WED Dec 21- Baby Steps

On Tuesday, the markets continued to take some baby steps. Not only did we see The DJIA take more baby steps toward Dow 20,000, but the VIX took baby steps toward the lows of the year.  Add to that Oil, Gold, and the Miners taking baby steps of their own.  Lets take a look and see what direction things seem to be heading in. 

DJIA –  The Dow was only 13 points away from tagging the big round number 20,000.  Since the VIX is below 12, we would usually expect a top to be forming, so the big party may be short lived once the Dow achieves that goal.

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NOTE:  To release this at 7:30 a.m.  , I just need to publish this report and go back and fix typos later.  Please ignore typos, thank you!

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The USD – We see a day 8 high in place with a possible topping candle, and for the USD to form as Left Translated, it should top soon. We would expect this, because the timing for an ICL is coming up. Lately cycles are stretching longer than the average, but I am watching for this USD run to top as Left Translated. This is something to watch going forward.  The USD does have higher targets using other methods of analyses, but they do not have to come to fruition.

WTIC – Oil peaked on day 19 and after a brief dip, started to rise again.  Volume is weakening, so it does not seem that the push higher will continue at this time, but that also doesn’t mean we have to get a big pullback.  Oil may just go sideways or drift around. Wednesdays inventory report may clarify things a bit more, but many energy stocks have continued higher.

NATGAS – NATGAS has been pulling back after breaking out to new highs. It is approaching support areas now and is getting oversold. Most people that I know like to play Natgas leveraged ( UGAZ for example) , so an entry with Natgas around $3.20 seems better than right now.  Usually I would start a position now and add on the dip a bit lower, but with leverage that can really go against you if support doesn’t hold.  It is best to be as patient as possible and risk missing a trade when using leverage, rather than to be early and take a deeper loss.

GOLD – Gold cannot take that giant step forward and all of these baby steps do no good in the name of progress. We want to see Gold take a leap over the 10sma to confirm that it is settling into a low. Gold really needs to get over $1160 at this point to show good progress. Notice Golds little 4 day base.

GOLD LIVE –  As I write this report at midnight Tuesday night ( Eastern time).  We saw 2 decent pops in Gold out of the lows and then a bull flag. At $1134.50, it has a bit to go to get above that 10sma.

GOLD – Breaking this trend line is around $1150. We can watch for that, but lately these baby steps are like watching paint dry.

GOLD LIVE AS OF 7 A.M. – You can see that the flag played out with baby steps too, and now we have a mini rising channel, but the MACD looks to be weakening.  Any drop from here breaks that channel. Gold needs a buying catalyst at this point.  EDIT:  It just popped higher to 1136 as I finished this report at 7:30.  The channel is in tact.  Baby steps in the right direction 🙂

SILVER – Silver dropped to a new low Tuesday and then put in a pretty nice reversal. We’ll see if it has any follow through higher, but this type of reversal is often bought by T/A fans with a stop below the day lows.

GDX – If Gold was higher by the open this morning and then GDX gapped open, that is a bullish set up.  This would be called an Island bottom reversal. Just because it doesn’t happen today, doesn’t mean that this pattern is finished. GDX may hold these lows for another day and we could see that Gap open tomorrow too, so this is something that we can just be aware of and watch for.

When you look at this chart, do you see a change happening?

GDX –  One good sign is that when a trend line was broken in the past, volume would swell and the sell off would crash price down immediately. Sellers bailed out. At these lows, Volume swelled and price didn’t move.  What does that mean to you?  To me it means that we might be seeing the lows form with accumulation instead of selling. Baby steps.

GDX  – That is why I mentioned the possible Island Bottom forming. We aren’t crashing down, we are moving sideways for 4 days with high volume Wednesday, Thursday, Friday. The FED slam may have been the lows. We want a gap open Wednesday  🙂

DRD showed some noteworthy strength lately with the Fed Slam too. It keeps climbing back , after selling off each morning. Baby steps in the right direction?

DRD bottomed early, before other Miners in the last run higher. In the summer of 2015 when DRD bottomed near $1, it eventually ran up about 800% to a double top. It has now pulled about back 62% and could be showing signs that it is done selling off for now.  The MACD is strong.

So we may be seeing signs of bottoming in some areas.  I have also pointed out the October lows in some Miners have not been broken, and that is also a good sign that in the future, we may see some great gains in this sector. Right now, we are going through the dreaded bottoming process, and this process often wears people out, ESPECIALLY if one is over trading, taking positions that are too big and they cannot stand the daily movement, etc.  START SMALL, with just a position or two if a Miner is acting correctly.  It is not time to “Go All In”.  Until Gold gets over the 10sma, we do not have a swing low in place.  I have had people tell me  ” When I see Gold start to pop, I jump in JNUG and then it drops and stops me out. I am done with this game!”   This is a time to be cautiously optimistic, not overly invested.

We need to see these baby steps turn into something more promising, but as you can see from the above, we may be seeing things beginning to line up.  Last year, the December lows in Gold RUINED peoples confidence, and when the Miners really started to make incredible gains, some had trouble believing it.  The run left many behind, because they got bored or frustrated over trading it.    We rode miners up several hundred percent, selling some on the way up, and buying the dips when they presented themselves. We may be entering that time period for this sector again, so we will continue to monitor progress as it unfolds, even though we may be taking advantage of other trade set ups too. The sell off in Gold has been real, but if the Bull remains alive and well, the next run higher should be very real too. Enjoy your Wednesday trading, and thanks for being here at chartfreak!

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~ALEX

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GLF – I love this weekly chart when I saw it yesterday. The daily has been popping with volume  ( I do not know the fundamentals yet, I just noticed the spikes on the daily chart). This chart is NOT the product of reverse splits, it was a very real sell off that may recover over time.  I am going to research this company today – I see news of a 300 million senior note tendering offer that caused the stock to actually spike higher 22% yesterday. This may be forming a solid base in a bottoming process.

This was the CENX trade mentioned here, along with WRN, FCX, PACD, NADL, and a few others. These trades are working out and

I encouraged buying in this area, so you wont get left behind if it takes off, and add if it dips further.

And off she went.  I had at least 3 people tell me that they took the trade,  Congrats! 🙂  Unfortunately, I miised it and took the WRN trade instead.    If  CENX  meanders sideways for a bit, it offers another chance to buy it before it takes off higher. I do believe this wants to break out to new highs in time.