Light Holiday Trading?

This was possibly going to be a slow week of holiday trading, with Thursdays markets closed in the U.S. and 1/2 day Friday. In some areas we actually saw some noteworthy changes. Lets take  a look at our weeks activities.

SPX – No change from what we expected, but we should see a push higher soon.

This is encouraging …

IWM –  The small caps that have been lagging broke higher. Ignore the light volume since Friday was a 1/2 day of trading.

IWM WKLY –  This broke out too and has a bullish look to it.

The Dollar may have BIG implications for the $CRB, GOLD, and more.  We need to consider whether this could be a double top or a cup & Handle with more upside? It is important to see this play out. 

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The USD –  The Dollar has been strong and the weekly chart shows that we are approaching the March highs. Below are 2 possible scenarios.

USD #1 – This may just break out or form a handle and break out higher.

USD #2 – A double top or fake break out. I say this because of the CRB & GOLD. I’ll explain later in the report.

As I look at  UUP,  it gives the appearance of a temporary top. This is important for Golds future move I.M.O.  Was Golds drop Friday a fake out? A Dollar drop would likely cause a Gold recovery & shake out.  More on that later too. 

THE CRB  –  If the DOLLAR double tops, the CRB would likely bottom. It is at support and overdue for a 3 yr cycle low. This would imply that the Dollar will top.

Along with the CRB,  some long time commodity companies also seem to be at long term support. Someone asked me to look at FCX, so you can ignore the writing on the chart.  It was for them.

$WTIC –  In Mid Nov I called for a continued drop in OIL , but energy stocks were holding up and basing out. It is confusing to watch this play out,  but my target was near $26 on the wkly chart using an A-B-C D projection. ( The A-B-C is still not confirmed).

WTIC –  Oil began showing strength and closed above the 10 & 13 sma  (It did not do that in the last steep sell off).  Friday Oil sold off again below the moving averages and the bounce was halted at the 38% mark. The RSI was rejected at the 50%,  and OIL looks like it wants to drop again.

WTIC long term – Oil is nearing support and inside a bullish falling wedge in this longer term wkly chart. There is still room to drop. 

XLE– If Oil drops will the XLE  finally give it up?   I think that it is possible that OIL drops to support on that long term chart and the XLE double bottoms with a H&S, but this is just a theory at this point. Many energy stocks remain healthy looking in well defined bases  and so far the 50sma has acted as support for the XLE. The MACD is weakening however.

NATGAS – Still  looks like it wants to break down.

Lets talk about what happened in GOLD this week. 

Yes there are a number of things that ‘Could’ be happening and people are getting very bearish again. I refuse to get emotional and stomp my feet and be upset because Gold put in a new low –  that never works. 🙂    Leave emotions at the door and lets just act like a forensic scientist and examine whats in front of us. 

Let me start semi-bearish.   IF the dollar breaks out and flies higher,  then Gold could drop below $1000 as shown in my prior wkend report.   These 2 charts were shown in past reports.

Now let me share a current Gold chart and mention another point.  A QUICK drop to $1033.90 could happen in a day.  If the Dollar did the fake break out higher and then drops ( possibly even to form a handle as shown earlier in this report), Gold could just drop $20 or so in 1 or 2 days and test the 2008 top.  Read the GREEN writing on the left of this chart first.

I mention this above point because GOLD dropped last week to new lows again,  yet SILVER and MINERS did not. They usually lead the way, so it stands out as odd to me. 

GOLD –  New lows.  Almost a $20 intraday drop and again –  it is only $22 from the 2008 ‘test’.   Silver & Miners are not following.  With that I have to wonder if this is a final shake out?  Many have gone short & are bearish now again.

SILVER–  Silver held recent Nov 23 lows as it sold off and reversed higher Friday. In fact, the MACD is trying to cross upward at these lows. I would be nervous “Shorting Silver” here.   It didn’t drop to new lows with Gold.

AG – Is a silver stock.  This looks strong for what happened this past week.

SSRI  –  A Silver stock that is holding up despite recent selling.

GDX – I drew this during market hrs to point out Friday mid day that GOLD broke to new lows and was staying down there,   yet not only have the Miners held their Sept 11 lows,   they didnt break the recent point that looked like a DCL a week ago.  HMMM  

GDX –  If this was a chart of a toy company,  I wouldn’t say that it looked ready to break down. 

So at this point, it is unclear what exactly is going on in the Precious metals market.  I wanted you to look at a few things that I am taking note of.   A few Silver stocks were holding the 10sma while Gold breaks down.  As I look at all of the evidence, I  do still want to cover both of the possibilities.  It could be Bullish shake out or Bearish break down, but there is no concrete way of knowing how this will play out for sure until we see further movement. Let me add this…

This is the C.O.T. report from over a week ago and Smart Money had already rapidly closed their short positions. This was already at prior ICL  levels.  Smart money does not want to be short.    IF Gold drops to $1033 or even possibly under $1000, I think that it would be quick.  

Additional note: Gold broke down, Miners didn’t follow

Is it possible that Miners could hold the lows while Gold dropped further if there is a real break down happening in Gold?  Lets just say that  it has happened at lows before.  Look closely…

In MAY 1999 Gold broke down to new lows week after week after week and sold off for 2 months.

In May 1999 – MINERS put in higher lows and never broke the prior lows. 

For a slow week of holiday trading we have a LOT to look at.  There is a lot going on and some of it has become intriguing.  The markets still look ready to move higher.  Oil turned down, but what about those Energy stocks basing out.  Will they continue to hold up?  What is happening with precious metals?  We cant know for sure, but a summary is that GOLD broke down to new lows and Silver and Miners didn’t follow.  As seen, some Silver Mining stocks are even holding their 10sma as of Friday.  The C.O.T. wasn’t released this week, but as of over a week ago,  the Smart money was closing their shorts.  Last week many speculators instantly turned bearish on the selling and added to their short positions. Now we wait to see how this plays out. If you are Long or Short,  stops must be in place.   Enjoy the rest of your weekend and we’ll see what next week reveals! 

~ALEX