Wednesday February 14th

We had some market moving data yesterday, the release of the CPI Numbers, and it surely lived up to that expectation of moving the markets! The Data gave us the idea that maybe the Fed doesn’t have inflation completely under control. Recently data has sent the markets higher, but this late in a 2nd daily cycle (and after a straight up type of a move), any perceived bad news would cause a sell off, so that was also anticipated be us & discussed in yesterday’s report. Let’s review that and then we’ll discuss what we actually got.

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Yesterday I said:

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SPX – As a cautionary note, the move from our ICL to our DCL to now resembles a bearish rising wedge, and they are bearish because they are unsustainable. Again, it can go higher in this apex, but for how long? We’ll see.

 

I THEN DISCUSSED A POSSIBLE SELL OFF FROM THE DATA:

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SPX #1 Guess – We have seen 1 day drops to or through the 10sma, and then it bounces back. Monday was a Pop  & Drop, so

1. Could we get a 1 day drop on CPI Data,

2. And then rally back on the Jobless claims

3. And then roll over into a dcl next week? Maybe. I’ve drawn that here.

We certainly did get the sell off with the data release:

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SPX – An hour into trading I was thinking that if this can put in a reversal, it is possible that this is just another 1 day drop? I was looking for a reversal…

 

THE SPX dropped a bit further, landed on the 20 ema, and gave us a reversal. If there is follow through higher, I’m not really expecting a strong long-term rally from here, but it may offer an opportunity to trade a little more on the long side or sell near the highs.

 

WTIC – Oil broke above the 200sma, and normally this would build confidence that Oils day 35 low was a dcl, however it did also break out at the end of January, and then it still rolled over the next day. If you bought the day 35 lows, raise your stops…

 

XOP – Oil stocks may have followed the markets sell off, rather than Oil. Or is this telling us that Oils break out is a fake out and the dcl for Oil is still ahead? If I was trading Oil from that day 35 low, I’d just raise my stops.

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The CPI data gave the impression that inflation may not be under control and that the Fed Might NOT be able to cut rates. That POPPED the USD. Usually if the USD pops, Gold drops, so let’s go and look at the damages.

 

GOLD dropped and actually broke below the last dcl low, so we now have that failed daily cycle. Gold has been holding up well, but this is exactly what I have been expecting for weeks…weakness and a drop into an ICL around the 4th (or maybe 5th) daily cycle.  I have not been tempted to buy Miners for weeks, but after this drops into an ICL, I do plan on buying the lows. We may see a strong rally to new all-time highs from there.

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Take notice of the writing in the lower left-hand corner of the price of Gold. That was a sell off into an ICL. I wanted to remind us that even though it was small down days at times, it was relentless with day after day after day selling. That was basically 2 weeks of constant selling, and we may see something like that going forward.2 weeks of constant down days can be mentally exhausting, but once the lows are in place, you can see a good rally unfold.

SILVER has been weaker than Gold and choppy. It broke below the prior dcl weeks ago, to signal weakness and that a sell off lower was coming. We saw a couple of decent strong reversals, but that did not fool us, since we knew that we were late in the intermediate cycle & due for lower, not higher prices.

 

The GDX was weaker than Gold and Silver over time and it really took that CPI Data hard. That was a high volume slam down yesterday. I would expect a bounce and some chop…

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This is somewhat odd, but with Gold hanging around up at the highs, The Miners do look like they have already been falling into an ICL style sell off: It resembles the last ICL sell off in many ways already.

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That said, Gold itself only on day 20 today.  During this period of time, Gold has only been giving us roughly 25-28 days in a daily cycle, so we should seed at least 5 to maybe even another 10+ days until we get the next low. This IS selling off in a similar manner as the last ICL, though. Notice the similarities of the a-b-c drop on the chart.

 

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Well, we saw a sharp reaction to the CPI Data when it was seen as possibly indicating that Inflation is not under control ( a delay in Fed Rate Cuts). If we just sell off from here, we can expect the sell off to be deeper than I have been pointing out (50sma for SPX), since we have time left to sell down further. If we bounce today or maybe tomorrow with the Jobless Claims, then that may be an opportunity to lighten up or trade a little more. Nothing really changed for the Precious Metals, since I have been discussing ‘weakness and an upcoming sell off into an ICL’  for weeks. It is now just a matter of time for us to chop lower. Things may be choppy if we get mixed data over time, but we should be heading lower for Gold & Silver over time.  Bitcoin and Crypto-stocks dropped with the markets, but they tried to claw their way back as the day went on.  Buyers stepped in and some stocks were down less than 1% by the close. That is what a bull market does!   I’ll discuss that below. Enjoy your Wednesday trading!

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~ALEX

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BITCOIN paused and dropped on Tuesday too, but it rallied overnight to $51, 328. This is a strong move out of the lows, especially once it left that pennant at the lows. Crypto stocks gapped down in a fairly big way, and then started to recover as the day went along. This is a bullish sector again.

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RIOT – I posted this in the commenting area midday as Crypto stocks dropped in a big way, but then started to recover. It is never an easy ride with this sector, but the gains come in fast. These will likely be at new highs for this run on Wednesday.

 

BITF– After a large drop, BITF only closed down 6 cents, so you can see that buyers stepped in on this sector, even when Bitcoin was down during the day.