Feb 8th – Playing It Safe?

When the Ice begins to get too thin to support you, you would proceed with caution and maybe even take the safer route.  When the markets experience a serious 2 day slam down,  it isn’t always the best time to just jump ‘ all in’ with  leverage.  That is a trade that may or may not work out, and so it has higher risk.  Leverage has probably robbed more people of their soul than thin ice has.  Let’s discuss that in todays report after our recent market sell off …

 

NASDAQ -I covered the general Markets extensively yesterday, review that report if you need reminders. We had a strong reversal, and it did stall today. It is an unconfirmed swing low.

 

I mentioned that in technical analysis, a strong reversal candle  that recovers much of the prior day can be bought with a stop under the lows, but the lows are so far down,  is ‘All in with leverage’  a safe trade?  You may be carrying a heavy load thin ice.  The lows may need to repair themselves too, so we will review this again,  though I did discuss ‘possibilities’ yesterday too.

 

QQQ –  That reversal can be bought with a stop below the lows, but yesterday I also pointed out that it seemed that we had way too many ‘bulls’ diving in with leverage to ‘buy the dip’.  I said that this may not be a V-Bottom, and markets may need to weaken the Bulls resolve by kicking them off.  See June, and August and ask yourself… Was that a great place for leverage ‘all in’ ?  …

 

NASDAQ – Using this chart, again I mentioned that NASDAQ  may not be a ‘V-bottom rocket shot’ like most are expecting.  I saw way too many people BUY THAT DIP in full leverage yesterday, so I mentioned that sentiment might need to be weakened.  I drew this drop back to the trend line.

NASDAQ –  And that is what we saw.  We saw the QQQ  quickly dropping  along that trend line.   When we didn’t get the rocket ship higher and follow through.

NASDAQ – I’m not saying that we can’t get a bounce, just that this might get quite choppy for heavy leverage.

So this is such a tricky area to be trading right now. It isn’t like solid ground, it is more like thin ice.  We do have a ‘swing low’ in place, but it is ‘unconfirmed’ and may take a while to gather some stability. Buying this area might mean taking a few small steps and not necessarily all in on leverage.  This low may need to firm up a bit by basing or proving itself.    Let me now discuss the Dow and point out what I mean …

 

DJIA #1 –  This was a mini-crash, not just a mild pull back. Often this takes a bit of time to heal itself if you dont get the V-Bottom rip higher. It may take some base building and today the Dow ran higher , but closed down. Anyone buying the Dow as it moved higher Wednesday saw it close near the days lows.

 

DJIA #2 – Before the 2007 market topped and crashed, we saw one of these Spike downs in February too. Granted, they are not all the same, but maybe we can learn from it.  It really doesn’t look like very much in the big picture, right? Well let’s zoom in on it, it too was a mini crash.

 

DJIA #3 – That drop wiped out weeks or months of trading too. No V-Bottom. Notice that jumping in heavily leveraged would have been difficult to endure during weeks of repair work.  In 11 days it actually broke the lows too.

So I just wanted to point out that we may have to endure some boring choppy markets for a while.  Some may want to avoid frustration and watch how it plays out or keep positions smaller.  Repair work may need to take place as the markets weaken that bullish sentiment.   We do not have a confirmed swing in place, and as you can see in the chart  above,  the lows were even taken out back then 2 weeks later.   ‘   At the end of this report I will have a couple of ‘buy set ups’, but they will be with the idea that either 

1. They resisted the crash 

or 

2. Use a stop and honor it. 

 

 

WTIC – We finally have some believable selling, and strong volume was there too.  I mentioned that XLE, OIH, and XOP  seemed to be leading the way down as they crashed, so now Oil may play catch up.   Even though it is within the timing for a dcl,  it could easily drop lower.  I actually expect this trend line to be broken to drop into an ICL now or after a small dcl bounce.

 

XLE –  My though yesterday with this strong reversal was that this may have to base out or go through a bottoming process too, while Oil drops to its lows.  Eventually,  we may see some excellent buy set ups form in the Energy sector.

 

USD –  ICL or DCL,  that is the question.  I explained my thinking in yesterdays report with the bigger picture EURO, USD analysis.  We had a day 11 peak in Dec, will the 50sma ‘peak’ the USD on day 10 or 11?  The MACD actually looks bullish, but this still can fail.

.

 

GOLD from yesterdays report, when I discussed my thoughts on  “running the stops” on the intraday chart. We would drop to $1300ish to run them all.

GOLD AS I WRITE AT MIDNIGHT-  THEY’VE BEEN RUNNING THEM – C’mon $1300

 

GOLD  – Gold finally picked up on the selling.  “Running the stops” on the intraday chart to $1300 is also the  50sma and 50% drop, so I am watching that area.  I would LOVE to just see this happen overnight & reverse, but we’ll see how this plays out.  NOTE: GOLD STILL LOOKS NORMAL USING CYCLES.

 

 

SILVER  – Silver broke down and is heading toward the ICL lows. Definitively not what was expected and definitely killing all the bulls confidence. No one is liking this sector anymore.

 

LET’S DISCUSS MINERS:  I AM GOING TO POINT OUT WHY I DO NOT THINK THAT MINERS ARE IN SYNC WITH GOLD, AND MAY NOT PLAY ALONG AS EXPECTED WITH CYCLES.  THEY ARE EXAGGERATING THEIR MOVES.

 

GDX #1  –  With selling everyday,  the Miners have not been a ‘safe buy the dip’ either. Some are holding up, others are dropping off.  We have not had a swing low to buy safely anyway yet.   I mentioned that I liquidated everything on Friday, because when you get a massive sell off starting in every sector-  it is best to clear your head, step to the sidelines, and watch how it plays out.   GDX is oversold & will probably flip higher when Gold does.

 

GDX #2  – When you get selling for 8 days out of 10,  it could exhaust, capitulate,  and flip if Gold finds its dcl, but again,  this is not a ‘safe buy’ until you see a clear reversal on a closing basis and then a swing low. WE DO NOT HAVE A SWING LOW.  MINERS ARE ALSO NOT IN SYNC WITH GOLD, and the chart #3 might explain why…

 

GDX BIG PICTURE #1  –  I was going to save this for the weekend report, but it may need to be addressed now.  I noticed that last year,  GDX dropped to the $21 area in March, May, July, and Dec . That is the same lows every other month- unusual . They did this every 2 daily cycles though Gold ran higher. I have seen this before in a bull market. Did we have 2nd daily cycles in Miners, as they move to their own consolidation pattern.  Do you see this pattern?  So next stop $21?   Or …

Note: I looked at this chart above and I wondered, “Are they going to eventually do a massive stop run?”  There must be Piles of positions from the bigger buy & hold groups / Funds that were started and never stopped out at $21 GDX.  If big boys want to pile into Miners heavily,  they could easily run those stops and trigger major selling, scooping up all those positions.  Their buying then reverses the sell off and shorts need to cover.  This could lead to a very strongly rally higher, but when?  The next  ICL? Possibly.  I’ll discuss that in the weekend report.

  GDX BIG PICTURE #2  -That is not the scenario that we were looking at, I said that I was expecting a break out ABOVE this pattern on the 2nd daily cycle as shown below.  IT CAN STILL HAPPEN, but looking back at March, May, & June 2017,   it’s starting to look like GDX ignores normal FIB levels and drops back to lows.  We may get our next dcl at those $21ish lows again if we dont reverse today.  Fridays job report could bottom Gold.

Miners haven’t followed Golds strength,  but when Gold flips,  GDX will likely flip & run too.   I agree with what you are thinking,  yes this is frustrating and ridiculous. It doesn’t make sense when you consider that Gold should be quite bullish under these conditions.   Some Miners held up, but the larger ones in GDX  ( NEM, ABX, GG, etc ) are being sold off, not accumulated. Are they preparing for a major stop run?

 

 

At this point, some cash on the sidelines is not a bad thing , because sell offs always lead to opportunities. Right now we have sell offs in almost every sector. Some are well along and starting to build bases (metals),  others still may need a little time (Energy, Miners, General Markets?).

 

 

~ALEX

 

IT IS HARD TO POINT OUT TRADE SET UPS IN THESE CHOPPY VOLATILE MARKETS, BUT BY REQUEST, I WILL SHOW 4 HERE THAT I THINK DO SHOW PROMISE. I WILL EXPLAIN WHY…

 

DDD – With such a big sell off in the markets, DDD is making higher lows, resisted panic selling, and is trending higher since that gap down.  It has increasing volume from this oversold position.  A break out could run to $12.50.  A nice short trade, use a stop.

 

ENPH  – I love this set up. Did it sell off with the markets? No, Monday it popped higher.  As volume increases, it then popped above the 50sma.  I bought this one myself, because it did not sell off Monday, and it popped higher Wednesday. I also rode that November run higher in this and it was a steady gainer.

 

TWTR  – I have mentioned this before too,  TWTRs problems seem to be behind them.  This did not sell off  as a mini crash with the markets either. It used to be a $70  IPO, it dropped and based out, and has almost doubled since moving out of its base this summer.

CVRS – This Vascular Robotics chart shows a possible reversal and oversold.  It didn’t crash down with the general markets, but did sell down a bit,  so this is not as strong of a buy,  it looks good if it breaks above the 50sma though  (Use a stop).

 

I said that Miners are not a ‘safe buy’ without a swing low,  but as a trader,  I look for intraday set ups and may find one that I will enter.  So I was watching GDXJ and found this interesting and entered a trade that I mentioned in the comments, so I will point it out here  ( DO NOT FOLLOW,  play it safe) .

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JNUG – When GOLD was GREEN at the open,  GDXJ Gapped down & recovered.  Then as GOLD sold off down $15,  GDXJ slowly dropped back down,  but only to its former morning lows,  a double bottom on light volume & formed a wedge.  I said in the comments section that I was going to buy JNUG at that double bottom ($13  with a semi tight stop).  I drew this chart.

 

 

GDXJ (or JNUG)  at the close – By the close , GOLD was still down and GDXJ broke out of the wedge and looked to back test it.  Unfortunately it never rallied like I hoped, to put space between my BUY & Thursdays open.   I held on, but a  large gap down will probably stop me out.  Just a trade unless it rallied higher.