yet. 

 

CRB DAILY – The CRB has been  breaking to new slightly lows each month and then reversing higher. The MACD isnt healthy at this point, the RSI is ok.  This could easily be forming a H&S with the Dollar strength so we need more time. 

So if the CRB could fail with a strong dollar, and the dollar SURGED FRIDAY,  why did I see this?

AKS, X, SHLO, SCHN, AA, CENX, etc  and other commodity stocks  closed higher Friday with the dollar surge. Interesting mixture. Maybe they feel that if the economy does well, these will too?

SCHN-  Steel company .  Compare this to my old SA chart below it. These are Bullish set ups.

SA – 2 weeks later – BOOM!

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WTIC – This is a very interesting mixture too . OIL looks somewhat 50/50 to me , yet the XLE looks bullish. 

WTIC WEEKLY –  Not so healthy looking with that reversal. There are both Bullish and bearish looks to the weekly chart.

WTIC DAILY –  The dollars big 3 day surge had 3 smallish days of selling here.  Read the chart, I’m 50/50 with this mixture, but many Energy stocks began breaking out last week after earnings.. 

 

I have said that I am focused on OIL/ ENERGY because the set ups look really promising. This  has continued to be the case.

XLE WKLY – It remain Bullish despite oils indecision.

XLE DAILY

WITH OIL SELLING DOWN and the DOLLAR SURGING ….WHY AM I SEEING THIS with many Energy / Oil stocks?

MDR & MTDR WKLY – A Bullish looking break higher last week.

These were Bullish set ups in Fridays jobs report update, and these are post earnings …

See also EXXI, BAS, GST, SGY, RES,  (CJES – Dropped on earnings Thursday and recovered 10 % Friday).

SGY – Nice volume.

LNG – New buy opportunity.  Earnings came out Friday morning and it put in a reversal at the lows.

I have said in past reports that I am focused on Energy Stocks, because they do offer nice % gains, while the Miners look for a low.

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GOLD SILVER & MINERS

Talk about a mixed picture!   As you saw, there is so much going on with the Dollar breaking out ,the Markets recovering , OIL slightly selling down yet the XLE rising.  The CRB looks shaky, but some commodities look favorable.   The Precious Metals and Miners are selling off and it is severe enough to be pointing toward a possible ICL in the near future.  If Gold and Miners were to only bounce with a DCL here,  they would likely roll over shortly and Dust would sky rocket.   I do not believe that is what we are looking at.  I think we are dropping into an ICL, but we need more time.   Lets just look at some charts.

REMINDER: I pointed out that ICL’s  ( Deep meaningful lows that rallies rise up from) used to come every 6 months, now they seem to be shortening to 4 months.  NOV, MARCH, JULY, NOV.     Mid Nov is 4 months from the Mid July ICL. 

REMINDER #2  _  Since August  I have been watching a few different things that may indicate that GOLD broke out & out performed the mrket for the first time in a while. Using the  SPX : GOLD chart, I mentioned that the SPX leadership had broken down.   I posted this and wanted to see if the break down would hold .

SPX regained its leadership with last weeks drop in Gold. The break down in SPX:GOLD was negated. 

 

GOLD – Gold hasn’t broken the $1072.30 July lows at this point.   IF these lows hold and Gold can put in an ICL and move higher, we may see Higher lows and would look  for Higher highs. That could be the start of an uptrend.  Recall that the dollar pretty much just did that, breaking its DCL and then rocketed higher.

Interestingly,  SILVER & GDX have NOT even broken below the Daily Cycle lows yet.  They often lead the way down & fall apart first, so this is interesting to see that they are a bit stronger lately.

GOLD WEEKLY –  This would lean toward a bearish view.  I just wanted to “Box” the time frame that we have recently seen lows fall into . Notice that the stochastics usually sells down below 20 on the weekly. Gold sold off so fast this week, that the stochastics is still high, leaving room for more downside.  This could be a bad sign if Golds weekly needs to drop that far. IT has in the Bear Market Rally, but would it in a bottoming process? We’ll see.

GOLD WEEKLY –  This would be a way to foresee a Bullish or Bearish view . We have seen a slam down week followed by a doji or small price range the next week.  This could keep us from breaking the summer lows and we could turn higher between now & next week.    Bearish note is that Stochastics MAY need to drop further and Gold broke down from a triangle and cannot recover ( Blue lines).

GOLD DAILY –  This type of relentless selling day after day after day usually exhausts and can lead to a rally. If the Dollar only had 2 daily cycles and then put in an ICL & took off higher, can Golds cycles be acting strangely with an early ICL now instead of a DCL?  I think so, we’ll have to wait and see. Either way I expect a quick rally soon.

 

I just want to share an observation. Things  do not have to repeat here, but it’s just an observation.

1. After some selling, we often get a Gap down

2.  The gap down is not THE lows, but the selling eases up a bit and lows are close.

3.  Note: A gap open higher that doesnt close is an ‘abandoned Baby’ and is bought aggressively as an exhaustion low.

 

GDX –  GDX triggered a buy signal Friday that I have traded for  many years now. I have back tested it and it is over 96% accurate, when it fails it is often close to break even.   That said…

 I do not share it here as a “BUY” and I will explain the trade and why I dont share it here.  For one thing,  Too many here would try to buy NUGT, JNUG, or another leveraged vehicle.  It can work for 3xETFs, but not at an  over 96% rate.  Sideways move kill the NUGT trade.

The trade is that you buy GDX Now and you hold it until the RSI 2 reaches over 80%.   THAT can take a week or that can take almost a month in some cases (see the chart).   It also can lead to draw down as soon as you buy, yes price can drop lower here like it did in July.    By the time you sell at the green arrow you should have a profit.   The Blue arrows are the only prior buys , the Green are the Sells  (notice the blue buys went sideways in March and July for a week or 2 in some cases.  This is why I dont recommend it here. 

When I mentioned GDX as a buy in July,  it dropped & bounced around for over a week little by little before taking off higher. Some people get too nervous  when holding positions that do not move higher right away.  (That is why I often recommend buying over the 10sma here).   I mention this here and now just to show that I now believe we are close to lows with this buy signal, but it may just go sideways for a bit too. 

   So in conclusion,  this is quite a Mixture that we see here.  The markets look to have recovered that slam down this summer and may even be setting up for a strong move higher.   I’m watching the 10sma in the SPX, NASDAQ, etc.  We may see a pause near the former highs like we did in 1998.   I am focused on Energy / Oil stocks for trades,  because the set ups are bullish looking and they continue to break higher after earnings and even with Oil slowly selling down last week.  Stops are in place.    The CRB isnt as pretty as it was, but some companies like  AKS, SCHN, WEAT, etc seem to be holding up, that is also an interesting mixture.  The Precious Metals have sold off hard, but Silver & Miners are fairing much better than Gold so far.  What does that mean?   Will they catch up or is there still a character change or bottoming process taking place?  More time is needed, I have pointed out areas of importance along the way. 

    I hope all had a good weekend, it was a fast paced, volatile week the past 2 weeks.    We’ll see if this week offers some low risk trade set ups, but often in rough markets it is also advantageous to just be patient and allow the dust to settle. Thanks for being here at Chartfreak!

 

~ALEX