Friday September 22 – The Roller-Coaster Ride
The General Markets are in a failed daily cycle now, so that means that we are dropping down in this daily cycle to seek out the ICL that has been discussed in the reports recently. Before we start our review of Thursdays action, I wanted to start by showing you a live chart of Silver on Friday morning. It surprised me to see it, but as you can see, the good news is that silver is breaking higher today.
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YESTERDAY I MENTIONED WITH THIS CHART THAT THE SPX closed at the lows and broke that lower part of the triangle. This gives us a left translated daily cycle so far and it looks like that sell down into the ICL is still ahead.
The SOXX actually broke below the dcl, so this is a ‘failed’ daily cycle, and that indicates that a sell off is ahead.
So yesterday we can see that The SPX failed on day 23 too. IF IT BOUNCES to fill that gap as drawn here, it still has plenty of time to drop, so you can short a bounce. It may just continue to sell off though.
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So with a Weekly chart, we are expecting an A-B-C drop into an ICL. I think it may possibly drop to the lows of this channel at the 50 week ma area.
PLEASE LISTEN CAREFULLY TO THIS IMPORTANT SIDENOTE: Traders that trade stocks daily need to know that when we are coming out of an ICL, I would say that bullish set ups have over a 90% chance of success ( that is a guess based on experience). The 1st, 2nd, and even the 3rd daily cycle on a run higher give great odds of ‘trade set ups’ playing out as expected.
Now look at the chart and you’ll see a nice rally out of the ICL. Late in the 3rd daily cycle you begin to see the run get tired and often trades get tired too. In the 4th daily cycle, Great trade set ups like CVNA, GRPN, GOOG, etc may show weakness, so they set up bullishly, but then chop. They get sucked into the weakness of the end of the intermediate cycle. Therefore…
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THEREFORE IT IS IMPORTANT to know where we are in the intermediate cycle if you are trading. As we enter the 4th daily cycle, trades should be made with smaller positions and less conviction that they will play out as expected. After the drop and the ICL forms –you can go in heavier with confirmation of the ICL. Trades & buy & Hold positions have a much higher success rate.
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What about a choppy bottom like we saw with Oil?
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Oil did not have a CONFIRMED ICL until it started higher and broke the downtrend line. After that Oil trades worked out well. Before that they would run up and break back down.
That choppy low and really any choppy low is dreadful, but the rally that followed has been great, right? Well, I mention this also because right now we have a choppy low in Gold, Silver, and The GDX. I hate them too, but the rally that follows can be well worth the wait.
So now let’s take a look at The USD Friday 5 am: We are so close to the $1.06 area, but that really may not matter anymore. Why?
1. Yes, the USD has an ICL.
2. Yes, the USD has rallied stronger than expected, but…
3. The USD is almost straight up, right? Gold, Silver, and The Miners are NOT straight down. The set up for Gold, Silver, and The Miners is Bullish despite tis straight up rally. Let’s look at Gold…
GOLD is not straight down at all, right? No. Gold has a choppy triangular formation, and this is Gold at 5 a.m. on Friday. It is actually rising right now trying to regain that 50 & 200sma area. A Triangle low can be quite bullish once it finally breaks higher.
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SILVER 5 a.m. ET Friday: Take a look at Silver pushing higher again. It has been in this large trading range, but with the USD going straight up, Silver has had some strong rallies. Once this takes off and breaks out higher, Silver Miners may finally rally out of the lows, but right now the Silver miners do not believe the rally. The buyers may be waiting for the chop to stop and the rally to unfold. That may happen if & when that USD finally starts to dip lower.
Yesterday was the Thursday after the Fed Mtg, so I posted this chart of the sudden slam down open of The GDX in the first 1/2 hr of trading. I was saying that even with the slam down open, if price holds here, it is just at the lower trendline.
GDX – By 10:30, the first hour of trading, The GDX Price began to rise and held at that trend line. I posted this chart.
GDX held the 34 sma and that trendline.
Now with Gold and Silver both rising at 5 am Friday, so I would expect that the miners will start to move higher again too. A triangle can give us a stealth dcl on the rising lower trendline, and I have explained that in the past, so a breakout of the Triangle could end the first daily cycle. Remember, GDX is Right Translated, but the choppiness causes us to feel that it is about to fail.
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So at this point we have 2 noticeable things following the Fed Mtg.
1. The General Markets are failing and that indicates that the ICL is ahead of us.
2. The USD has been strong before and after the Fed Mtg, but that honestly has not damaged the Precious Metals. The USD ran straight up, yet Gold & GDX formed a triangle, with Silver having strong rallies out of the lows in a trading range. That is also surprising with the General Market in failure too!
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I HAVE seen the markets drop and Gold and Silver rally in opposite directions, so we may be seeing that develop now. This means that even though we are seeing choppiness, Gold really may be preparing to run up and break out to new all time highs. The chop is frustrating, but the rewards of a choppy low that leads into a strong rally can be very rewarding, if we don’t allow our emotions to get the best of us. Enjoy your Friday trading!
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~ALEX
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