Dancing Markets

The markets are always dancing around on a Fed Wednesday, and often the volatility spills over into Thursday.  Lets take a look at the charts and see what we can see.

SPX – The markets sold off after the Fed Decision.  I called for lows recently and I still expect higher prices to develop from a bounce.  You can see that this is how the markets moved coming out of the lows in August too. I do not expect the recent lows to be broken, but a little more downside is not out of the question. Please notice how difficult it would have been to trade the Lows in August/ September.

That being said,  the RUT / IWM looks like a bear flag, so lets look at a few other areas. 

Lets look at the NASDAQ…

QQQ –  This does look like a place that the selling could dry up.

I should mention that we are in an earnings environment, and its not like the good ole days when earnings were embraced simply because the company name was Apple or EBAY.  Those charts are actually not looking very healthy .

I grabbed a chart of EBAY when earnings came out and somehow caught this crazy candle.  2 minutes later it was gone, but this may be what todays chart looks like.

AAPL WKLY –  Not as pretty as it used to be

Other companies that sold off with earnings  were JNPR, AAPL, BA, X, .   Pops after hrs were  HA, TER, FB, UA ( up 14%)

SO I have been saying that I expect  a bounce / Rally , but I believe we are seeing changes where Markets may be setting up for another big drop.  This may lead to a change in the Precious Metals bear market.

IWM –  Oddly , this looks like a bear Flag.  Remember that the Russell 2000 hardly bounced in the August crash. This needs to move higher rather quickly if markets are going to bounce.

So we see a bit of a mixed picture.  I checked the VIX and Put/Call  Ratio, etc and still feel that we are set up for a bounce, but caution is always warranted  (Stops) when trading around lows.

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USD – The dollar looks weak and has a good amount of downside if it breaks  ( shown on yesterdays chart). 

WTIC – Oil looks like it wants to finally break above the 20sma, but until it closes there and adds to gains, it remains unclear to me if this is a bounce or bottom. This chart looks Bullish a a glance. 

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NATGAS –  No change.  The longer it lingers,  the less interested I get.  It needs to prove itself.

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GOLD – The FED decision added a little more gain to Golds already bullish chart.

GDX – We are getting the expected move in Miners. The lows were called at the shake out and the push higher has been rewarding. Even though Miners have been straight up,  they arent near the upper B.B. ( Usually slows it down) and they are not overbought. 

The above chart shows that we are in the middle of a nice move.  GDX can continue higher for a few more days, or it can pull back first, before moving higher.  That said, I do not know what the day to day moves will be, so when I’m asked in an email at this point “Where can I get in?”,  honestly the next ‘safe’ buy is a pull back.  The Buy was at the lows.  The next buy is really at the next pull back.  There is  chance that this runs away and doesnt pull back much like the chart below,  but no one knows if we will pull back today like the September 11, 2015  run or will it just go sideways & then higher like it did at the 50sma in the chart below. 

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So the next best thing to do is to look at how certain Miners are acting individually.  You may find a “Lagger” that is ready to play catch up.

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  I also like to look at GG, NEM, and ABX since they are the main components in GDX. Is there more room to the upside based on these? Lets see…

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GG –  This actually can run further, based on the past 2 green arrows. Once it got going, it only stopped after riding up the upper B.B. GG is still near oversold too.

ABX –    We already know that ABX broke out and has moved higher. On Jan 7,  I called for a target near $10 or $11.  The measured move to $10 would start inside the triangle at the apex. 

ABX –   ABX is near $10. This move could be stalled here  (But it doesnt have to).  It also may stall sideways and then break higher to $13 on the next run.

NEM –  NEM has been running well, so it could stall GDX here,  but it may not.    This looks like a large Base.  Look at the run from the small base last Dec.  The Jan 2015 break out occurred as the MACD crossed zero and the stochastics was overbought.  It ran from $18 to $27.    We currently have only run from $16 to $19,  so If this breaks out, it could keep running. 

So it is the day after the Fed Decision , and it was not seen as negative for precious metals. I believe that MINERS just put in an ICL and that means that we have weeks of upside left  ( 2 full daily cycles at least). There will be other areas to enter on pull backs, but I cant say where they will be at this point. Anyone that bought miners at the lows can ride them for a few weeks or take profit and hope to get in lower. It is nearly impossible to know what the next day will do in the middle of a move.

I will say this – SILVER is just starting it’s move higher ( in my opinion).

  Silver was under $14 /  Oversold / when I used this Jan 15 chart to show that SILVER usually moves sideways at the lows during  the first leg of Golds move.  It then explodes higher when the zero line is reached on my indicator. We reached that point this week.   

I then focused on this triangle and pointed out how we just saw this form in Gold too.  Gold had broken out from its Triangle, expect Silver to also. Look at the bullish divergence in the MACD & RSI.

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SILVER  has now broken out too.

AGQ or USLV are leveraged Silver trades. I do NOT recommend trading them if you are not experienced.  Notice that in September USLV first went from $12 to $14 to $12,  before running about 40% higher.  They move quickly in both directions.   

A few Silver stocks that may be better for you to trade are SSRI, PAAS, EXK, AG, FSM, GPL, HL.  They also can run 40% without the deeper dips, but they have already moved off of their lows, so entry is difficult.  I am watching many approach their 50sma. If they pull back there, they may offer a higher low to buy from.

It is difficult to offer trade ideas in this current environment.  The Markets shoot up one day and sell off the next, plus it is a week filled with earnings .  Ebay gets slammed down and FaceBook is up $11 in pre-market.  That’s a tricky environment.   Oil and Energy stocks are up 20% one day,  and dip 15%  the next.  Miners were identified at the lows , but now they have moved higher for 6 days. It’s tough to recommend entering now , when a pull back could take 1/2 of the recent gains away. So it may take a little more time to allow the markets to show their next immediate direction.  Will OIL break out? Will the markets get that bounce / Rally that I am expecting?  Will Precious metals pull back and allow a lower risk entry ? I will be looking for set ups to trade based on the markets settling down and choosing a direction now that we are post Fed.  I may not have a report Friday, this report should cover today and Friday no matter which direction they go in.  If I see some really appealing set ups,  I may post them as a separate report in the morning.  

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Thanks for being here and best wishes in your trading!

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~ALEX