Free Falling

Count the Green days vs the Red days in Gold for the past 2 weeks, and you could say that it has been in free fall for a bit. We’ll discuss that after a market review. 

The SPX has been moving rapidly higher and recovering from the August – September  sell off quickly. Since the former highs could offer resistance, we may see a drop with the jobs report .

Now I want to show you a chart of the SPX that really looks like a drop could come soon.

We have all seen what happens to the Bearish rising wedge, and this may be one as we approach former highs.  We are heading into the jobs report . I  see 2 scenarios as likely …

1.  We get a brief burst higher to new highs to suck in the Bulls and then drop into a dcl.

2. The daily cycle is late, we may go higher today and just drop on the Jobs report.

I’m not saying that the run is done, just that we could see a normal pullback after the jobs report is released. We still may be seeing the blow off top type parabolic move discussed recently.

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USD –  The jobs report could affect the weekly charts close, but so far the Dollar has a break out.

The CRB –  I dont like the drop on this chart. We’ve seen 1 day drops in the past and recovered, but this dropped below the 50sma and the run higher has been more of a sideways move. It would be too easy to break to new lows, so it should be monitored. 

WTIC – Oils drop wasn’t as concerning at this point, since nothing was violated.   Price remains above the 10 & 50sma, but the volume was a bit too heavy for my liking.  I do not want to see follow through below the 50sma  ($45.83 currently).

XLE – The XLE still looks strong at this point.

GOLD, SILVER, & MINERS

We expect selling into a Daily Cycle Low (DCL) after a period of time. When the daily cycle gets into the 20 day plus time period, we look for the drop.  Miners have held up recently , so the drop seemed normal in Gold, but after returning home and really looking things over I see something else may be occurring. One of the readers here asked me, “Do you think this is a DCL  or an ICL?”.   Thanks for asking D.P.  Miners were holding up so well that I assumed its is a normal daily cycle low  (DCL), but I thought about it a bit more and want to point out a few things. 

I used to point out that ICLs (Deep trade-able  lows) came along about every 6 months. Lately we see them every 4 months or so. Conditions in Gold now mirror prior ICLs. It has been almost 4 months since the July lows.   Note: Most were not V-Bottoms,  they bounced and did a final slam at lows  (jobs report?). 

Do you recall me mentioning that ” WHEN GOLD FORMS A TRIANGLE, CYCLE COUNTS GET BLURRY TO SOME”?  I have been saying that there were signs of a short 2nd daily cycle and that we are on the 3rd daily cycle. ICL’s CAN & HAVE occurred in the 3rd daily cycle.

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1. We are in a 3rd daily cycle and could get an ICL

2. if we bounce & have another Daily Cycle, I think the July lows get taken out and the Bear continues.

Yesterdays chart showed how normal it is to break out and “Test” the break out area, so we may be close to a low.   Again,  I mentioned they are not often a V-Bottom, so we may see Gold acting volatile around the jobs report, and then move higher.

Looking at past ICL’s, you can see a similar sharp sell off occurring now.  Notice again that those lows were not V-Bottoms.  We do not want to break below the $1072.30 to remain bullish longer term. 

 GDX – The Miners have been holding up well  (So far) with light volume selling.  It is possible that we get a stop run and a drop to the 61.8% retrace.  That is just a guess and I only say that so that if we see the GDX lose the 50sma today, no one thinks that it wasn’t a possibility inside of a bullish scenario. We do also keep in mind that if the Bullish scenario comes off of the table, Miners can sell off sharply! Honor stops.

Now to be fair, I have to throw out the Bearish view too, right? We have broken down below the blue line of a triangle and have not been able to recover with 2 attempts.

  Lets say that we have another daily cycle ahead of us after some type of weak bounce .  You’d get a run higher/ sideways into day 8 ish and then roll over for 20 days or so.  It could look a bit like this. Picture a repeat of the 1st Green Box.

 With all eyes on the  Jobs report and so many areas of the markets at possible turning points, I think we will only know better after that report.  That gives us today to prepare for various scenarios pointed out, both Bullish & Bearish for Commodities.  One of those scenarios should be that the SPX is recovering and the Dollar may be breaking out….things continue as they have for the past 3 yrs.   Markets run higher with the dollar and Commodities just bounce on the way down.

 So we ask with a Jobs report & possible rate hike in Dec,  “Will that Dollar drop and close the weekly chart back under its recent break out, or is it breaking out for real?”  “Will Friday end Golds sell off and put in an ICL?”  “Will the SPX break out an run higher in parabolic fashion , or will it drop from a rising edge and seek out a daily cycle low?”   Gold may bounce into the Jobs report and then get a final quick slam into an ICL ( no v-bottom).  Miners and Energy stocks have held up well  (GDX & XLE) and those may be clues to a bullish scenario going forward.   The CRB stumbled, clues to a bearish outcome?

In any case,  we have to keep our eyes on things as they unfold and try to let the markets tell us what they are doing.  ‘HONOR YOUR STOPS’ because even if the bullish scenario plays out & you got dropped off on the way down, you can always get back in when things are clearer. There is Always another trade!  Thanks for being here and Best Wishes.

~ALEX

P.S.  HMY  (Harmony Gold) misses on earnings, but is up quite a bit pre-market