The Turning Point

It doesn’t matter whether markets are rising or falling, sooner or later, they hit a turning point. We have a lot to discuss this weekend regarding those turning points, so lets dig right in…

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SPX – Whether we started a bear market or not, I still expected a strong rally when we were at recent lows. It would draw in bulls, but what comes next after 6 weeks higher?

This rally has played out pretty much as expected, but I want to point out some interesting changes in character that could affect future trades / trading.

SPX DAILY – Shorter term, this is most likely a right translated first daily cycle on day 25. I’d expect a dip into a dcl, and we have that rising wedge that should assist in the drop. 

SO HAS ANYTHING CHANGED IN THE THINGS THAT I LOOK AT NEAR TURNING POINTS ?

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If you have been here for a while, I was saying that the markets had topping action last summer. I pointed out that I expected a serious drop and then I posted this chart  (Among others)  showing what would be important to watch for.

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Before we even dropped, I mentioned that at Prior tops,  The 10+20 sma turned down, The 10 crossed under the 20. THEN a rally back tested that 20 ma area, and the next drop came. That could be a good place to go  ‘short’.

This was last week as we rallied higher, I again was pointing out that where we end at the end of March would be important.  It looked like the rally wanted to recover the moving averages.   We need to watch that.    Lets take an updated look…

Right now, those Moving averages have been recovered in this first daily cycle out of an ICL. THAT DID NOT HAPPEN AT THE 2 PRIOR TOPS.   Also the RSI is bouncing off of the 50% line.  I said before that it was too early to short the rally in the first daily cycle, and now I am saying be EXTRA cautious even though I expect a dip to a DCL. We need to watch how things unfold here and…

I also pointed out last summer that the TRANNIES were leading the drop.  We saw  lower lows and  lower highs.  Now the TRANNIES  look to be recovering here, breaking above the 200sma.  I see an inverse H&S with follow through.  A change in character at the turning points?  Stay tuned.

To make a point –  I am not just being fooled by a strong rally.  This rally doesn’t look much different from those other rallies on the surface, and I remained bearish on those.  I am pointing out other differences this time that I see and that need to be monitored with the coming pull back and next daily cycle.  And yes, this COULD go sideways and roll over like the others did, but we need to watch it.

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I looked at some beaten down charts and they have huge upside potential if things turn around. Take a look at a 1 yr chart of the beaten down GPRO, MU, TASR.  They could recover if the markets break to new highs  🙂  I already mentioned how the 3-D Printer stocks look to be recovering from their recently hated condition.  See DDD, SSYS, VJET, XONE.

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USD – I expected the Fed to finish this drop.

The drop is complete.  Now the USD is due for a daily cycle low.  It may be a DCL or ICL.  I’ll be watching for new highs or breaking down, and that of course will take time.

USD DAILY – Divergence and a small  reversal that could become the DCL. Gold may finally  feel the pressure. 

 

WTIC – Man I hope oil doesn’t hit $44.  There’s going to be some big problems if it does! I’ll explain shortly.  It did already hit $42.49 Friday!  This is recovering from breaking below the lows last August. We also broke from that wedge.

WTIC DAILY –  I did point out the break through resistance and the move towards the next resistance area ( $43 ish). Again, I hope this doesn’t close above $44.  That could cause some problems!

WTIC DAILY –  the 200sma has acted like resistance, so OIL may pause here below $44.  Boy do I hope it doesn’t just break out to $44,  there will be some big trouble if it does!  The MACD has swiftly moved higher. 

 

If OIL closes above $44,  we may lose one of my favorite contrary indicators.   Another one of those guys that loves to make ridiculous calls ahead of time to draw attention to himself.    If Crude gets above $44, well,  it could signal the end of Gartmans  very life.

 

Lastly is OILS BIG PICTURE-  Someone being interviewer last week on CNBC said that to bottom out, Oil has to trade at $20’s- $30’s for many months (  to form a base) .  This chart says that we have had a v-bottom in the past,  so doesn’t that mean that could see it again? We will use the charts as evidence.

NATTY – Still moving higher. On this March 11th chart,  I mentioned that even bear mkt rallies out of lows lasted 3 weeks, so lets expect higher price. 

NATTY NOW – We did get another week higher.  Maybe we get another, look how oversold it remains on the weekly charts.

THE CRB – The CRB is in the normal timing to find a dcl ( 20-28 days roughly).  We may have just seen it. If Not, a pullback in the markets could have this drop into a dcl, but timing wise it is getting late. The CRB may just ride out the 10sma like Miners did.

CRB – The Big Picture.  The commodity runs out of the lows can be steady and strong. We have been monitoring Steel, Aluminum, iron ore stocks, etc.

GOLD

To shatter one illusion,  I wanted to post this chart.  The Illusion is when someone says ,  “Gold has run up so fast and strongly out of the lows, that all the dips will be bought by those dying to get it. Gold will only go sideways from here, it will not drop.”  GOLD CAN DROP.  If the dollar starts to rally out of its lows,  Gold can pull back and sentiment toward it can change. 

GOLD 1999 Surged out of the lows, breaking prior highs repeatedly.  It definitely pulled back.

GOLD – Gold finally looks ready to pull back from a topping pattern. 

GOLD WKLY  – Normal target would be in these areas, but these pull backs can take an entire daily cycle or 2.  That’s  approximately 30 – 60 days!  So it can bounce around seeking out the next daily cycle low.

This is a Big Picture Wkly Log Scale of Gold. It has reached overbought, like recent prior runs out of an ICL . The RSI is stronger than other prior runs out of an ICL.

Some may wonder,  “HOW COULD A PULLBACK of say 50% last weeks?” 

Here is a visual of something very similar to Gold. A triangle wedge / round bottom low.  It also had a strong run up hugging the 8 ema for months. Then?  A 2 month pull back. It is SO difficult to exercise patience when it drops and pops for weeks like this.  Maybe this visual will help. 

There are 2 ( or more) ways to look at GDX.  One is really Bullish,  and one calls for a quick drop.    I will say that individually,  Miners all have excellent looking charts. I do expect a pull back, but I will still show 2 patterns that look like they could have formed here. 

A running correction remains bullish with small pullbacks  that are continually bought up. Then it pops higher and finally rolls over.  Less likely at this point.

This bullhorn pattern breaks down, and I could see this happening if the Dollar rallies and Gold drops. That is not a target,  the average pull back  area would be around $15-$17, and I will track it as the pull back starts. 

 

For the sake of learning,  lets look at prior bull runs and Miners.   You will see that the ride can be  both difficult to buy & hold, but also rewarding.  A CORE of BUY & HOLD does work if the Bull Mkt has returned.

CDE — At a glance , this is CDE  from $3.60 to $24.86 in a year!  That’s a winner.  Easy to buy & hold, right?  Look closely at the dips though, since we may have some dips coming now.  Could you have ridden this movement out ? 

CDE ROUGHLY – $3 to $10, back to $5!  Up to $17!  Back to $10  🙁  Then to $24.   Rough ride, nice gains over a year though. 

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AXU –  Another very profitable BUY & HOLD.  At a glance, this was $0.43 to $4.00  – WOW!

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Again, could you ride this ride for a year?   The pullbacks affect the  account balance, dropping 50 or 60% at times.  The account balance drops, therefore, our emotions are affected if one isn’t careful.

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So we are at the doorstep of many turning points.  The absolute lows of some of the recent sell offs may be in, and dips can  offer some profitable trading entries to the patient ones. 

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The general markets really are due for a dip into the DCL (Daily Cycle low), and now they seem to be  acting a little more bullishly in the big picture. This needs to be monitored going forward – unbiased.  If they start breaking to new highs, the changes could be meaningful.  Also the Monthly & Quarterly charts end in a week and a 1/2.

OIL, NATGAS, COMMODITIES, PRECIOUS METALS, MINERS , etc –  they all seem to have put in  meaningful bottoms  ( Natgas needs more proof, really)  and what an excellent time it has been for traders. We have to expect some pullbacks,  and Gold & Miners are overdue.  These could present excellent buying opportunities if  THE LOWS  for precious metals are in place. 

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Thats a wrap.  We’ll see what Monday and the rest of the week bring our way, and the days ahead may  add clarity to our expectations going forward.  Currently, I think the commodity stocks and Energy could have more upside short term.  Patience is needed on the rest of the pullbacks.

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~ALEX

Sidenote  on the Biotechs:

  As mentioned in one of last weeks reports with this wkly chart of the IBB ( below) –  I am interested in many of the Biotech charts set ups.  I do see “bases” that have been  forming between the weeks of the 2 red arrows that do have a bullish appearances on individual charts.

One can use ETFs or options to minimize risk, but trading the individual set ups does include a good amount of risk.

  Personally I have traded biotech in the past , and they can be high risk no matter how solid the company seems.  In the past I have owned a few ‘good’ companies that either failed on a drug trial that was going well, or the FDA didn’t approve their drug due to side effects, etc.,  and the stock will actually open up down 20- 50-70%.

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This is an example.  CLDN ( no chart included) – An analyst had given the stock  a price target of $29 as it closed near $14.  CLDN failed their tests,  the target was then changed to $3 by the same analyst immediately, and they opened at $2+ the next day. OUCH!

 

http://www.marketwatch.com/story/celladons-stock-craters-after-disappointing-trial-results-downgrade-2015-04-27

 

  On the other hand,  I look at biotech charts that have sold off, and see bases forming now that look rather interesting. A warning is that these are extra high risk and I would only take small positions in individual biotech and probably trade them quickly. Only trade what you can afford to lose.    Maybe I will post some set ups in future report with this warning again.  For example: 

RPTP –  Huge drop from $12 to $8 ,  but now I like that base in the $4 area.

 

  Look up 6 month charts of   BIIB, IDRA, CRMD, INO, ADXS, AMGN, SPRT, BEAT, LJPC  and many more.  They caught my eye on my list of Biotech stocks.   They do all seem to be lining up.   Again, these can be super high risk if something goes wrong with their testing,  but the entire sector may  have put in a double bottom.   ETFs may work best for you. 

And of course we DO have some high risk traders here,  and  LABU is the NUGT/JNUG/UGAZ/UWTI of the biotech world.  It should ONLY  be traded by fast, experienced traders that do not need my input.   I’d rather not discuss trading 3x etfs,  because they are tricky to trade unless you really know what you are doing ‘real time’.