JAN 26th – Turbulence, Please Fasten Seat Belts

 I imagined that the Friday report would consist of  me saying something like,

” Not much changed today, so for the last day of the week I have a few stock picks to present.”   Instead,  we got rocked with a sudden blast of turbulence in our midday flight to our next destination.   Have you have ever been on a flight that suddenly experiences a rough patch? It can be alarming, but in almost all cases, the final destination is still reached despite that choppiness.

 That is how I view what we experienced on Thursday, so let me  just share this view by running over a few reminders.

AS A REVIEW:  The USD has been dropping, and Precious metals have been running higher since Mid Dec. We had a pretty clear dip in Silver and the Miners recently that looked like a DCL.  Gold had smaller dips along the way, but I did mention that it just didnt have a CLEAR DCL.    I accepted that maybe it had a milder dcl, since the Silver & Miners look to have.    As for Gold-  it was on a mission and kept moving higher towards the September highs,  forming a cup that I did expect it to form.

As these CUPS form,  they often pause at the top, possibly forming a ‘Cup & Handle’.  That is where we are today with gold,  let’s review some charts.

USD #1 –  The USD does look like it put in a strong reversal candle. Is this a DCL?  It could be…

USD #2 –  Look back at the September ICL.  We saw the USD put in a solid reversal candle on August 29, but then it continue a ‘bottoming process’, even dropping a bit lower into Sept 11.  We saw a reversal candle in November too, but it didn’t just take off then either, so this may not just become the USD blasting off higher.  We’ll see.

USD #3 – Now look at the dcl in November / December, it was followed by a somewhat weak rally just above the 50sma.   The peak of that weak rally is when Gold bottomed in December.  If this is a dcl in the USD and a bounce follows, Gold could put in a handle & even drop to a clearer dcl, but I would expect this bounce in the USD to be even weaker than the last one (unless this was an ICL).  I will discuss a USD  ‘ICL’  possibility later.

GOLD  –  I wrote this in the report yesterday  ( this is a copy / past).  It highlights that :  1. Gold is at the highs of September.  2.  It finished the CUP  as I expected.  3.  They often pause or pull back at former highs as a cup & handle.  4. The DCL was not clear, but Silver & Miners really look to have a dcl in place.   5.  Even if it stalls at these highs, it remains bullish.    You can read all of that that  I wrote in yesterdays report below , and we will discuss further.

GOLD  – GOLD dropped after 2 p.m. eastern rather sharply. Miners filled their gaps, but this may not be a 1 day sell off, based on what we see with the USD. These cups are known to grow a handle, right?  A ‘Cup & Handle’ is possible…

AUY AS GOLD – Often when the ‘Cup’ is finished forming,  you get a ‘pause ‘ or ‘pull back.    Even a ‘Handle’ is very common, that is why we call it a ‘Cup & Handle’. I posted this Jan 16th chart of AUY as an example in prior reports of what Gold or Miners may do.

AUY AS GOLD –  I am simply using this up to date chart to show how AUY acted the way we want Gold to act.  It acted bullishly after the cup finished.  You can clearly see the Trend line break & 10sma violated & recovered in the cups handle.  MAYBE we get this in Gold now, if the USD simply puts in a weak  dcl bounce?

GOLD 11 P.M.-  As I write at 11 p.m. eastern Thursday Night,  this is Gold.  Does it look ‘Broken’? No, but it did experience some turbulence at the top of the cup, and if a handle is to form,  it will not be a 1 day dip.  If this just takes off higher,  it is fighting against the resistance & selling.

GDX –  Later in the afternoon,  the markets sold off  sharply and the gaps filled completely.  Is that it?  Well, it doesn’t have to be. See the chart for possible handle formation.  It may depend on the USD & GOLD at this point, but Miners also do NOT have to sell off very much, they can just experience more choppiness.

Was possible ‘choppiness’ expected, or is this a complete surprise? It is a disappointment, but it was a possibility…

GDX –  Interestingly,  even though the dcl was in place in the July to August first daily cycle –  the move higher from there started out very choppy, and I have been referring to this.  Notice that despite that choppiness, those Aug lows were not taken out.  Maybe Miners will just remain choppy until GOLD puts in a clearer DCL –  or maybe they both just get a little sideways choppy before moving higher?

Honestly –  For weeks I have repeatedly been pointing out this type of choppiness in the middle of several of these runs in charts like the one below.  This is the important part that I always mention: I mention that it always seems to look easy riding a BULL MARKET in hindsight, but RIDING IT REAL TIME is a whole different feeling than seeing it on a chart.   Emotions get involved.  Notice the choppiness in this chart below that I posted earlier this week. I warned about leverage during choppy times, but I still own it.

How many times have we said that we just wish we could get a nice long EASY bull run higher like the 2016 run out of the JAN lows?  Have you ever said that?

GDX –  That said, welcome to the Bull Market.  The Bull kicks and bucks and does not make it ’emotionally’ easy to ride. Which marked area of choppiness looks worse?  #1? #2? #3? #4? or #5?  Probably #1 or #2 found within the 2016 run higher, right?  It runs higher – gets choppy – then runs again.

Back to the Big Picture USD to address a question that came up-

Maybe others are having the same question?

In the following chart on Jan 12th,  I pointed out that the September ICL had been broken, and that is a FAIL.  I said that I now expect the dollar to drop much more over time.  I also have said in many of my past reports,  “If the USD could climb as sharply as it did in 2014,  then it can fall just as sharply.”   

Someone basically asked , ‘How can the USD drop when we haven’t had an ICL since Sept and one is due’.  My answer is almost always,  ” Let’s look at the charts.”

USD ICLs – Do you see clear ICLs & solid rallies higher every 4 months? Look at that big drop that we just saw from January 2017 to that September 2017 ICL, because that is 9 months.   I see no big bounces over the 10ma that lasted during that 9 month period.  Yes, the USD will bounce, but I’m not looking for strong rallies in the big picture, and I don’t see Strong rallies in that drop from Jan to Sept 2017.  That tells me that that can repeat ( Red Arrows). Please examine this chart.

 CONCLUSION:  We had some turbulence on Thursday, and that can play out further. My Big Picture views can always be found in the last weekend report ( or the 1 before that).  Until anything changes in a major way with the big picture, the set up remains bullish, but the wiggles, choppiness,  and the day to day turbulence will not make this as easy of a ride as it may look in hindsight.

FASTEN YOUR SEATBELTS , YOU ARE HERE- Again, take a look at that 2016 run, and this choppiness is not as bad.   I have a feeling that someday this is going to look like an easy ride too. 🙂

And again-  If The USD BOTTOMS like this as a DCL is put in place similar to December…

 Then GOLD could put in a handle something like this.  ( Please- I have said this before, This is NOT an exact path.  A couple of my readers will say, “You said it was going to put on a handle and it would drop, then go higher, then drop, then go higher,  why did we drop 3 days in a row?”    No, I have mentioned that I do not draw these knowing  the exact path day after day – these are visual aides or guides to get you through the choppy times.  It prepares your mind for possibilities,  but NO ONE KNOWS AN EXACT PATH DAY BY DAY.

So fasten your seat belts, we may continue to have some choppiness ahead, but at this point in our flight, the destination remains the same.  Enjoy your Friday trading.

~ALEX

A LESSON ABOUT GAPS

GDX –  I actually drew this up at 11 a.m.  as a “Lesson” about Gaps.  The reason was that I was being asked about Gap Fills.  “Do they have to fill?”  “What if it is  just a partial fill?” , etc.    So I drew this to point out that they don’t always fill the very next day, but they still can fill later.  Our GDX gap did not fill at this time, and began moving higher,  so I wanted to let readers know that just because it didn’t fill Thursday morning,  that does not mean that it won’t fill later.

  So in this chart of our current run, GDX & GDXJ were reversing higher  even before GDX closed the gap Thursday.  I wanted to point out the gap from JAN 15 and how it did NOT fill over the next 6 days,  but it did fill later.  Then our current gap filled by the end of the day, so this is just a lesson for another day.  🙂