March 9th – Big Picture Formations
This is a long weekend report, but I want to discuss a few reminders pertaining to The Precious Metals sector, so lets dig right in…
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SPX WEEKLY – I was expecting a drop in the general Markets, so I went short. The Jobs report was a HUGE miss, but the selling actually started before that report was released. As you can see, we got a big 1 week drop. Prior drops like that usually were not isolated ‘1 week wonders’, so we may get some follow through selling to the 10 weekly MA.
SPX DAILY – Friday closed with a market reversal, but I am simply pointing out here that not all reversals are the end of selling either. I was short using the SOXS & SQQQ. I locked in my SOXS gains ( which had bigger gains) and left my SQQQ open, in case we just tag the 10sma and drop again. I was thinking that we’d tag the 50sma and we are not oversold yet.
TRAN WEEKLY – Rejected at the 50sma so far. Some recent selling in the Transports started with a small week of selling and then a bigger week down. So far we have the small drop & a bigger drop. We’ll see what happens next week (these things don’t always repeat, but I thought I’d just share things that I look at). If selling continues, the TRAN may tag the 200sma.
I will briefly discuss 1 more thing about the General Market selling at the end of the report too.
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WTIC WEEKLY – Oil does not look bad, but I have been warning that the Energy Sector ETFS look ugly, so I exited all longs in this area a while ago.
XOP WEEKLY – And last week, the weakness really shined through. XOP lost the 10 week ma.
OIH WEEKLY – This sector is breaking down, and the OIH also lot the 10 week ma.
USD WEEKLY – This looks like a bearish rising wedge, but the USD has internal signs of strength, so …
USD WEEKLY – If this were to happen, you’d get
1. A bounce in Gold as the USD Dips
2. And then the USD rises to the top and Gold drops to the ICL.
3. Then the USD breaks down and Gold takes off out of the ICL. THIS SEEMS MOST LIKELY TO HAPPEN.
USD WEEKLY – However, since we are expecting a deeper drop in Gold (ICL), I had to entertain this idea of a break out to former highs (double top) and then a drop. This would send Gold down to a deep ICL. This is LESS LIKELY.
So basically we have to watch how these things play out. As time rolls out, we see our expectations take shape or possibly morph a bit, and we simply make the necessary adjustments along the way.
So let’s now look at and discuss The Precious Metals Sector.
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GOLD DAILY – Gold formed a swing low with a day 29 low – read the chart. The RSI dropped all the way to 30, the Stochasics was pinned at about 6 Thursday, & the MACD opened wide, causing me to think that this day 29 low will be it.
GOLD WEEKLY #1 – I’m expecting a deeper ICL drop ahead as mentioned with the USD, but this is what we have here …
1. It is a weekly reversal, 7 months after the last ICL
2. It actually broke a trend line & recovered
3. In technical analysis – Reversals after a sell off can be bought with a tight stop & the stop is raised as it progresses
GOLD WEEKLY #2– So we have a dcl, but an ICL is still expected to be ahead, so I have to at least expect something like this for Gold.
GOLD WEEKLY #3 – My Big Picture thinking is to assume that the ICL is still ahead, and we can get a bounce that eventually drops like this. This would be when the USD moves higher 1 more time to the apex of the wedge. Based on my experience with ICL drops in the past, they usually are not mild, so I would think that this type of a drop is more likely.
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SILVER NEEDS TO BE DISCUSSED, BECAUSE IT IS ACTING DIFFERENTLY FROM GOLD
SILVER WEEKLY #1 – Silver is another story. It did not rally like Gold. Silver dropped to and reversed at the top of the base support & 30 weekly ma this week. I have said that I like Silver Stocks, because they are not extended and when the time comes to run, they will add good gains to your account. ( I’ll discuss this again later in the report too).
SILVER WEEKLY #2 – In reality, Silver didn’t rally with Gold AND it did not even recover from the break down yet, though Miners have, and that is what makes this tough to analyze going forward. What will it do next, if it hasn’t followed Gold or Miners? It may just chop around and continue to do it own thing between support & resistance as shown, remaining slightly out of sync with Gold & Miners . OR…
SILVER WEEKLY #3 – Can silver drop like this if Gold is seeking out a deeper ICL? Yes it can , but it would likely be followed by an explosive rally as it comes out of the ICL & shorts start to scramble to cover. This would be a great buy.
SILVER WEEKLY #4 – LESS LIKELY, BUT LET’s WATCH FOR IT ANYWAY – If Silver doesn’t chop around like it has been, and it breaks out ABOVE the blue line, it is probably ‘Game on’ for Silver to rally. Silver may take the lead as Gold finds its low, after all, Gold rallied and Silver didn’t. Maybe the opposite happens next and Silver leads higher. If I see a break out like this, adding Silver stocks would be wise. I actually added to AG on the back test this week, I’ll discuss that later.
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GDX DAILY – GDXJ made new lows Thursday, but GDX had its low 4 days ago, so this is a day 28 dcl in GDX, now on day 4. It broke the 10sma & down trend line. If an ICL is ahead, it may just do a double top here or the H&S that I pointed out before.
GDX DAILY – Though it is a strong burst, I don’t want to lose sight of the fact that we have seen strong surges in GDX stall & drop in the past, just like the last 2 rallies. If you bought this low as an oversold dcl, just raise stops as it goes ( maybe under the 10sma). If this is a final daily cycle, the rally should top sooner than later.
GDX – I drew something like this weeks ago, and so far it is playing out unless we break out to new highs & negate this idea.
GDX DAILY – Another idea of what we might see – a drop to the 50% – 61.6% Fib drop.
GDX WEEKLY Big Picture– And a dip like this is not a big deal in the Big Picture. It is possible and is what we look to buy ‘All in”. Let’s say “Roughly” $20, and that matches the Fib Numbers above.
IT IS LOOKING LIKE A VERY EXCITING TIME FOR THE MINERS IS LINING UP! STAY TUNED!
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That is our weekly wrap up.
I want to discuss the Precious Metals sector a bit more, because I think that the time is fast approaching where those that have been patiently waiting for another good buying opportunity in this sector will be rewarded. I want to discuss the General Markets a bit more too, so I will do that after signing off.
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Enjoy the rest of your weekend, and as always – Thanks for being her with me at Chartfreak!
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~ALEX
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Just An Important Reminder About the General Markets – 5 Charts
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QQQ – When something ramps up out of the lows, like the General Markets have been lately, emotions do get a charge out of it. It starts to seem that there are no sellers, only buyers, and this can only go higher with all of the good news around. Well let’s look at QQQ as of March 2018. After an ICL sell off, it ramped up beautifully too. Buying with a trailing stop was the way to play it, and…
QQQ – That stop is what saved many, because in these markets, things can change Very Quickly.
Just last week when I was calling for a dip, I was being asked by more than 1 reader, “Are you sure we are going to sell down? These markets just won’t stop.” Suddenly, big selling took over this week. Looking at the chart ABOVE and Below again, you see how fast things can change. And as a reminder…
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SPX JAN 18 _ So this was from January pointing out that though I expected a Rally, we need to be aware that the Bull Market may be on its last legs with one final run higher, and that is what a H&S does. I wanted to see the next 2 daily cycles for clues…
Now we are further on in time and the rally has been nice. Many stocks made good gains ( SQ, AMD, MU, TSEM, and many more) , but we are entering what could be the right shoulder area, so I mention this because I don’t want anyone to lose sight of the fact that even very good rallies like March 2018 can still go south fast. Read the chart.
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ADDITIONAL PRECIOUS METALS THOUGHTS
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Gold & the Miners have been selling off for over 2 weeks now, but what a nice reversal GDX just had. Keeping in mind that a drop into an ICL for GOLD or GDX is coming due, I wanted to mention again that that does not mean that we will see new lows for every individual mining stocks ( I point to AU, KL, etc as examples). Some will drop faster or further than others, some will hold up better. In past reports I said that if you like this sector, it would be advantageous (if you can take a little choppy wiggle action) to buy at least a couple of Miners near support. You also may recall me saying that I was expecting SILVER stocks to either play catch up or play out bullishly, so I bought AG before it broke out. This week I added on the back test, and these are longer term positions. Let me show you how what I said back then does seem to be playing out.
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AG – I liked this set up and bought it. A break out from the base may never break down again.
AG – I’m thinking that you will remember this Jan 31 Big Picture chart, where we are still inside of a base and the potential is outstanding if this sector heats up.
AG – I said that if this line gets ‘back tested’, I would add, because this is a longer term position unless it really crashed down and breaks support. Last week Ag tested support & reversed.
AG WEEKLY – And the weekly chart looks great, so this is still going to be a BUY & HOLD , as long as it acts correctly. It reversed off of the weekly 10ma, and in technical analysis, that is what we want to see in a bullish uptrend. Look at the run of 2016, the risk/ reward is very much in our favor.
EXK – I pointed out that SILVER STOCKS were what I would look at to begin out performing and hold up better. Many were still near the lows, since Silver didn’t run with GOLD. Well EXK broke above the 200sma and I pointed that out in Feb. That is a buy with a stop loosely under the 200.
EXK – The recent pull back just caused a back test and now it has made new 6-7 month highs pulling out of a long multi-month base. Silver stocks are acting bullishly.
EXK WEEKLY – To form a cup, EXK can run to $3.30 during this daily cycle. On a down week, EXK was up 13%, and THAT is what I mean by Silver stocks acting separately or doing their own thing. What about the Big Picture?
EXK WEEKLY BIG PICTURE – Even a bigger drop back to the weekly 10 ma after a run would make this a great buy! It also MIGHT just do a slanted sideways/ down chop & form a handle to the 10 weekly ma. EXK looks to be perking up Bullishly now, but notice that in the Big Picture it is still near the lows. Great for the watch list or even a starter position.
AXU– In late January I saw AXU back test the 50sma and I almost bought the reversal, but I had a lot of MJ stocks and other trades open so I didn’t. Suddenly it just went higher & higher day after day, so I figured that I’d watch it for the next pull back at the ICL. Well, now I think that this is not coming back as much as I had hoped. It is oversold and taking off again. EXK might do this now, right? Big Picture?…
AXU WEEKLY – This little Silver stock is acting correctly too, on each weekly pull back it found support at the 10 weekly ma.
Let’s just discuss a couple of Gold Stocks too, while we are at it
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AUY #1– AUY gapped up in January, then it eventually filled that gap. Now AUY Gapped up again and it looks like it wants to run, but it may then just come back & fill Fridays gap at the ICL. So the ICL may not damage some of these miners much, just a continuing consolidation, so…
AUY#2– I have been saying that it is possible that a drop into an ICL for GOLD or GDX does not mean new lows for individual stocks, so what if this just did this? Let’s zoom out …
AUY#3 BIG PICTURE – This looks like a shake out & Recovery turned into an inverse H&S. If that is the case, even the right shoulder really shouldn’t be broken again unless we have a very strong drop into an ICL. AUY is still near the lows and has good upside ahead if it runs like 2016. MANY GOOD OPPORTUNITIES STILL LIE AHEAD IN THIS SECTOR.
IAG – IAG just filled an open gap & has now surged higher on very big volume Friday. If this just breaks from this base, it could run strongly higher on its own, whether GDX pulls back or not. This is still at the lows (base) , so I feel that the risk is minimal in owning it. Zooming out…
IAG WEEKLY – This could base out a bit more, but with Fridays high volume surge, it could also just break now. Take a look at how IAG acted when a base was broken upside in the past. What I see is “No Large Back Test”- it just moves higher and bounces off of the 10 ma.
CONCLUSION: I like what Miners are doing despite that strong USD. The current set up is not an easy situation, since we are awaiting a more meaningful drop into an ICL for Gold. Many Miners are acting correctly, even though they pulled back over the last couple of weeks, but they should still pull back again for a final drop into an ICL too. Looking at those charts, some seem like they may continue to hold up better than others though, and in 2016, many Miners held up better than GOLD. They resisted a much deeper drop.
Currently we have a dcl in place, and buying at a DCL is fine for quick short term gains. Some miners do look like a good buy set up. That said, I still have to expect that GOLD will still get 1 more drop like we usually do into an ICL. The above was written because I wanted to show you how nicely some of these miners are acting. Some may be worth buying here since they remain above support, like AG. I did recommended starter positions weeks back (for longer term positions) and so far many remain above a support level. The ultimate buy, that ICL Dip, still seems to be ahead, as seen on the chart below. That will be the time to go all in if you have been waiting for a nice rally in miners. 2019 still looks to be a good year for Miners.
