Thursday August 20th
SPX – With a day 36 peak, it is really time for a dip into a dcl.
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WTIC – Again, Oil remained above the 200sma, but the Energy stocks did not celebrate. That makes me wonder if Oil will stay up above the 200 sma?
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REMINDER FROM THE WEEKEND REPORT: I SAID THAT WE NEEDED TO SEE UPSIDE THIS WEEK. I WROTE:
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I noticed that coming out of the Dec 2018 ICL, the XOP looked good too, but had a weaker 2nd leg up also. That 2nd run broke the trend line & sold off in April 2019 , so I am going to keep an eye on that trend line too. We are on the trend line now, so a tight-ish stop will help. We want to see a push higher next week in my opinion.
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XOP – In the weekend report I said that we really needed to see a move higher this week. This daily cycle ( So far) has been rather weak as it moves out of the lows. As you can see, the XOP dropped a bit further on Wednesday. The 50 sma is now also starting to bend down, and August can be a choppy weak time of trading, so I just sold my Energy stocks ( except for BLDP). Last week I said that I needed to see a rally this week, and we haven’t. If it comes, I’ll just get back in.
So I can always get back in if there are gains to be made upside, but the recent choppy trading can chip away at funds. I cannot always get out on time if this quickly breaks down, so I exited Energy with small gains.
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USD – Look at the divergence on the USD. The USD dropped and made a new low Tuesday and flipped higher Wednesday. This could be day 1 for the USD. Will that affect Gold? It certainly can act as a cap on Gold.
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GOLD 11 P.M. Eastern – Gold peaked on day 4 so far and dropped sharply yesterday, as the USD reversed out of the lows. Did you notice that the MACD remains ugly and wide open, even after a good bounce? Gold is now showing more weakness.
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SILVER #1 – Silver did not break down as sharply as gold did, but notice that on this mini rally higher, the MACD also did not move up with it. The RSI has also been flat as price pushed higher. Am I saying that we are about to crash? …
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SILVER #2 – Not really, since we should still be fairly early in the daily cycle. Silver doesn’t have to crash, but even if it doesn’t, it could just become very choppy and difficult to put up with. We could see something like this.
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GDX & GDXJ filled their gaps. I mentioned a few times that like that June bottom ( rectangle) , this could just become choppy. The Gap filled and we’ll see where it goes from here.
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It is getting choppy, and that can chip away at the Gains/Funds, so I have recommended smaller positions and even less positions / more cash. August is notorious for Choppiness, when big fund managers and other traders often take the last 2 weeks off for summer vacation. As Chartfreaks, we know that this time we have a double whammy–we are also at the end of some of our Intermediate or daily cycles. That also causes weakness or choppy trading too.
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When our trading was early in the Intermediate Cycle (s), in March – June and even July we had a lot of excellent set ups finding buyers and follow through. I said that I found myself holding 16 trades at a time- VERY RARE for me to hold more than 10. As time goes forward, we always want to take note of the fact that cycles are getting older and they weaken, just like anything else that gets older. I go to heavier cash, smaller positions. You can picture in your mind that some set ups are a bit more brittle and can fall apart rather than break higher and climb again. Thats o.k., because every Intermediate Cycle goes from an ICL to a ‘Peak’ and then chops down to another ICL, where we get another great buying opportunity. The key is to hold on to your funds, and make those excellent gains at the next ICL too. Yesterday , even with Golds large $75 drop, GDX & GDXJ didn’t get too ugly. They gap filled and were down around 4%. Some miners dropped rather big on Wednesday ( see BTG), others held up rather well ( ELYGF , GPL, etc. for example).
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When we had many good trade set ups, I mentioned that I was often in 16 open positions , low cash. Last week I mentioned that I am in less than 1/2 as many positions, they are smaller sized, and I have more than 50% cash. I am still trading, yes I do still own RIOT, BLDP, ELYGF, and a few others, but positions are smaller and if I drop below support, I am out. So I will just repeat the admonition to keep things small, be cautious, hold some cash & you will look forward to an ICL in the precious metals sector with that cash on hand. Enjoy your Thursday trading!
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~ALEX
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Due to a few emails, with people discussing ‘buying the dips’, (but apparently buying each dip every day) I just want to point out why I prefer smaller positions and not adding on ‘every’ dip. I try to add at the DCL or add at the ICL. This may help others, since I have a few emailers in this situation:
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EXK – Excellent stock, excellent run up, but right now it is dropping toward that 50sma (Lets say roughly from the peak) $5 to $3.oo. If you simply own 2000 shares,..
that would be your account going from holding $10.000 in EXK to $6,000 in 1 month. Adding on every down day compounds those losses even bigger and this is just from owning 1 stock. Again, $10,000 EXK in the account to $6,000 EXK in the account.
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BTG took a pretty big drop in just 2 days, and I think we have all seen even Good Miners drop like that at the end of an ICL drop, so holding LARGE positions on the way down may hurt if you are not used to racking up losses. And…
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BY request: “I Bought TDRRF Heavily in early August because it looked really strong, is this one ok, I’m down quite a bit? Can it go lower?” I will say this: This is actually a very good stock, it was ( is) Very strong. It should break those recent highs over time, but yes—this can go lower. Timing that trade is important, and if we get it wrong ( we see it drop) we have to take a small loss or it can become a bigger loss. Lets look at the chart & discuss this.
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TDRRF– I will own this at the ICL, I think it is a winner!. That said, right now if I jumped in near the top as it chopped sideways with 4,000 shares at $3.50 , I would go from owning $14,000 TDRRF, to now owning $8,000 TDRRF just 2 weeks later. And add the EXK example above too, and say I own 8 Miners and am buying all the way down? That adds up and we are not at the ICL yet. So …
If you Own 10 different companies, and they all drop like this, you could give up THOUSANDS, even tens of thousands of dollars of buying power at the next ICL. In a Bull, it should eventually come back, you could be fine, but I personally prefer a small core and buy heavy at that ICL when the sale prices are there.
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