June 12th -Walking A Tightrope
What can we say about Thursday, our Post-Fed trading?
I thought that I saw signs saying that we’d get a pull back in the markets, and a push higher with Precious Metals. Well, the selling was definitely far more extreme than I expected, and even though the Miners opened the day higher and looked like we’d get our follow though, they were dragged down into the close too. I ended up with about 60-70% Cash by the end of the day, being stopped out of positions and watching the fire get hotter and hotter as the flames were fanned by selling. Let’s just review what we have and discuss the situation.
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YESTERDAY I WROTE : SPX – The Feds speech sounded like they have concerns. At this point, we have a simple day 16 peak and a small dip has started. We see 1/4 & 1/2 cycle dips all of the time, so this alone is nothing to be concerned about. Read the chart & notice the deeper 1/4 cycle drop in April – we could possibly do that now.
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SPX THURSDAY – We saw the markets gap down and sell off, and that selling continued all day. The SPX was down almost 200 points! We are on the 200sma, is that going to become support? This kind of selling could cause follow through selling, and the 50sma is the next line of possible support.
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THE DJIA was down….almost 2000 points! That gap down caused an Island Top. These are often very bearish. What does that mean? It means that even though this could bounce or chop around, this might be THE PEAK of the intermediate cycle taking place during the 2nd daily cycle. This could get ugly longer term,
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YESTERDAYS REPORT SAID ABOUT THE VIX — The Vix has landed right on that 200 sma this week. This also looks like a Bullish descending wedge, so I can’t just ignore this. With our Fed Day Mtg, the Markets started to dip down and GOLD & SILVER perked up. We may be seeing a change here, so we must Stay Frosty if we are Long The General Markets.
That VIX Popped big time and the markets crashed. The Vix could keep going higher and the markets can keep dropping, but the VIX can also dip to back test the break out and the markets can bounce. So with that I’ll say that even if the Markets bounce, it seems like an Island Top Market Peak. Let me draw that for you…
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THE DJIA – So this is just an estimate of what I am picturing could unfold here. It is a ‘Maybe”…
1. If that Island Top is the ‘Peak’, we’drop, then bounce , and then break down into the next dcl.
2. It breaks the 2nd dcl lows as a ‘failed daily cycle, and
3. The 3rd daily cycle rallies as a false rally (maybe to the 200 sma?) , and
4. That rally sucks in the Bulls again. We have a lower high and roll over..
Let’s see what Friday brings. FRIDAY WILL COMPLETE THE WEEKLY CANDLE, and that could be an UGLY candle or a bounce off of support gives us a less bearish candle.
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AS A REMINDER, IN THE MARCH – MAY WEEKEND REPORTS I HAVE BEEN LOOKING AT THE CRASH IN 1928 vs Now. That crash also had a multi-month believable rally and then a Bear Market took over. This has been my current thinking as the Markets rally now. I will discuss this again in the weekend report. Hint: I’ve been saying that I think Gold will benefit during future Bear stages of the downtrend.
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WTIC – Oil is on day 36 and these daily cycles often run 40-50+ days in length. Even if Oil peaked, it should be a Right Translated daily cycle, so the 2nd daily cycle should be good too.
GOLD looked Excellent Wednesday as the Fed Spoke, and it also looked great Thursday morning. It was breaking out and remained bullish despite the DOW being own 700 points at the open. By the end of the day, it rolled over too. Gold still holds above the 10sma, so I have to report that Gold looks ok, however…
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SILVER looked good too, but it rolled over and closed UNDER the 10sma. That may still be a normal dcl on day 33, but if this breaks below that low, we continue our count ( We still should be close to a dcl). My Silver miners sold off in a very disappointing manner…
GDX also pushed to new highs with the Dow down 700 points, and everything looked to be playing out as expected. Suddenly, many Miners rolled over and started to sell off. This looked like a DCL 4 days ago, but now this could break down to the 200sma. IT IS POSSIBLE that Miners are being liquidated to pay off Margin Calls, offset losses in the General Markets, or Big Boys are selling to scare out retail investors and buy up their shares. etc.
GDXJ had a nice triangle, but it is now back at the lower trend line. A drop tomorrow probably sends this to the 50 or 200 sma.
GDXJ on day 28 actually could chop & drop to a day 30+ dcl near the 200sma, and be totally normal. I count the First daily cycle at 34 days, this one is 28.
And I know that you recall that I have mentioned a few times that we could get a bounce & drop because the cycle timing could use more time. I drew these charts on June 5th to show that bounce & drop, It hurts A LOT MORE in real time, than it looked like it would on these charts last week, right?
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And NEM was rejected at the 50 sma . In technical analysis, this is usually a “loss of the 50sma last week, and a bounce to back test it, and the kiss goodbye”. NEM had high volume on this drop, it looks like it wants to get to the 200 sma. That is Ugly, but it is also a nice low priced entry if you wanted to buy it.
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So with todays report, we see that some rather unexpected damage was done. The selling was relentless on Thursday, and it was very hard to find Green Stocks ( Some China stocks and a couple of other areas did ok). It will be interesting to see if the selling continues or if we get a bounce on Friday, because Friday will complete is our weekly candle.
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Thursdays selling also stopped me out of many positions. I am 60 % Cash all of a sudden. Even my Silver miners sold off in a very disappointing manner, and I got stopped out of 1/2 of my Miners positions too. By that I mean let’s say that I owned XX,XXX number of CDE, a full position, and I had a tighter stop on 1/2 of that position. Well, 1/2 of that position sold, but the rest was bought a long time ago in the first daily cycle, so it has a lower stop. I now only have 1/2 position.
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I (we) have really enjoyed the fast trading over the past 3 weeks. The gains were exceptional, but like I was saying, “The Music will stop one day, and we need to stop and heed the warnings then too.” We are at that point now where it is best to have stops in place, and just watch what the markets do next. This could be a big 1/2 cycle drop, and then we start to move higher again (bounce), but it is also a warning of how fast things can change.
There is a bit of uncertainty short term, so Sitting on our hands (unless you are an active day trader) may be the best play short term. The lows on precious Metals was not taken out, so we still may have a dcl in place, but we really need to see follow though higher soon. Buying with stops is still a valid trade in that sector. I will cover the BIG PICTURE like I always do in the weekend report, and there is ALWAYS another trade that comes along in time. Things will set up as low risk, and we will enter those trades again.
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Enjoy you Friday and your weekend, and thanks for being here!
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~ALEX
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EDIT 8:40 a.m. Eastern : What a difference a day makes, and at this point it may be a bounce out of a 1/2 cycle low. Yesterday was a pretty real ‘warning shot’ though. These are fast markets, keep poosition size comfortable for your trading plan.
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OAS – THIS IS NOT A BUY RECOMMENDATION, I’m just showing how OAS and really many other Oil Stocks dropped and landed on the 10sma after our strong rally higher. We bought this on the 50sma and made great gains (300%). If this bounces and chops for a bit, we may get a low risk entry for a great trade later, as seen on my next chart…
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OAS -If I see this, it will be a BUY in the reports and could double or more again. That goes for CPE, DNR , and several others too.
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SIDENOTE: CREG – Many Chinese stocks did well despite the selling, so I own a couple. One is CREG, and I still own SXTC and bought QD. Smaller positions that I wanted to add to if they took off.
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QD – This is what I liked about QD. It is easy to use a stop since we are right at the base, so I am still holding this one.
PLIN – A BUY FOR CHINESE PLAY, I BOUGHT YESTERDAY
