FOMC AGAIN

Wednesdays release of the Fed Minutes certainly caused a ‘reaction’ in the various sectors of the markets. It falls in place with the timing of certain cycles, so lets review the action and what it may mean moving forward.

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SPX –  The General Markets sold off with the Fed minutes. They recovered into the close. This still looks like a H&S and has yet to recover the 50sma.

 

Something that I find very interesting happened on Wednesday, I’ll discuss it later in the report.

 

 

NASDAQ –  I pointed out that the NASDAQ is under resistance.  It sold off with the Fed release, but also recovered.  Will it have the juice it needs to go higher?

USD – I have suspected that the USD put in a DCL, and possibly even an ICL. This would likely finally cause a pull back in Gold,  and we need to be careful with Metals and other Commodities during this time too.  The FOMC helped the $USD today to surge above the 50sma.

Reminder:  MAY 2 CHART –  Longer term I think that this will be a $USD bounce and a Pullback in Gold.  How Far and for how long will that last?  Maybe 98.  That will be determined as time goes on, but it will take a while.    No Long term change at this point.

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WTIC –  Caution at this point.   Oil hasn’t hit my $50 target, but it may still get  toppy in this area.  If so, I still  expect it to continue higher later after a pull back.

CRB –  The CRB didnt flinch much with the FOMC release Wednesday, but is in a resistance area.  It does also look like it is possibly slowing down.  This is the 3rd daily cycle, so I have mentioned that this late in a cycle,  you dont want to be too heavily invested,  using leverage, etc.   I expected 190,  but it may or may not get there.   Time will tell.    ( It can top  Left Translated and drop or go sideways for weeks.   The CRB is made up of many things components .  Energy, Metals, Grains, Meats, etc)

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GOLD & MINERS

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Believe it or not,  the CUP & HANDLE is still valid in Gold  – B-U-T –   that reaction Wednesday was a huge warning sign, so lets not ignore it.  Gold dropped and held at the 50sma,  but that MACD and RSI and other indicators are showing deterioration. With the POP in the USD, This may start the drop in Precious Metals. 

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Yesterdays long term chart of the GOLD  was 2 fold in purpose.   

1. It showed how in the 2008 recovery, the uptrend should stay in tact, but some of the drops are easily visible. 

2. It also showed how that Cup & Handle could POP Gold to $1400 very quickly. 

Look at that chart again and let me now make this very important point…

This is a weekly chart. Those pull backs took weeks. A pullback in Gold would take weeks.

Silver – This acted fine, but will it hold up going forward?

GDX –  See that uptrend in 2009? The Miners dips are a bit steeper and also do not take many days.  We will need patience when the real pullback comes. 

GDX after the FED RELEASE Wednesday –  Not broken, but that was an  8% drop on HUGE volume.  DUST and JNUG had HUGE volume that usually signals a top in Miners. So while all critical areas held up in Gold, Silver, and Miners,  DUST VOLUME may indicate that this is the start of the pull back.

GDX is not broken.  It is still above the support area, but these indicators also show weakness in the GDX. The RSI has not moved below 50% since January, but it may be about to.

GG –  A larger component of GDX.  Breaking down? Warning sign? Leading the way? 

Note : Experienced traders can use Options or Dust, JDST, GDJS, or GDXS to  hedge  core positions.  TRADE REASONABLY – please do not get heavy in leveraged positions. 

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HBM   ( and some other stocks)  still look ok at a glance, but I do wonder how they will weather the volatility.  I repeat,  Keep positions small.  Honor your stops, whether mental or physical.   Also you do not have to swing for the fences every time we trade.  I trade heavily at ICL’s, and as time goes on, I lighten up on size & number of positions.

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-Thinking Out Loud-

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With all that happened in the Wednesday trading and with the recent volatility,  my thoughts on ‘Keeping your positions smaller’,  ‘Don’t use Leverage’,  and ‘Use and honor stops’ and so on takes on more merit.  When the markets start to get volatile like this,  the music can stop and the chairs of support are gone. 

Consider this.    Are you trying to be a day trader or are you just trying to invest so that you can make money?  Less active traders might want to just go to CASH, or at least  Mostly Cash, and just be patient waiting for a low risk set up in the Miners.   That low may be weeks away, but it will be rewarding to have funds to invest with.      Look at your account balance.   What would have happened if you had that amount and put it on CDE, AG, GG, MUX,  GPL, PAAS, and so on in Mid January?  They are up 200%, 300%, etc . Your next chance to ride a nice run in Miners should be coming up in the weeks to come this summer. Having funds to invest in that opportunity is key.

Riding the recent volatility can really shake your confidence if you’re not used to trading.  Constantly being stopped out and jumping back in can widdle away at funds.  This is especially so if you haven’t lightened up or are still tying to “go all in”  or use leverage and 3xETFs, etc during a consolidation.    Know your own personality as an investor and trade in a way that benefits you the most.

 

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~ALEX

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That said,  now I want to show you something that I find quite interesting.  I think that it shows how smart money controls things, even on Fed Wednesdays. It also may reveal the next best investment for traders still wanting to trade.

Check – This  – Out.

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This was the SPX Wednesday. 

1. Notice the sell off right at 2 p.m.with the FOMC release, and then it started to recover  a half hour later.

And this is GDX  on Wednesday

2 P.M. sell off, no recovery into the end of the day

Now take note of this.  Smart money at work?  I was told that “BANK STOCKS REACTED STRONGLY TO THE FED MINUTES RELEASE”.  Were you told that?  I’m telling you that they did not. They reacted way ahead of the it. 

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JPM Wednesday intraday –  J.P.Morgan was being bought up right from the start of the day and did NOTHING with the 2 p.m. FOMC release.

BAC intraday Wednesday – Bank Of America was being bought up from the open and also did nothing special during the FOMC.   I found the same with Morgan Stanley and many other banks.

All the Bank stocks that I looked at took off from the open Wednesday,  not the Fed Minutes release. HHmmm, seems like someone knew something.

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Now look at the daily charts of BKX  (Banking index) and Banks.   These charts are all identical and they didnt “Take off as a result of the FOMC” like you may be reading.   They took off from the open. 

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BKX –  Bullish

JPM –  Looks exactly the same as BKX

HBAN –  Ditto 

KEY – Ditto

BAC –  Ditto

 

The above Bank charts all look alike and I have many others too.  My point?  I mentioned in past reports that this sector looked bullish and it seems that smart money is buying the dips.  Wednesday I think they scooped up shares on all of the banks that I checked,  and they did this  before the fed Minutes release on Wednesday. 

 

So, I think Banks are a buy.