July 20th Weekend Review – Ready for a Summer Sale?
You may recall that the Fed spoke 2 weeks ago about a ‘rate cut’ as inflation cools toward that 2% goal of theirs. The following day the data showed inflation cooling and Boom- The General Markets and Gold Markets heated up. That was followed by 2 weeks of bullish action in the General Markets and Precious Metals. It even seemed to halt the normal dip into an ICL and Gold rallied to all-time new highs! THIS LAST WEEK, however, the Jobless Claims number came in stronger than expected and the markets started to sell off Thursday and Friday as a result. I think that we are about to get a delayed summer sale in stocks. Now let’s take a look at what THAT has done to the charts and why I think.
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THE SPX did sell off and close under that 20ema, which is a weaker move than we had in the last bull run that I have been pointing out in Oct 2023 to April 2024. So this weeks selling becomes what I would label as ‘a little concerning‘. A caution flag goes up with the stochastics having plenty of downside available if this continues next week.
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Usually the semiconductors lead the market direction, so how are the semi’s?
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Well, here we see that The SOXX lost the 50sma and closed under it, the RSI lost the 50% line, and the MACD is weak. Take a look at that volume and now I am even more concerned that this sell off is not just a normal dip after a 2 week rally. This looks like a double top with the MACD divergence too.
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THE SOXX Weekly chart shows us that last week we saw a 10% DROP. The last drop close to that was the final drop into the ICL in April, so this is now becoming quite ugly with a 10% drop off of the top and we aren’t due for an ICL for maybe 3 more months?
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I concluded Fridays report with concern for that drop with the Jobless Claims Report. I said this, in part:
“So today seems important when it comes to the markets ‘price action’ after that unemployment report. The General Markets landed at an area where they reversed in the last Oct to April bull run.” So we were looking for the markets to turn higher on Friday, and they certainly didn’t.
Then I said, “Enjoy your Friday trading and it might be worth thinking about how heavily or how light you want to be going into the weekend, depending on what we see in the markets today.” Well, Fridays price action was MORE SELLING in an area where the markets were supposed to turn up. It was time to lighten up, get stopped out, etc. If we bounce next week, I would sell into that too, because it would likely only be a weak bounce.
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WTIC – Oil was doing great, but once it tagged that resistance line (downtrend) it reversed lower. This past week saw Oil drop 4.34%. We watched the Oil Stocks in the XLE & XOP for signs and they actually broke out, so that made things remain bullishly set up, but Friday selling came in, and what did we see?…
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XOP -We saw selling in this sector too. We still have a breakout, but we BARELY have a breakout. It almost looks ready to drop lower and give us a false breakout. What about the XLE?
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The XLE is not ugly by any means, but that is a reversal candle and now we have to be thinking about any weakness that may come going forward if Oil continues to sell down. The Green arrow would be a simple back test, the red is the false breakout due to Oils selling. I will say this–that looks like an ICL sell off in April-June, so the choppiness could still just be a bottoming process. We can see that ICL & Choppiness in May, June, July 2023 also, and then it took off higher.
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The USD dropped last week, but it was coming due for a dcl, and as of Friday the weekly chart shows us a reversal candle. This is most likely the dcl. Usually that can affect Golds ability to move higher, so did Gold drop as the USD reversed?
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GOLD:
1. Gold took off out of the lows with that bullish 2 week rally.
2. That continued with a new high this week, new all-time highs actually.
3. But now with the recent selling, that looks to me to be a false breakout too. Gold may remain channel bound, but if it put in a stealth ICL, the lows should be in place. If Gold didn’t put in a stealth ICL, I will explain my thoughts on that later in this report. One reason that Gold may not have a stealth ICL is because of what Silver has done…
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SILVER never followed Gold. It only had 1 strong week with that inflation data and then it stalled (no new highs). This week Silver dropped almost 6%, so it did not join Gold & the Miners to new 2024 highs. THIS looks like a normal intermediate cycle. Now I see that Silver broke the uptrend and closed under the 10 week ma. Silver will likely act bearishly for a while now and chop its way down to the 30 week ma over time. I’ll explain this further, later in the report too.
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The GDX ETF (Miners) did bullishly do what Gold did.
Miners were selling off into June too, but when that inflation data came in and Gold took off higher, Miners joined in and rallied to new 2024 highs. This week, however, the selling has started and we got a bit of a reversal / doji candle at the highs. This calls for a pullback. Were you looking to buy Miners, because you could on the next dip? We should see Miners retreat and bring back some lower prices. I have circled prior topping candles.
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THE BIG QUESTION: What happened to Cycle counts when Silver stalled did NOT make new highs, and yet Gold & the Miners made new all-time highs? The answer MIGHT be a 5 daily cycle intermediate cycle. How do I view that? Let’s review Gold with a chart…
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GOLD: Let’s break it down intermediate cycle by intermediate cycle.
1. The 2023 Intermediate cycle was 4 daily cycles that basically travelled sideways. The first 2 were stronger than the 3rd & 4th.
2. The 2nd intermediate cycle that started with the Oct ICL rallied with 2 strong daily cycles, a 3rd that became a double top, and a 4th that kind of made a triple top, before selling mildly below the 3rd dcl. So it also chopped sideways for months. Next we’ll focus on our current 3rd intermediate cycle…
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3. The current Intermediate Cycle had 2 very strong daily cycles running sharply higher. The 3rd made a slight new high too (and looked like a double top) and then chopped lower. It was L.T., so the 4th should have ‘bounced in a weaker manner and then sold off into a new low (ICL), but it took off to new all-time highs. THAT was not normal, it was a very strong sign of strength based on rate cut possibilities. THIS WAS AN ANOMALY, the 4th daily cycle made new all-time highs after a L.T. 3rd? It could be an ICL, so yes, We could have a stealth ICL and this is dc #1 about to drop into a higher low dcl – OR – with Fridays big $60 drop, we now head into a 4th dcl, bounce in a 5th daily cycle as drawn here, and drop a-b-c into a real ICL in August. Then the promise of a rate cut or a surprise rate cut would rally Gold again.
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SILVER IS THE REASON THAT A 4 or 5 DAILY CYCLE INTERMEDIATE CYCLE WORKS: The current set up for Silver is actually quite normal, because it remained weak. It didn’t make a new high on dc#4, so it would be that weaker 4th daily cycle that drops into an ICL (or a 5th even weaker daily cycle that drops into the ICL). THIS CHART MAKES SENSE TO A CYCLE VIEWPOINT, with Gold & GDX just showing too much strength in a 4th daily, thus calling for a weaker 5th.
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So now we see weakness in our Bull Markets. It seems like every weekend report has ended with BULLS RUNNING STRONG week after week, right? Week after week of Bullish charts running higher. Well now we see some changes and to me it is time to lighten up, lock in gains, only trade smaller positions, and be ready to buy the dips after they bottom out again. Shorting is possible at times, but timing that can be tricky (they say never short a bull market).
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It has been said that the rate cut for September is now at 100% chance of happening, and cuts later in the year too! Not only that, but if inflation shows another faster than expected drop, the Fed would need to cut before it gets to 2%, so you can only imagine what a ‘surprise rate cut’ in mid or late August would do. The Bulls would likely come screaming out of the gates again, so we want to be ready for anything going forward. Right now though, I think the Bulls have factored in the cut with Gold breaking to new all-time highs and the GDX to new 2024 highs. Silver played it cool though, and we need a pull back to erode this strong ‘to the moon’ sentiment. A summer sale may be on the way. Well, except for Bitcoin. I know that we had 1 slam down day on Thursday for crypto-related stocks, but many started to bounce back Friday with the markets still selling off. This sector not only still looks good, I think that you may be surprised to see just how good it looks. Really? Yes, you’ll see. I was surprised too! I’ll cover that below. Enjoy your weekend!!
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~ALEX
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IN FRIDAYS REPORT I DISUCSSED A POSSIBLE SIDEWAYS CHOP TO THE 10 SMA OR 20 EMA. To the 10sma would be a small pause, to the 20ema would take a few days. I said:
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Bitcoin – So there is absolutely nothing wrong with the price action for Bitcoin, but you can see from past sideways pauses to the 10sma or 20 ema that this chop can last for days.
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BITCOIN Saturday 4 p.m. ET –
It looks like Bitcoin decided that the 10sma was enough of a pause. This is now a day 15 new high, but these daily cycles can go 30 days to a half cycle dip and 60 days to a dcl, so guess what? This could have a long way to go, right? And guess what else?…
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THIS WEEKLY BITCOIN CHART IS EXTREMELY BULLISH AT THIS POINT: Wow! This is the surprise that I was mentioning at the close of todays report. 2 weeks out of the lows and we are almost at the highs? Do you know what this means on day 15 with a 60 day cycle? Let me show you something…
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BITCOIN blasts out of some lows and chops out of others.
Take a look at the orange box. That blast off was very fast and very strong, and this one resembles that so far with 2 weeks of gains. If I copy /paste that box and overlay it to where we are now, what do we get?…
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BITCOIN – This is that rally copied and pasted over our current one. Fasten your seatbelts if that happens, because I dont think that MARA, RIOT, CLSK, IREN, WULF, HUT, HIVE, etc could resist joining in the race. We’ll see, but that is my thinking with this current set up. I still own a basket of Crypto, but like I always say—it has been the toughest trade to buy and hold. Hopefully it pays off in the long run. 🙂
