Clear As Mud

Whenever we get mixed signals in the markets, it may take time to  allow  things to clear up. We are seeing that with the divergence between Metals and Miners right now, but until time resolves the differences, we can also look for clues. We’ll do that here, but first lets review a few other sectors.

NASDAQ – We got the back test that we expected and then the drop back down. I expect the Aug lows to be tested or broken, but you can see that volatility has kept things from being a smooth move. We may bounce around inside this down channel too.

USD WEEKLY – it crossed above the 10 ma, but lost it Wednesday. The MACD is bearish, but the RSI has held up. Mixed signals, but Friday will complete this picture.

USD DAILY – Mixed also. We had a reversal today after rising above the 50sma. We could still go higher, I believe we are still early in a new daily cycle. 

Lets talk about OIL. 

A very bullish looking set up now looks to be failing.  Energy stocks seemed to be  pointing this out all along. They have been weak for days.

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WTIC WKLY –  Usually this is bullish, but it can go either way. I am currently out of everything energy for 2 reasons.

1. I dont like the way that the energy / oil stocks are acting. They were breaking down below their 50sma while oil was up strongly Tuesday .

2. Wednesdays  oil reversal reminded me of something.

WTIC –  This was an ugly reversal after inventory reports were bullish.  What did it remind me of? 

 WTIC – I was reminded of the bullish set up this spring that fell to a double bottom ( stop run). Notice the similarities in February and now?  I just want to step aside and see how this plays out for now. Energy stocks have not been acting correctly.

With that in mind…

Miners are not acting very well, but GOLD looked nice today. Lets examine Gold and Miners for possible clues.

GOLD – Gold really has a bullish look to it. Support held and price reversed higher.  USUALLY we see Miners Lead the way.  Are Miners telling us that Golds move is almost done? Or will Miners take off upside soon?  Both scenarios will be shown here. 

SCENARIO 1.  What if Gold is almost topping, and Miners are weak -pointing to that conclusion. ( Right now I feel this less likely, but we’ll need time to prove this out). This top shown is only $1150. Look at the chart above and see where  $1150 is.  You’ll see that 1 day could do it.

SCENARIO 2 – Golds first daily cycle was Right Translated and should run to new highs. The C.O.T. was bullish again and sentiment is terrible. Miners are likely being shorted here, and that could cause a short covering rally. Lets look at Miners and see why they may be delaying. 

GDX – Sept 23 –  Possible drop to a gap fill on both GDX & GDXJ?  Selling Volume did lighten up today. Look at SEPT 9,10 on this chart.  It looks like Sept 22.23. We got a quick reversal on Sept 11 – maybe we get a gap fill & reversal Thursday?

The best thing that you can do under these circumstances is look for more clues .   I will  look at ABX and NEM. They are heavy components of GDX.  Are they Bearish or Bullish?

ABX–  Yes, it looks like it can drop more  (GDX would fill the gap?), but it also looks like a Bullish descending Wedge and  Divergence is strong.

NEM – This stock also looks bullish. It could also drop a bit more, but it also seems to have strong divergence and support that would fill that gap on GDX.  Time will tell. Very light volume today.

I pointed this out in the Wednesday morning report. This type of drop has happened before. Look at that drop in GDX last Nov to Dec.  ( Pink boxes).  Then when the lows were in, it Popped and dropped again, similar to now. 

 Let me go 1 step further… 

If I quickly told you this was a chart of GDX today , you would probably not give it a second thought.  This is GDXJ last December, the day before blast off. The MACD was weak then.  It isnt now.

GDX now – compare the 2.  The above Dec GDXJ price was closer to the lows.

The next day

  Nothing is broken on the charts, but if this type of movement bothers you, what should you do?

   You  may want to get out / step aside if the weakness bothers you.  If you do , or if you get stopped out,  do NOT jump back in on the next green morning.   Let it prove to you what it needs to do for you to stay in and be comfortable, whatever that may be.  A cross of the 50sma? An overhead trend line break?

  Am I saying that this cannot fail? No, Scenario 1 plays that out.  Gold could top and both could drop. I take all things into consideration, and I see a first daily cycle that did a nice run.  COT is Bullish.  Sentiment is in the trash.  Unfortunately that 1st daily cycle pulled back similar to the one in Dec 2014.  That 2nd daily cycle was great, and we have a chance of seeing that here.   I just want to have everyone ready in case we get that type of move higher.   We could see a couple more days of wiggles, so do what makes you comfortable during that time and we’ll see how this plays out in Time. 🙂 

~ALEX

P.S.  Whats up with Palladium and Platinum? 2 very different paths being taken.