ANOTHER STEP CLOSER

Lets see how the various market sectors continue to march toward their next big move.

SPX – Many thought that the recent sell off would recover straight up like the one on the left last October. Did you notice the back tests recently? These are acting like resistance points.

Lets look closer…

The NASDAQ has been one of the stronger sectors, but when it broke down it bounced up and was stopped at resistance too.  This will likely drop down and test that high volume candle at some point.

IWM – Same story here.

Review-

I have been mentioning that I think the markets have topped.  At the same time I think we are seeing commodities bottoming and we could see money start flowing from one to the other.  With that in mind, lets look at prior TOPS.  I keep hearing in the comments that we missed the  opportunity to go short. 

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SPX MONTHLY TOP

Notice that prior Major Tops had a solid drop 1 month, then a green candle the following month.  Eventually the 10sma crossed below the 20sma on a monthly basis (red arrow) . We have not seen that yet. The MACD crossed down ( we have seen that now).  The RSI crossed below the zero line.  This all happened at the top,  there was a lot more downside to follow.

Unfortunately , the first chart that I drew showed down days in black candles, and  its hard to see here.  What you can see is that in the following month or 2  a white candle rises and ‘tests’ the 10 & 20 sma (monthly ).  We have not seen that yet, it was 1 or 2 months later.  THAT will be a good place to short if we see that around October. 

Someone emailed me a week ago and asked something like,  ” If the VIX just had one of the largest spikes seen, and it almost compares to 2008,  how can we say there will be further decline?”  That wasn’t the exact wording, I can’t remember the exact phrasing.   In other words,  did the VIX just max out?   I drew this a week ago & forgot to post it. Picture that the markets keep popping & dropping  ( Top box) as the Vix keeps spiking higher & higher with each drop. In between each Vix Pop would be a drop or bull flag in the Vix.   

$USD – Could rise to the red dotted line and then we’ll see how it looks, but I have been saying for a long time that internally I see weakness. That changed a tiny bit, but not much, it still looks rather weak.

WTIC WKLY –  OIL remains bullish and still oversold, buy the dips.

WTIC – stalled at the 50sma as expected here, and could be forming a bull flag type pattern. $43.50 is fine.

NATGAS I remain neutral  ( see the last report) .

GOLD, SILVER, & MINERS

I was asked in the ‘comments’ to address something.  He felt that  cycle -wise we didn’t have two stages higher from the March 1025 ICL and the May 2014 ICL.   He feels that the ‘peak’ happened in the first daily cycle, and fears that may be  happening now.  That is not true.  This is an older chart that I drew this summer for someone else, but it shows the 2 moves higher using cycles and then the roll over to the next lows. We are currently waiting for the 2nd leg higher in Gold. The 2 time periods pointed out in the request are shown.

BASIC GOLD CHART as of Friday

GOLD CYCLE COUNT – Day 30 was Friday. I actually thought that Gold could drop Sunday night and do another stop run. We didn’t and now Monday was day 31.

GOLD – Since we are on day 30  (Now 31 after Monday) It is time for a dcl. I pictured this if we did drop to do the stop run.  I had a $1095 target if you take the H&S pattern and use the drop from the top of the head to the neck, and use it as a drop from the top of the shoulder. A-B-C-D style.

SILVER – These are 2 important numbers to watch for with Silver. I would expect the shake out to $13.91 to hold up.

I want to go back to a chart that I drew a few different times.  This one was Aug 27, and I was showing that after a daily cycle low  (DCL) is in place, you often get a bounce & a drop that shakes out new buyers.  See it in December? So a drop in September  was expected after the lows were in.  Repeat after me….Bounce /drop. Bounce / Drop. Bounce/ Drop. 

GDX – Bounce / Drop.  Friday we see a reversal with Gold still down.  Will it hold? Tuesday should give us the answer.

GDXJ – Bounce & drop.   Gold was down Friday, and Juniors also  put in a Reversal Friday.   Price is pushing against the 10sma. A break above the 10sma would be very encouraging.

If you go back to the report that I wrote Friday,  I said that the main reason that I wrote a Friday report was because I was seeing a bullish pattern in Miners as of Thursday.  With Gold selling off, they dipped and revered Friday,  both GDX and GDXJ closed green.  We will have to see if there is any follow through on Tuesday.  Gold is getting quite late in it’s cycle timing (Monday counts as day 31 ).  A low can form any day this week, and we may see Miners leading the way, as they often do.

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Look at this chart of  NGD –  That is a nice looking bottom forming. Gold was down Friday and this was NGD with strong volume, recovering the 10sma and pushing the 50sma. 

Search through some of your Miners and see if they looked good at this point.  Some do, others may in the next few days.   NGD, SA, NG, to mention a few stayed healthy looking. I do not think NG is a H&S  🙂

You may even be able to grab some (like SVM) at the lows this week if things remain bullish, and put a stop right below the lows.

  I like OIL/ENERGY as we see them pulling back.  I think many Energy stocks look like good candidates for a buy the dip. The SPX, NASDAQ, DJIA, IWM, etc are tricky.  Even though I do believe we are breaking down, we could still bounce around in choppy fashion and eventually work sideways or higher to eventually ‘test’ the 200sma. The recent ‘tests’ shown in the charts included in this report may be pointing out short term resistance.  They may be a good place to go short when tagged, since we will likely test that high volume candles lows,  but I personally am not playing the short at this time.  I am focusing on Energy & Precious Metals.   Also Commodities mentioned in last weeks reports like  FCX, VALE, AKS, MDR, etc may be good long candidates too.

  Gold is one step closer to fining it’s lows and Miners may start move higher first.  You can watch for that.  A recovery of the 10sma in GDX or GDXJ is a bullish step in the right direction. Happy trading!

~ALEX