Take A Hike

With only 4-5 trading days left until the Fed meeting next Tuesday & Wednesday, I’m not just watching what the markets do today, but also trying to discern how they could be aligned going into that Fed Mtg.  Lets start with the $USD.

USD – as of Dec 4, the weekly chart of the Dollar bounced off of one of its important supports, the 10ma. I didnt like the MACD set up, this looks like a double top, at least temporarily.

But by Dec 7 it looked like a Bear Flag was forming on the daily chart.   More downside likely.

That Bear Flag gave way, losing the 50sma yesterday and

That 10 ma weekly support has been breached ( so far) too. Notice that this never happened in the strong bull run higher from July 2014 to March 2015.

I’ve been watching the VIX, and it is looking bullish actually.  A bullish VIX would imply a market drop.

So I wanted to look at various sectors of the markets and see if we currently see strength or weakness. I see a little of both, but overall it would be an appearance of weakness.For the sake of time I wont explain all of these charts, just give you a market snap shot and say that I’m interested in seeing how these line up going into the Fed Mtg next week.

SPX – Cycle wise this has plenty of time to drop further

NAZ -Tech has held up the best, but is also weakening.

1.  Drop into the fed, bounce and drop further?

2. Bounce around further into the fed, and then drop?

XLF & BKX Banking – Financials are weakening  ( See Goldman Sachs)  ticker GS & RF

IBB – never regained the highs, but also doesn’t look as bad yet.

To summarize :  It could get tricky.  I see weakness and with the Fed Mtg only days away, and that could have downside implications.  The tricky part is that we could drop into the Fed, and then see a false rally for a day or two after that Mtg, drawing in many “longs”.  Then a drop would trap many ( See the NASDAQ Chart above). 

WTIC – Due to the fact that daily cycles in oil can be 30 to 50 days long, I have not been trying to catch this bottom. I have had downside measured targets that were not reached yet, so I will be happy to stay on the sidelines here.

We have a ‘swing’ forming and have become oversold, but I purposely avoided the last 2 with the weakness of this chart.  I said to watch the 20sma if you trade this area.

The Big Picture.  Unfinished business? When OIL bottoms, I do expect that it will  be a long term bottom.

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GOLD

Reminder of my Dec 7 chart showing how Bottoms can be a “Pop” and a sideways move .

That is what we see so far. At least Gold remains above that 10sma for comfort. ( Orange line – 4-5 days to Fed , )

GDX –  On Monday Dec 7 when the GDX dropped, some were nervous.   I mentioned that the 1 day drop could just be a small 2 day drop and still have GDX moving higher.  Nothing was broken yet.

GDX –  So far so good. A move above the high 3 days ago would likely give us a right translated set up  (Bullish). If we broke down from here into a daily cycle low, lets hope that that FED MTG would shorten the drop and make it a 19 or 20 day cycle.  It would remain R.T. if it was less than 22 days long and it should not break the Nov lows.

  So I do see some interesting set ups in some Tech Stocks, but I hesitate to offer them as trades with market conditions looking weak as we head into next week.  For now I am only investing in Precious Metals and Miners, because the stop set below an entry is less likely to get hit than the upside potential if we just put in an ICL  in Gold and Silver.  I would expect weeks of moving higher with an ICL in place.  Juniors are not performing as well as the Bigger Miners, but that will change over time if we have put in longer term lows. 

  These are the types of things that  I am watching as we move forward. It can improve our trading if we look for signs of weakness or strength in various areas ahead of certain market moving events. Thank You for being here at Chartfreak and have a nice Thursday! 

~ALEX

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Sidenote: I think that this is less likely, but I should mention it anyway. Gold sold off to new lows and Miners didnt follow.  GDX bottomed ahead of Gold and it is on day 14, while Gold is only on day 4.  That could lead to this development…

What if GDX starts to drop as the Fed day nears?   Many ( Not necessarily here ) will Freak out and curse Miners apparent weakness, saying they got fooled again. They may start shorting and buying Dust. You can picture that, right?    Well, I might allow myself to stop out below the 10sma if I were leveraged, but I will wait to see if we get an early DCL and not panic or go short.   No emotions, just have a plan.   Remember, in that scenario it is still right Translated and The 2nd daily cycle could start after the Fed day and move straight up. That would be a final shake out.   This is my LESS likely scenario, but I wanted to just throw it out there in case I am away from my desk and this drop occurs  ( we had a black candle Wednesday ). 

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It may just be a dip into a shortened DCL as past of this bottoming process – see the SEPT blue box.