Sharp Reversals

Tuesday brought us some sharp reversals in the markets.  Let’s take a look and discuss the short term as well as the longer term.

This weekend I used this chart and I cautioned that when I see strong divergence as a technician, it calls for a pull back soon.  Note: A pull back can simply be a pause  that can correct the divergence over time, so it isn’t a Red Alert, but lets just discuss ‘possibilities’.

QQQ –  Yes, we have a Pullback, new highs were not confirmed.  This is a ‘bearish engulfing’ and when it comes after a run has taken place, it usually indicates what I call a ‘temporary buyers drought’.  No one stepped in to scoop up the bargains, so I expect further downside.  The volume increased and it is a tad overbought, but it still may simply lead to a ‘pause’.  Notice the sideways drop in December (Arrow) and the small drop in February. This may be all we see on day 21 of this daily cycle.

MU – A black candle at the top of a run is almost always a ( temporary) top. This could lead to a nice lower entry.  Yesterday I showed MU and said I would have sold 1/2, due to the high volume gap open, and today I would have probably sold all of my MU.  I think we can buy this lower.

BACK TO THE TECH SECTOR

QQQ – I just wanted to mention that cycle wise, if we are on day 21, this can peak on day 30, or this might begin to drop into a dcl, since they come in various lengths.  Daily cycles can be 30-40 days long, so this should be right translated.  It may also drop for 4 days like the end of Feb and then run to new highs peaking on day 28 or more, we just dont know.

What I have drawn here would be a normal consolidation, similar to December.

NASDAQ –  And the NASDAQ  can still be ramping up as drawn. This would be the very bullish blow off top idea, before a larger consolidation sets in.  The current set up still fits this bigger picture idea.

That said, I have mentioned a double bottom possibility too, and that can still happen in all of this, so lets just examine this idea too.

SPX WEEKLY –  I did mention that a double bottom is a possibility, and I drew this chart 2 weeks ago to keep in the back of our minds.  We have double bottom consolidations before so…

SPX – Day 21 and a drop to a deeper dcl , even a higher low, still fits the double bottom possibilities. I think that the best thing to do is to watch individual ‘stocks’ like MU, AQ, SQ, TWTR, CY, CREE, etc. (and various sectors) to be able to gauge whether we drop deeper or mildly.  I will be watching that divergence too.

WTIC WEEKLY  –   If I am expecting an a-b-c drop, we could see Oil under $55 according to this current weekly chart.

WTIC DAILY –

1. Oil inventory comes out Wednesday,

2. I have expected this a-b-c down the whole time, and

3. Yet I sold my DWT Tuesday?  I am now thinking that I will try to get into SCO or DWT again soon , either pre-market or this a.m. from my parents house.

LAST WEEK OIL slowly ran higher into and after the inventory report and then sold off an hr later. Maybe I’ll get that gift again.  DWT & SCO actually sold off a  little bit into the close on Tuesday, so I may be able to re-enter almost where I sold it if they sell off a bit more.

USD – The USD is struggling at the 50sma. BASICALLY – The USD & PRECIOUS METALS are continuing to go sideways as expected. If the USD drops ( let’s say into the FOMC meeting square box),  and then runs higher…

GOLD – If the USD drops ( let’s say into the FOMC meeting) and then runs higher,  Gold could pop now to draw in the Gold bulls and then it may fall at the FOMC meeting march 21.

This is just me trying to figure it out as it plays out, but basically we have what we expected-  SIDEWAYS, HARD TO TRADE CHOPPINESS so far.

GDX – As expected , Sideways choppiness in GDX & GDXJ too. I did buy a couple of Silver stocks over a week ago, just in case we got a pop higher.

HL in yesterdays report

Tuesday

SUMMARY:

 The General Markets have had a nice run, and many stocks like MU, CY, CREE,  CASA, AQ, SQ, etc etc have also done well,  but it may be time for them to pull back and put in a normal correction.  This is when opportunities to buy lower or add to positions begin to develop, so we will look for some low risk entries if this pull back plays out.

I am expecting a sell off in Oil, likely to an ICL.  When that ICL is in place, then the ENERGY SECTOR may offer us some excellent trade set ups too. I already have been watching stocks like AXAS, SGY, WPX, WLL, etc and they have become somewhat bullish. This may be what made me jump out of DWT, but others like AREX, OAS, the XLE & OIH are not so bullish, so I am watching and waiting for a green light in this sector too.

 The Precious  Metals sector continues to waste Bulls and bears time, going sideways and boring people to tears.  This is not a bad thing, if we can be patient. I am still thinking that this sector is going to perform very strongly in 2018. Each ICL puts in a great rally, but the follow through & continuation higher has been missing.  That will change, but we will have to wait for the next ICL  ( most often 4 to 6 months after the last one).

 As mentioned, I am watching the Medical Marijuana sector and Block chain sector, because after spectacular moves higher that we cashed in on in Oct – December,  they have now sold off, consolidated, and may be slowly setting up too.  The Biotech / Pharma sector also has had some nice trades.

Current Trades have been playing out very well, but once they play out, they may need to pause and  consolidate those gains.  If that was an ICL in the General Markets, we are early in an intermediate Cycle, and there will be another run higher soon.  We’ll need a couple of days to see how the markets react in the short term. Day 21 could mean that the Peak is not even in yet, it could come on day 30, so we’ll see how this plays out and it may be a buy the dip pause if we get one.

 SIDENOTE:  We got 2 feet of blowing drifting snow, and I have cleaned up my driveway & walkways and my neighbors walkways twice.  Some areas were 4 feet deep from the wind drifts, this is the 3rd North Easter in 2 weeks!  CRAZY for March.   Wednesday I will have to help my parents, so I wont be in the comments section until I finish up down there, but I may buy SCO or DWT using my phone, as mentioned in the report.    After clean up, I can log in from their house and join the fun  🙂  Enjoy your Wednesday trading,  and as always, Thank you for being a chartfreak !

~ALEX

I skimmed over this report, but I am not going to have time to really proof reading it in the morning like I usually do. I am pretty tired and decided to just release it tonight,  get some sleep and leave in the morning,  so please excuse any typos. Thanks!