AUGUST 2 – A Dull Gold Market?

There is an old saying that says, “Never short a dull market.”   Why?  Professional traders know that under the right conditions, a quiet or dull markets can suddenly break out into a strong move higher.  I am going to discuss this a little later in the report, but right now, let’s visit a couple of sectors that have been a bit more active.

The DJIA is at new all time highs.  The SPX is still near the recent highs, but let’s look at the Nasdaq & Transports…

QQQ–   So this could be a bear flag, and we see that the NASDAQ cannot rise & close above the 10sma yet, even though the DOW is at all time highs.  I would remain ‘cautious’ or alert  until it does.  This looks like it may want to drop down to the 50sma.  Would this dip  just be a 1/2 cycle low?  Possibly, but it will need monitoring if it does drop further. APPL Earnings were bullish and AAPL is set to open at new all time highs, and this may help the NASDAQ.

TRANSPORTS –  I pointed out that we didn’t really even get a bounce in the transports, so I wondered if this was a warning sign.  We got a drop, multi day pause, drop,  multi day pause so far. Looking at the IYT now, I see a possible 5 wave move to the 200sma, and it is approaching oversold.

The Transports obviously broke down here,  but at least a bounce to back test that 50sma is likely.

I am personally still avoiding the general markets at this point, focusing on Commodities and Miners  .  Interestingly, the UPRO  ( Ultra S&P ) is starting to look like the TQQQ used to.  It avoided the sharp drop that the Nasdaq experienced, as you can see here.

WTIC CHART #1 – Oil had a large drop on Tuesday, and the inventory report comes out on Wednesday. How concerning is this?  Well, on day 28, Oil MIGHT be dropping into a DCL.

WTIC CHART #2– The 1st day of July saw a large drop too. It lasted 3 or 4 days.  This one could tag the 50sma and put in a dcl, so I am not overly concerned at this point.

Oil dropped 2%?  tell that to the XLE. after struggling for months, it barely flinched.

GOLD, SILVER, & MINERS

Some feel that the ‘Miners are just too boring right now’, and maybe they are.   That saying about not shorting a dull market is spoken for a reason though.  Often slow consolidating markets can burst higher & run after putting people to sleep and causing buyers to sell off their holdings due to boredom.  Let’s take a look.

I put the USD in here to point something out.

USD – Once the USD lost the 10sma in a notable way, and it has been unable to regain it. Please read the chart, this could trigger a pop in GOLD.

GDX has been slowly going sideways for a week above the 200sma, and sideways for a week underneath it before that.  2 weeks of sideways is putting people to sleep.

GDX –  Just an interesting observation: Here I point out where day 16 fell in prior moves higher out of the lows.   Day 16 was not the top, it was followed by a burst higher.

GDX –  This chart is using the special indicators that I developed to allow me to see whether a move is strong internally.  Notice that each ‘sideways move’  was actually quite a bit weaker looking than this recent one, and even those ones Popped higher.  I still think that the Miners can pop higher .

GDXJ –  Junior miners are being called weak or dull too, because “They are just going sideways”.  When I look at GDXJ, I see a much higher low in July than in May. I see a sideways consolidation that could break out into a solid  run higher.  Time will tell, but I do not dislike what I am seeing in either GDX or GDXJ.

So I remain bullish with the set ups in GOLD, SILVER, and the Miners, and Commodities.  AFter signing off here, I want to add to the end of this report, an up to date review of a “Lesson”  that I had in the past. Energy still seems to be bottoming or setting up nicely, and when OIL dropped sharply, the XLE did not. What about the NASDAQ?  AAPL earnings seems to have pushed the futures up around 40 points, but I would watch the close.  The NASDAQ has been gapping higher and unable to close above the 10sma. After that flash drop that came out of nowhere, caution is warranted until the chart repairs itself, and it has not done anything bullish ( yet).  Enjoy your Wednesday trading!

~ALEX

TGB –  I have been holding Stocks like WRN, IPI & TGB literally for weeks.  If my stops are not hit, I am still riding them, and we are seeing sideways moves in many of the commodities.  Look at TGB, it  went sideways for the last 6 days, and sideways for the 5 days before that.  During this time, I keep getting asked questions about TGB and IPI ,  ” Did you sell your  TGB? What do you think now? It is boring me to death. Should I sell?”  I get this question every other day, and the point that I want to make here is that when it goes sideways,  Nothing Has Changed For Me.  I may sell to lock in profit at times, and revisit it later, but sideways and dull is not bearish at this point.  I still own  TGB, IPI, WRN, and we will take a closer look here…

TGB #1 –  Sideways , sideways , sideways.   Boring when you watch it all day long, day after day. Boring , but not bearish ( Just be aware of the earnings dates).

TGB #2 – TGB had an awesome run last October to February, and I dont think anyone would disagree with that looking at this chart.  $0.40 to $1.50

TGB #3 – That run last November & December had bigger sideways moves than we see now, and actually, those sideways moves were downward sloping. So it was boring & painful for weeks then too.  This recent sideways move has only been 5 days long. Even if it drops for the rest of this week, it looks like that run last December.

TGB #4–  And actually,  this recent run from June to now has been excellent for those buying & holding, because unlike last Nov & December,  there have been no large drops in this move higher.  TGB is up 35% from the June lows and this recent sideways move could move it even higher.

HBM – Here we see the same Dull, boring multi-day sideways moves where people just want to sell and go where the real action is. Now read the chart…

Conclusion:   I have actually posted lessons about bull market runs in the past.   Almost everyone looks at a run higher in a stock and says, ” I wish I owned that when it ran higher” , as though it was an easy ride straight up to the top.    Take a real look at the day to day action of a Bull run and you will see that most get stopped out along, because a bull run higher is not straight up.

As long as you have a reasonable stop in place, and you know when the earnings reports are due out, you can ride a bullish sideways move without undue worrying.  If your stock is going sideways above important moving averages, you could be simply in sideways consolidation while riding a bull run higher.  If you are bored to death with TGB, WRN, IPI, CLF, VALE, HBM, etc when they move sidewaysand want to move on?     Move on, the choice is yours  🙂

AKS – Exceptions in trading would be if your stock is NOT acting correctly in an otherwise  bullish sector.  Let’s say that it breaks below the 50sma and closes below an important trendline, then it is telling you something else.  You would be stopped out and may just move on to better stocks in that sector.