March 24 – Corrections

The markets have a way of maintaining themselves, and that is through corrections. I believe we have started a few ‘corrections’ now. Any pain from these corrections should be short lived this week, since the markets are actually closed Friday in the U.S.   Today is the last trading day of the week. Lets take a look at the markets.

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SPX – I have been pointing out this rising bear wedge for a while, expecting a correction. I believe that it has started.

The Dow looks the same

TLT – And with that , the TLT looks bullish in the short term

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WTIC – We saw a drop in Oil.  As pointed out in 4 oil charts yesterday,  that was not unexpected. Oil was hitting the 200sma, I expect that it may go sideways or drop to build steam to break through it.  On day 28 we MIGHT be dropping to a DCL, since we see a trend line break too, but that drop does not have to be straight down.

As pointed out 2 days ago , Oil could do something like this and then break higher on the 2nd daily cycle.  This would lead to a buying opportunity in Oil / Energy soon. So a drop to the 50 sma was never out of the question.  I did sell my one oil stock.

Natgas – Natgas dropped, but it remains above the owntrend line that I have been pointing out.  NATGAS reports come out on Thursday, so watch the $1.80 area . So far the downtrend is broken.

CRB #1 – The CRB looked very bullish to me.  It still does, but using cycles – the picture isnt clear. I thought that day 22 was a DCL  and now we should be moving higher in the 2nd daily cycle  BECAUSE THE FIRST DAILY CYCLE  was very right translated .  That means the high point came late in the cycle (Day 20 high) and the next daily cycle should be strong. Therefore this drop should NOT break the dcl that I thought we formed on day 22.  However, maybe we havent seen the dcl in the CRB yet? See chart.

CRB #2 – A second scenario is that we did see a dcl at 170.46, and if those lows are taken out, this cycle is failing.  

The Commodities have been strong, so I have to look at this dip as a possible future buying opportunity setting up.   I look at Steel stocks and Aluminum stocks ( X, STLD, AKS, FCX, AA, CENX, etc) and I will monitor the dips to see if they get ugly ( Failed daily cycle) or are they buying opportunities.  More at the end of this report.

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GOLD –  What can I say?  Gold has been very strong, gold has been due for a pull back. Since it has been strong, I kind of expect a lot of head fakes. A down day , a rally ( to suck eager buyers in, thinking they are missing the move) and then a drop again. It will take patience to watch this, but I see plenty of time for this to drift lower 🙂

GDX –  And the Ultra bullish Miners also showed that they are vulnerable.I really want to try to focus on our next buying opportunity in Miners. If you traded with us in Jan- March,  we made great money here,  round 2 should be excellent for the patient shoppers.

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So today is the last trading day of the week in the U.S.  As a “Trader”, I still may take some trades if they present themselves, but I really look forward to watching the Miners pull back and looking for opportunities there.   Let me point out another area that I will be actively monitoring, and what I look for.

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We have seen excellent moves in commodities like X, CENX, FCX, AKS, etc . etc.  For future possible trade set ups, This is one example of what I will be looking for here.

CENX –  Seriously, this was a Great run!  It has been correcting and a drop to the 50 & 200 sma could act as support. You can see how , if commodities have bottomed, this could run another double, triple, or more over time. Lets zoom in.

CENX ZOOMED IN –  It’s almost too perfect, right?  A continued drop or sideways move  could begin to level off the 200sma. The 50 is already moving higher and the 50% retrace is nearby. 38% is where we see CENX now. Cenx is almost in the oversold area.  I am monitoring CENX, X, AKS, AA, VALE, CLF,FCX,  ETC for future trades too.

As for VALE & CLF.  I bought the reversals on those, and they moved higher, now they began dropping yesterday.  Quick review. The buy was the reversal day on the 20sma, because the 20sma has acted as support . $3.52.  You can see from my arrows that I wasnt saying it must move straight up, I actually drew arrows that dropped to the 20sma repeatedly.

VALE –  Dropped, but its at the 20sma. I would like to see this hold. Unfortunately,  as a “Trader” my stop would be below or at my buy point, so I may lose VALE today.  ( If I was investing loner term in Commodities,  I may just try to hold it through the corrections).

CLF – CLF also had a reversal on support recently, and I bought it as a trader, actually expecting maybe an   a-b=c-d   type move higher.  It wrestled with the 200sma and gave up yesterday. AS A TRADER, I bought positions near $2.20 and $2.25.  I sold 1/2 below the 200sma near $2.75 just to lock in gains. Thats 50 cents / share . If I had a few thousand shares, it adds up.

Why sell, it it in danger?  No, I sell as a trader with a trailing stop on partial position. I was away from my desk all day yesterday, except for lunch break.  It was a stop on 1/2 the position just to lock in gains. This chart doesn’t look broken, but it might drop to the 50 sma, back to my purchase price, so as a trader , at least 1/2 a position locks in gains, the other remains or gets stopped out as a small loss below the 50sma.

THIS above was as a TRADER scalping gains.     If I was trying to buy positions as a longer term investor in Commodities – wanting to buy low and looking at the longer term charts expecting that commodities have bottomed and will eventually continue to go back to highs?  I would probably just hold my entire position with a stop below an uptrend line on a wkly chart like this …

Again, today is the last trading day this week.  I’m eager to see how the corrections continue to play out in various areas of the markets.   NATGAS inventories come out on Thursdays, be aware of that if you took a trade in natty.  I am watching for pullbacks and corrections to offer buying opportunities over time in precious metals, but these usually do take time and patience.  As for my other trading positions?  I own half of my CLF purchase , All of my VALE in recent purchases,  RPTP ,  and I sold energy.  I may  hold or sell, depending on personal trading decisions, but I do still think that the commodity stocks that we have been watching (  X,AKS, CLF, VALE, CENX, AA, FCX, STLD, ZEUS, ETC, ) for weeks still remain healthy. 

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Have a great day, and a great weekend!

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~ALEX

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For the sake of getting this out well before the mkt opens, I am releasing this at 8 am, and will have to go back and check for typos and proof read now .  Thanks for ignoring typos  🙂