April 18th –

Something interesting taking place in the General Markets

SPX – Here we see the ICL in November and 2 dcls that followed.  Obviously the markets have been relatively strong, because those dips down into their dcls have been shallow.  Over the last 2 weeks I mentioned concerns about the XLF and then the  SPX broke below the 50sma last week.  The ‘timing’ dictates that an ICL is coming due and since the XLF has been weak, so I would expect more of a dip now or soon. At this point, I’m actually noticing some interesting developments taking place here too, so let’s discuss that. Notice how the recent consolidation does look similar to the last one at the dcl…

Note: That last dcl has not been broken and a break out here is not out of the question, and here is why.

REVIEW OF A SHORT TERM INDICATOR : In past reports I have used the Put Call ratio as one way of seeing how negative sentiment is.  I then pointed out (  On this Feb 2016 chart for example) how often a trade-able lows of some sort or a good bounce occurs in the SPX  when the CPCE broke or spiked above that 90 – 1.00 mark.  Please look at the chart below- Notice that those spikes often lead to lows and a bounce ( often near or at DCLs or ICLs).  SPX is the top box, PUT / CALL is found in the middle box.  Those spikes ( Blue lines) were pointed out as occurring at SPX lows.

THURSDAY APRIL 13th –  This spike actually occurred  last week as the SPX broke below the 50sma.  Was it marking a low? It is very interesting how bearish sentiment became when the 50sma was taken out, and it does usually indicate that the crowd (sentiment) is more bearish than expected. A bounce or low is usually close, so I wanted to say that SHORTING here would probably not work yet.   As far as ‘going long’? I would personally wait for a break back above the 50sma and maybe even a break out as a sign of strength.  Here is why.

I used this chart last spring and again, spikes above 90 – 1.00 were often good trade able lows or at least a bounce, but do notice that some spikes were at ‘double bottom lows’ &  markets sold off again after a small relief bounce .    So I use it as a short term indicator, and I use it when the timing is right cycle-wise for a low.   SPX did just put in a dcl and basically is due for a drop into an ICL soon, but the recent DCL may not quite be ready to roll over at this point.

SO again, SPX reversed higher yesterday ( or started to bounce) after that spike.   Notice that I mentioned a PSAR trip on this chart? The next chart discusses that we need follow through for this to give me a buy, but it is very close .

SO using this indicator ,  I used to wait for a PSAR signal after a spike down below 1.00.   Notice that the dip on this chart below 1.00 is RARE.  INTERESTING –  It usually comes around ICLs.   We dipped there already with the small SPX drop.  THAT is interesting and I need to study this further.  The top box shows that the SPX  often bottoms  & we get a good bounce at a spike down below 1.00 and then a PSAR signal.   So here, We do NOT have a PSAR signal change yet, but  I do think the SPX would have one if it did recover the 50sma and break out.  It almost looks like it marked an ICL at the last dcl. Notice that the last one was in NOV at the ICL, and then JULY before that.

SO basically I am just trying to show that sentiment hit an extremely bearish point when the SPX broke below the 50sma, and many bought PUTS.   The above chart spikes down and we get a PSAR TRIP usually at ICLS.   At times when I see spikes like that, it is usually NOT a good time to short the markets.  It is best to see if a new low is in place ( meaning that the last DCL will hold) and look for follow through upside. We could get a decent bounce or rally, and I’m still watching the XLF for signs too . It has broken down.

WTIC – So oil did rally upward and fulfill that back test that I was expecting, but that rally was strong enough that I personally am not shorting Oil here.  It is pulling back and the 50sma may be the pull back target.

XLE –  We had an ideal situation with ENERGY stocks ( XLE)  as they broke above the 50sma and broke above down trending channels. Many have now pulled back more than expected and lost what could have been support  ( their 50sma), so are Energy stocks possibly showing that OIL will pull back more than the 50sma?   OILS RSI made it all the way to 70  (Strong) while the XLE barely cleared 50, so energy stocks really just need to now show a sign of strength or resilience before I re-enter one.   They may do that if Oil just bounces around and consolidates.

GOLD – Gold seems to be fulfilling an attempt to get to the $1300 mark.  I DO expect Gold to drop into a dcl soon, but because Gold now has 3 right translated daily cycles,  the next DCL may be around the 200 sma, and then we may get 1 more daily cycle ( This one L.T. ) and then a drop into the ICL later in MAY.

GOLD – Just to give you a visual, we have  R.T. 1st, 2nd, 3rd daily cycles, and a 4th could put in a lower high and then give us a sentiment changing drop into an ICL. This is just a rough idea.  GOLD has been stronger than the MINERS in this intermediate cycle.

GDX – GDX is not above the Feb highs like Gold is.  It is within a measured target area and could be peaking in this area as Gold finds its peak.

GDXJ  3:15 yesterday –  is obviously way below the performance of Gold and the larger cap Miners.  GDXJ started to break down as expected, at the 50sma.  Some Juniors look healthy, others are breaking down now. Yes I’ve read the stories about GDXJ.

GDXJ – By the end of the day GDXJ put in a reversal candle, I was asked if GDXJ will now rally to catch up with GDX.  No I dont think so.   This chart shows that in the bear selling of last year,   GDXJ peaked 2 times and then rolled over, similar to now, see the chart, and …

GDXJ had reversal candles then too, but it still rolled over when the “timing” was right.  See the chart and also…

Many juniors are rolling over now that the ‘timing’ is getting late.

SO with precious metals, I think that the “Time” is just about up for this Intermediate run.  GOLD wants to tag that $1300 area, we’ll see if it can do that.   Cycle Timing dictates that a DCL is due and we are also getting into the timing for an ICL, a deeper sentiment changing low. I’m still holding a position short the GDXJ, and with the stories that everyone has been talking about, maybe the drop will be caused  by a little panic selling, leading to a drop deeper than anticipated.   The General markets are due for an ICL, but the recent DCL may hold and we may get a good bounce before it rolls over.  Could the indicators be indicating that the recent DCL was really an ICL?  I just don’t think that it fits the criteria, but if the markets were going to go parabolic in 2017, the dips would become more and more shallow.   I dismiss this idea at this time due to the lack of recovery in the XLF, but will continue to monitor all things.    We have plenty of time to see how this plays out,  but anyone wanting to buy a recovery of the 50sma can put a stop under it as a low risk long attempt too.  The choice is yours.

Recent pullbacks like we are seeing in Metals & Energy stocks (and should be about to experience in MINERS) can lead to good low risk buying set ups in the near future, so I am watching for that.   Enjoy your Tuesday trading!

.

~ALEX