Feb 5th – The Markets Have Spoken

The markets have spoken.  They have been ripping higher for weeks and they said,  “I need a rest!”,  and so we had another scalding drop in the markets on Monday.  We were expecting a drop into a dcl, but it looks more like a drop into an ICL, since we are overdue for a good ICL too.  Let’s take a look at Monday activity…

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DJIA MONTHLY-  Recently on this chart I pointed out the accelerate rate that the Markets jumped in 1 month.  That Monthly candle was a lot bigger than the rest,  like panic buying in January.

DJIA–   Now the Dow dropped 666 points on Friday and was down almost 1600 points at one point on Monday, wiping out January & Decembers trading. You can see the benefits of a trailing stop when these markets climb relentlessly.

SPX – The daily chart shows what a drastic sell off that was on Monday.  December and January gains are gone in a couple of days, unless one locked them in with a trailing stop or just liquidated on Friday.  This is not a ‘safer buy’ without a swing low. Some bought on Friday ( buy the dip) and got smoked on Monday. Please read the chart. We hope for an undercut & reversal to lower the parameters on Tuesday.

SPX WEEKLY – This was an extremely right translated intermediate cycle, so we really would not expect it to top here. The trend line break on this weekly chart indicates a drop into an ICL is likely taking place though.

WTIC – Oil gave up a bit more on Monday and the selling may start to accelerate .  Like I mentioned in the weekend report,  when you take a look at XLE, XOP, OIH,  you see that they may be leading the way lower.

As mentioned in my last report, OIL is due for a dcl and an ICL too. Some may use SCO or DWT to short oil …

XLE –  I remember feeling like I was missing the energy trades, because I stayed on the sidelines with that OIL COT as bearish as it was. This looks like an ICL drop and may lead to some good low risk set ups when it is done.

USD – The USD looks to have put in a day 7 high and confirmed a swing low by finally closing above the 10sma. Interestingly, Gold didn’t drop. Please read the chart.

GOLD – Gold did not sell off with the USD rising, it actually closed a bit higher than stockcharts shows at $1339.  See the next chart.

GOLD – This would give us the cycle count of a day 36 daily cycle low if Fridays low holds. It is not a confirmed (safer) swing low until it re-gains the 10sma and breaks the overhead down trend line, preferably on a closing basis.  This was captured by me at 5:30 a.m. Eastern time.

GDX – GDX dropped down and regained some back by the close.  This lowers the parameters for a swing low.  A break above the 23.02 puts in an unofficial swing low. A break and close above the 10sma is considered a bit of a safer buy.

GDX WEEKLY– The weekly chart shows that GDX tagged that 61.8% fib retrace area. We would like that to hold.

GDXJ – At the open I posted this just to show what I was watching for and hoping for.  This small drop at the open gives us a new lower low, and this eases the parameters for a swing low.  The 10sma is way up there, so it will be hard to wait for a confirmed swing low.  Maybe a close above the 50sma would allow a buy with a stop.  Next chart…

GDXJ – GDXJ did close green.  This seems good because the DOW was down 1600 points, the NASDAQ was down 273, and the USD was higher.  With that going on,   several junior Miners were green.  That seems bullish.

GDXJ – For the weekly, it looks like this  IF THE LOWS HOLD . Please read the chart.

GDX:SPX – Almost a break out. Please read the chart.

So I wanted to look at a few charts of these Junior Miners.

GSV – Reversed on a trend line and the 50sma, and this was with the markets crashing heading into the close. That’s encouraging.

MUX – Up almost 5% with the Down crashing down 1600 points in the final hour.  That seems bullish.

VGZ– That was a pretty nice reversal, up 6% with the Markets crashing down, and NASDAQ  down 270+.

So we see some bullish looking action in Gold, Silver, and the Junior Miners , but we want to see those lows hold and get some upside buying too.  That will put in place a swing low. I want to show a slight reason for caution below, it has to do with the bigger Miners.   Enjoy your Tuesday trading!

~ALEX

So as I mentioned, some of those Junior miners really did well under the pressure of the Monday market crash.  I was not as excited with the bigger miners,  so why don’t we watch for improvement with those today?

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NEM – NEM sold down to the 50sma, and so did GG.  So while the Junior Miners went green, and GOLD & SILVER were higher,  some of these bigger miners kept selling down and it looks like rather heavy volume.  This is why GDX didn’t go green.   This gives me a bit of caution.

RGLD – RGLD also started to sell down on Monday to the 50sma. Heavier volume than Friday too.  The only positive here is that this one didnt really drop Friday.

ABX–  ABX is actually back to the lows on strong volume?  So I am seeing a bit of a  mixed bag here, and this might be reason to ‘proceed with caution’.   Some juniors were very encouraging during that markets slam down, but some Bigger miners did not hold up.   I am still going to buy a DCL when we have one in place ,  but let me show you why I will remain cautious in the back of my head…

GDX LEAST LIKELY SCENARIO – In the back of my mind,  since some of the Bigger Miners kept selling yesterday,  I wondered about this.

1. This is a different daily cycle count that would show a first short daily cycle as R.T., bottom on day 18

2.  Then another daily cycle peaking on day 11 and now on day 18. That would be L.T. if it bottomed here and makes the next run a 3rd daily cycle and it COULD be weak.  WHAT DOES THIS MEAN?…

WHAT DOES THIS MEAN?…   The above is just a cautionary note as a less likely scenario.   It simply means that I will enter at this daily cycle low , but I want to see this next daily cycle RIP HIGHER  and quickly break to new highs as a strong 2nd daily cycle.  So – If it lingers and fumbles around for too long,  the above chart will still be in the back of my mind and in my reports.  For now?  I am expecting a first daily cycle to end in a R.T. DCL, and the Second one to break to new highs as shown on this chart.

Note: When I give more than one scenario, like I have done above, it is to show you how I am viewing the trade.  That is important to me, because it may affect how I approach the trade,  or how you want to approach the trade, based on the possibilities.

 Someone in the ‘comments’  recently accused me of giving 2 scenarios “so he can be right no matter which way it goes’.  That is complete horse manure and an insult to me. Next time send me an email.  I’m not mad, but I have new subscribers here that read that comment, so let me set the record straight.  The most important thing to me is not being right, but for my readers to be informed. What is most important to me  is to show my readers how I am viewing the trade set up, what I am looking at, what I have seen in my years of experience.  Maybe a few pros and cons of the possibilities of that trade.  That may result in seeing 2 scenarios under present conditions.  At times I need readers to know that ‘this is Bullish, but be aware that  XYZ could happen too, honor your stops’.  This week we’ve seen the reason for such warnings.

 So if I am bullish yet cautious, like I am with this current set up,  it would be a disservice to you for me to only show you the bullish side and then herd everyone into a trade that needs to be watched as it unfolds.  As we have seen this past week,  Markets are NOT 1 directional.  I’m here to share my experience and  how I may examine a sector from all angles and possibilities.  The dominant possibilities are mentioned.  That said, I am not going to keep important information from my readers.   This does not need to be mentioned again. Thanks.