The Eye Of The Beholder

Not much has changed since the weekend report, and we are still seeing once semi-ugly charts becoming diamonds in the rough. Let’s review…

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SPX –  I personally took a long trade after calling the ICL in June  ( And pointing out the 3 white soldiers very bullish pattern),  I didn’t stay long  during the long sideways move started getting drawn out.  I still expect a dip soon into a dcl, though this break out does have an occasional pop higher out of the sideways consolidation.  I think you are looking at 1-2-3-4-5 completing for now.   It may become a buy the dip in the future.

NOTE:  This report is released an hour later than normal, because it is as long as a weekend report.

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NASDAQ  – New all time highs after 8 straight weeks of green.

NOTE: I have been emailed and told by far more than one reader that they have read that this break to new all time highs is not bullish action. They are reading that this is a final break out to suck in the ‘dumb money’, and that this is a bull trap with a huge sell off is coming.  I have heard many reasons why some have said these things and I am asked, “Do you think this is the case?”.  I’ve heard of a Kondratieff Winter cycle, or a 7 yr cycles  following the 2000 tech crash, then we had the 2008’s crash, and after being stretched with funny money, it is now due again.   I don’t want to dismiss it completely, I do understand why some are calling for a CRASH, but at this point I cannot say that I am seeing that. Many crashes start in October and they do seem to come out of nowhere, so I will try to do a little discussion on this idea of a possible crash coming in the weekend report. For now, we have a break to new all time highs and I see it as that.

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WTIC –  On AUG 10th I pointed out what resistance to look for going forward if you were long Oil.  Resistance could pause Oil at the 50sma and trend line as shown. You might lighten up if you had leverage just in case.

WTIC –  We are there, but oil broke slightly above the 50sma Monday. It also could be a complete A-B-C-D, but they do extend in bullish conditions.  Notice how OIL danced with the 50 sma in February. Oil can bust right through, or it can work its way through. I think that it could actually push right through, time will tell. We will discuss “Buy the dip” if it dips.

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BTE – I looked at some Oil / Energy plays and they may be at resistance too.  I bought BTE 2 weeks ago when I discussed good looking set ups in Oil and the possibility of a DCL / ICL.  I am not selling here due to resistance,  I will added the dip if I get the chance.

NATGAS – I think that NATGAS is due to bottom, but where and when?  Has it bottomed, or just bounced?  I drew this on JULY 8. I showed how even with a reversal on the 50sma, it MIGHT drop down and do an undercut, then bounce, and still go all the way to the 200sma as an ICL.

We see that NATGAS  did drop below the 50sma,   now we got the bounce, but is that a strong bounce, or a bear flag? So far, that bounce looks rather weak, but it is on a trend line for support. We’ll see if it can push above the 10sma, but even 1 more day higher could be a bear flag. I’m watching the 10 & 50sma.

GOLD – No real change from the weekend report. More lack luster action, BUT look what happened to the RSI. It actually curled up though it couldn’t get above the 10sma ( $1353 on Tuesday).  Watch the 10sma and that RSI, our consolidation is still in play.

LETS LOOK AT THE PROGRESSION OF SILVER SINCE JULY

SILVER had a strong run, so normally a rest is expected

On July 11 I proposed 2 scenarios possible to offer a buying opportunity.  A back test or…

A flag / consolidation

JULY 28th –  We see a wedge / flag type consolidation.  A break out & bullish run was expected by me.

 Shortly after that break, you may recall that I mentioned that Silver was looking too weak to continue this break out. I cautioned that something didn’t feel right.  At that point my gut was not expecting the break out & run yet.

And then it just dropped.   🙁  How could this remain bullish?

AUG 4th, I also said that this can correct itself in time with consolidation like we saw in Feb t0 March.

SILVER TODAY – BETTER

It remains bullish by continuing to form an even bigger flag in that consolidation.  This could be an example of a diamond in the rough. 🙂  A Future break above $20.50 could continue higher.

AUG 5th I SHOWED THAT SILVER REMAINS BIG PICTURE BULLISH

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GDX –

So as we saw with Silver, repair work can be done with the consolidation phase.  I also saw weakness in the GDX & GDXJ , so I reported that last week.  Each POP HIGHER at the open has sold off. We may be looking at a diamond in the rough again here. We  currently have a bouncy, volatile, consolidation that consists of Higher lows.   Read the chart.

 SO the thinking has not changed since the weekend report and the reports posted last week.  I like Energy as mentioned in prior reports and the follow through on many stocks and Oil has been good.  I believe that we are early in the next Intermediate Cycle, which means that we should see weeks and even months of upside  ( gradual or volatile remains to be seen).  Short term , we’ll see if Oil pauses here or breaks through the 50sma. We’ll also see what individual energy stocks do at this time.  ETFs are the safer trade if any are worried about risky companies struggling with Debt, so some may be watching UCO and USO.  If you can take some wiggles, they could be buy & hold for weeks. There are also  leveraged ETF trades known to the experienced traders.  I believe that Precious Metals and Miners can and should move even higher, but they may need to work through this consolidation phase first.  I’ll  discuss that consolidation phase at the end of this report.  When each pop higher sells off by the end of the day, it means that we may be riding one now.  Enjoy your Tuesday trading!

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~ALEX

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 So in the weekend report I had drawn up 5 charts to discuss this consolidation phase. They often come about after a bullish run higher starts to run out of steam and needs a bit of a rest.  It should be noted that they aren’t bearish longer term,  just lack luster and maybe short term boring or frustrating. For the buy and hold investor, they can be weeks or even a couple months of gains, losses, gains, losses, until the next break out run higher takes place. Let us examine this phase as it occurred coming out of the 2008 lows.

GOLD –  Notice the run higher out of the lows, and then it got choppy and went sideways for many weeks until it finally broke out & ran higher .  It went sideways for over 6 months actually. My point?  Look at the “Wiggles” through out 2009 before the launch, could you ride that with your core? Please read the chart.

HUI 2008-2009 – I wanted to show that late 2008-2009 was basically uphill – BUT – could you enjoy this ride? Look at the lows of April and the lows of July. That was $275 to $400, back to $300 in 3 months. So when I felt that Miners looked a bit weak last week, I wanted to take some off of the table to hold my gains. I still said that I would ride a core and a bit more, and I can always re-enter if it perks back up.  I still own Miners, but I am not 100% in like I had been, I am spreading my trades to OIL / ENERGY as mentioned.

HUI 2008 through 2010 – That ramp up in Gold that you see in the fall of 2009 in the Gold chart above, was not as easy for Miners.  For this chart, I also just mapped out the TIME in GREEN from the lows to where we would be now. I’m not looking for a repeat, I am just saying that 8 months into the run out of the 2008 lows was very volatile.

HUI NOW –  SO I wondered if we could see this? It is similar to that HUI run from $275 to $400 back to $300.  This would be 200 points from the ICL to 300, and back to 220 & a tag of the 200sma at the next ICL this fall.  In the back of my mind, I think that we will see a good sized dip going into the next ICL, but when will that be? That remains unknown.  The First Intermediate Cycle lasted only just over 4 months in Miners from  mid January to late May.

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HUI CURRENTLY – I think that this sideways flag is a reasonable possibility for short term and would correct any current weakness.  We would get another run higher before a drop into that ICL.

Another burst higher is not unlikely.

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GOLD LONG TERM POSSIBILITY –  Flagging under resistance.