Thursday October 29th – Choppiness or Crash?
YESTERDAY I WROTE: THE SPX closed down and closed below the 50sma. Not only that, but that MACD is warning us that the General Markets are losing momentum here. AND…
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( ALSO FROM YESTERDAYS REPORT ) The Dow Jones looks even worse. It closed near the Monday sell off lows. If you look at the Green Arrows, the 50sma has been supportive in the Bull Run, but we are starting to see a bearish look here and the MACD is bearish. This could be a warning sign and needs to be respected. The other sectors in the General Markets may start to follow.
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SPX WEDNESDAY – On only day 24 the SPX dropped 120 pts. The last daily cycle was a long 60+ day cycle, many are roughly 40 – 50. That means that we are only about 1/2 way through this daily cycle and it is breaking down before the elections.
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So I drew this cycle count to compare our current day 24 drop with the last daily cycles day 22 half cycle dip. Do you see where we are here?
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SAME CHART: We have a LONG way to go before this daily cycle ends. After day 22 we saw over a month of additional trading, so we should trade for another month? Yes, hopefully with bounces & chop rather than just a major sell off. If we get a bounce it is possible that we will then drop again that may be short-able. I have drawn THAT scenario on the next NASDAQ chart.
#1 NASDAQ BEARISH SCENARIO – As noted above with the SPX, we could have 1 month left for this set up to occur. If it remains bearish we could back test the 50sma and drop toward the 200sma , breaking the last dcl lows. That reversal at ‘B’ would be short-able. I will have to look into that last sell off low and see if it is the ICL, or was it a dcl and we are NOW heading into the ICL of the General Markets.
#2 NASDAQ BULLISH SCENARIO WITH ELECTION JITTERS – Believe it or not, this can remain bullish and the lows may not break. I have been saying that I expect pre-election choppiness & uncertainty, and we could be just seeing this major choppiness without breaking the prior lows too. This would lead to a post election rally and this would actually be a normal W-Pattern chart set up too.
I expected this to be a choppy and difficult week of trading along with next week too, saying that ‘THE MARKETS HATE UNCERTAINTY”. I did recommend smaller position size or even going to cash as a way to manage risk, reducing losses (or maybe sacrifice gains) and try to wait it out. Honestly though, the depth of this choppiness is deeper than I expected already. The Pre-election / FOMC uncertainty is making this week a dreaded week of indecision and choppiness. Now we have to wait and see how this plays out into the elections and beyond.
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The Precious Metals did not fair any better.
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GOLD dropped sharply, but notice that so far it only put Gold back at the trend line. It did not break the last dcl lows, but Miners did, so I am watching for this with GOLD & SILVER.
SILVER was stuck under the 34 sma and dropped pretty sharply yesterday. I have been pointing to silver reaching the $20 area and now that lines up with the 200sma area too. That drop now seems reasonable with the FOMC next week and cycle timing lining up with next week too. Silver actually looks like it could drop there early if this keeps up.
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PSLV – Yesterdays drop was 5%, but this can drop a lot further if SILVER heads to $20, so you may wish to keep this in mind if you are shopping for PSLV. The 200sma may come into play on some of these Precious Metals trades. If you buy it there, you get in at June Prices. Wow.
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GDX -Less than an hour into trading I posted this chart in the live area to show that the Miners broke below the last dcl. This is a failed daily cycle and signals an ICL ahead.
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GDX – It seems early on day 24, but this drop does resemble the spike in volume on the last 2 dcls. I would expect GDX to get down to the 200sma (blue line) and it may even do a shake out move as we approach the FOMC.
How could this avoid plunging through the 200sma and a watershed crash?
1. It either bounces and lands in that area ‘on time’ near day 30, as shown
2. It could bottom early with a short daily cycle, but I have to view that as less likely. I will know when I see it.
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GDX – So this would represent that possible bounce with the dcl coming near the FOMC MTG.
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FOR THOSE THAT DO NOT HAVE TIME TO RUN THROUGH THE LIVE AREA COMMENTS: Yesterday Cal ( thank you Cal, this is where a team effort is appreciated 🙂 ) pointed out to me that due to the elections the FOMC MTG is Wed & Thursday and not the normal Tuesday / Wednesday schedule. THAT MEANS that the FOMC MTG Results are released on day 30 Thursday. That could be the perfect timing for a dcl / ICL.
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If you have been sitting on some Cash waiting for the Miners ICL, Next week could be that buying opportunity. Of course I will have daily reports leading up to that and the big Picture Weekend Report will cover what happens this week and what we may see next week too. SO FAR it has already been quite a rough ride already, so fasten your seatbelts, the markets really do hate uncertainty!
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~ALEX
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I’m not recommending any real action at this point, because patience is what will pay off here, but I’ll just post a couple of charts here for entertainment purposes.
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AG -First majestic Silver has moved from $14+ to $9 at the 200sma on the last low. AG is actually currently overbought. If Silver drops to $20, AG could even break lower and you may be buying that $14 Miner for $7 (1/2 price sale). Sprott bought it above $12, congratulations to you!
I was asked yesterday for my top 5 Miners, but I do not have a top 5 (yet anyway). I love the potential on many of these Miners and many could double or triple, etc. When an ICL takes place, Miners can change from very bullish looking to ‘Step aside and let the dust settle’, so I wait for that. Then you have to reassess the set up and that is what I do as we come out of an ICL. Look at CDE as an example:
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Tuesday I would have said CDE looked quite strong & was holding up nicely, yet as an ICL approaches we see a 1 day sell off of 13%. If it dropped 13% in 1 day, what could it do in a 3 day sell off? Where will this be at the ICL? It is always best for me to let the chart finish developing and then see if it is damaged or healthy.
AS A TRADER, I STILL LOOK FOR TRADES IN GOOD & ROUGH MARKETS FOR MYSELF: I still try to make it a low risk entry with bullish reasoning. I’ve been watching OSTK.
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OSTK#1: I’ve been watching OSTK and saw a possible double bottom low here, oversold and with divergence on the intraday time frame, and ignoring the market crash. I took the trade and mentioned it in the live trading area yesterday. I got in near $72 and it was breaking the 10sma when I grabbed this chart a minute later. A simple pop to that 50sma is $81 and that could be the whole trade for me ( $72+15%=$82) , but…
OSTK is the stock that ran from simple digits to $130. It is now 1/2 price and COULD run back to the highs forming a cup, so I will play this trade step by step. When a stock does a normal 50% pull back and then returns to those highs, it gives you a 100% trade. These past 2 green days were during a market crash, so it resisted the selling so far and I can buy low risk with a stop right here.
Just 1 more example of why I have found that trying to wait for the ICL can save you some pain & money.
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THM was breaking higher Tuesday and this was looking bullish for sure, but if the Metals are due for a dcl/Icl ( Gold & Silvers) drop, Miners usually follow.
THM dropped 16% yesterday alone. Who knows how this will look by the FOMC Mtg next week?
