Wednesday October 21st
QQQ 5 minute 1 day chart – The markets were climbing nicely yesterday and suddenly ( and without real provocation) they dropped with a quick flash drop. It can be seen on this 5 minute chart and you’ll see that
1. It never really recovered after a bounce attempted to do so .
2. I feel that if the markets had more time, it would have sold off further and may have even closed at the low of the day.
3. The big question: Did that make the Markets bearish? Answer: No.
SPX – The markets aren’t bearish, but they do remain choppy. The SPX tagged & sold off at the 10sma. This still resembles a cup & handle type of pattern, but we may just see more ‘choppy trading’ as we approach the US elections.
WTIC – Oil actually looks like it wants to break free from this consolidation, but today is the Oil Inventory report. That may help, that may not. In an interesting turn of events, the Oil Stocks started to look a bit more bullish too…
XOP – yesterday I showed the possible inverse H&S set up. If this breaks higher, it should be a buy signal as long as you use a stop. And…
MRO ( APA, LPI, ERF, etc ) Are all still at the lows and do look to be shaping up. APA , VLO, and LPI are even closer to their lows than MRO. They can be bought as low risk entries if Oil responds well to the report, or if the XOP breaks free. With the MRO for example, it could be bought with a stop at the reversal low. So far that has just been a choppy trade, but the MACD is climbing and it may be setting up bullishly.
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USD – It is very important to note that the USD is showing very early signs of weakness. A break below this trend line breaks the dcl and then we could actually sell off for several failed daily cycles. This could be the catalyst that finally sends Precious metals higher. SO far we have seen 2 daily cycles of sideways chop in Gold, Silver, & the Miners. We need a catalyst to drive it higher.
GOLD – Just another day with the same set up, but honestly this does look Bullish set up at this point. Notice on day 13 it crashed and looked bearish, now it looks bullish? This is the result of choppy price action/indecision. We are on day 18, so I can say this for Bull vs Bear:
1. BULL: If we break above day 12 to new highs now on day 20 or so? It is Bullish. We don’t get right translated 5th daily cycles. that said…
2. BEAR: The last daily cycle looked quite bullish all the way up to day 25 too, but then it dropped very quickly into that dcl. That can happen too, so this continues to give us a mixed review.
SILVER – This looks bullish too, but it also could go either way. The problem is the sideways chop and lack of strong volume on the up days ( so far). A break above the 50sma and a new 1 month high would make it seem as though an ICL drop happened in September and this could be the first daily cycle as mentioned in prior reports.
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I’m going to review 5 charts of the GDX: The Bull and the Bear sides.
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GDX #1 – We have a day 18 reversal forming a trend line. A break above day 14 would actually be bullish and the MACD is healthy. You could buy this with a very tight stop at the trend line, but we are still really in uncertain territory here. The next couple of charts explain why…
GDX #2 – You could buy this reversal with a stop, and if the ICL is in place with gold, you should see a break above the 50sma. The good news? So far we are only chopping sideways and GDX has a Sept dcl low at $37+ ( and we are only at $39 here 18 days later). That means that we haven’t missed much, right? 3 weeks moved from a $37 low to $39 so far.
– Also notice that if you bought that reversal low at the dcl, you would have bought toward the end of the day at almost $39 anyway.
– That is the same price that GDX was at Tuesday, we haven’t missed anything so far.
GDX #3 – We have to keep in mind that an ICL drop ahead could result in this, and this isn’t really too far off from what we saw in September when the last sell off dropped into a dcl too. The elections ahead could cause this reaction, so buying does have added risk.
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SO LETS JUST TAKE A LOOK AT THE LAST DAILY CYCLE & THE DROP INTO THE DCL:
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GDX #4 – That last daily cycle looked pretty bullish in that sideways chop too. Look at the Green Box.
1. It pushed toward the highs for 3 days and then rolled over quickly.
2. I just wanted everyone to see that bullish box, because this current set up looks bullish too but it did roll over.
3. So if you buy this or add here, just know that we may get one more drop ( its better to know that than to get surprised). These last 2 daily cycles have been FAR MORE choppy that the run up in the first few daily cycles seen on the far left.
GDX #5 – Finally, price right now is pretty close to the price that you would have entered GDX at on the day of that DCL reversal. GDX closed above $38.50 the day of the DCL. It is now $39.50, only one dollar higher. Even if you decide to jump in now, you have only missed 3 weeks of choppy frustrating indecision.
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I drew up these 5 GDX charts because a question was raised: I didn’t buy GDX or any miners at the dcl because it looked like we’d have a weak daily cycle and then a final drop into the ICL. Can I still start a few positions now? The answer is above with the 5 GDX charts. What about individual Miners? I would say that you can if you start with a small position, understanding that it basically could go either way at this point. I will explain more below.
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We can watch for the reaction to the Oil Inventory Report today and also Bitcoin took off higher overnight, so the blockchain area should continue to pay off. Enjoy your Wednesday trading. 🙂
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~ALEX
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Similar to yesterday when I discussed the stronger EGO, VNNHF vs other weaker Miners, I want to show a bullish and a bearish Miner:
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Similar to EGO, we see that NGD has worked its way back up to the highs. It had a sell off in September, but that wasn’t any different from the sell off in June, so it has just continued to climb higher step by step. At the same time…
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We have MRDDF at new recent lows. You can see that this one ran from under 10 cents to 66 cents in 2020, but now it is dropping right back to the 200ma at 25 cents. You can also see a support consolidation on the left , so this one may reverse at the 200sma, and that would make it a low risk/ higher reward Miner.
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So some Miners look strong, some look bad, and still others may actually be starting to improve. I wanted to show you First Majestic Silver:
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AG – I haven’t liked the look of AG for a while, but it is finally improving to the point that it looks good to me. Notice that AG fell to that 200sma and found support in that area by chopping around & reversing. I think that it could actually be bought here if someone wanted to own it. A break out higher from here would be a break of the 50 sma & put it above the down trend line too.
RGLD – and then we have this Royalty Company Royal Gold. If you bought this after April, you are break even or down in your position. This has just been riding along the 200sma over the past month and after 5-6 months of sideways consolidation, it could really run swiftly once we get another rally. So my point is…
So my point is that we are still seeing a big variety when it comes to the Miners, but most have been choppy and lack luster. Several look Bullish, most have been choppy, sideways, and even a bit frustrating if you own them, and still others are down at the lows. If you are itching to buy or start a position and you didn’t at the dcl, what can you do?
I would find one near support like RGLD or showing signs that it may be ready to break above the 50 sma like AG, and start small. You can add at an ICL or add if it progresses & raise stops. Understand that we could still get that final drop into an ICL, and if we do you’d need to stop out or you could take a smaller position & even ride it down and hope for a sharp drop & fast recovery.
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BITCOIN : This triangle is when we really started to focus on Bitcoin near Oct 9th. We started buying MARA and RIOT ( also HVBTF). It was breaking higher and I expected follow through, even to $12,500 as a first target.
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BITCOIN : We almost hit $12,500 overnight, so we are getting our bullish follow through as expected.
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MARA TRADE : I do think these are just now gaining traction, and I did recommend these as a swing trades ( hold for a couple of weeks as long as it acts correctly). We could see over 100% gains again over time.
