Wash Day

The Bullish love for Miners over the past few months took a bit of a drubbing Wednesday.  We didn’t see the sellers using the gentle cycle to try to wash away the sentiment, it seems that they may have pulled out that wash board and vigorously scrubbed away at it. Many seemed to be heading for the exits.  We’ll discuss this further, but first…

The General markets sold down a bit, but we are still within the same consolidation that I’ve been pointing to for weeks. Any further selling should seek out the dcl that we have been expecting now.

SPX –

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USD – The USD should roll over soon, it bottomed in May.   For now I would expect a break above the trend line and the 10 sma.  It may hit resistance at the 50sma. Of course, we look at this and try to figure out what Gold might do if they are correlated, but it remains a tad cloudy. Was the dcl where my 3rd arrow is? If so the Dollar should POP higher for a bit with Jackson hole. Was the dcl at the blue dotted line? It never broke the trend line, but it did close above the 10sma.  If it was a dcl then, it could roll over at anytime  and save Gold.

WTIC – As expected, a drop to the 10sma.  It might tag the 50sma as a back test, I expect it to find support soon. Inventory reports have people thinking Oil will drop to the low 30’s again, and you know when Oil rises they’ll say something bullish about supply too.  The plan is to buy the dips at low risk entry, stop out if necessary  ( below the 50sma for example). 

I want to explain that nothing has changed in my out look for Oil & Energy stocks, because nothing has changed in the charts.  I was asked if we should be selling with Oil stocks joining Miners in the sell off.   Are they joining miners in the same sell off?

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XLE

RICE – Bullish

ECA – Bullish

CPE – Bullish

LPI –  Bull Flag shown here, and it was  down 1 penny Wednesday.

PGH –  Dropped 7 cents, but remains healthy.

So with Energy stocks, we are looking to buy the dips at support levels, and we are looking to own them for a while unless they violate support.

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NATTY – Possible break out coming up.

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We are moving on to GOLD & MINERS.  SO MUCH running through my head, so many ideas.  It was a Crazy day for Miners, but Gold didnt drop with the same severity. There are a few scenarios that can play out, but how can one know for sure?  Only by looking for clues as it plays out.  For right now it is a matter of observations and possibilities based on historical evidence or past experience.  Miners are getting crushed this week , and yet Gold isn’t.

1. Will Gold get crushed next, maybe as Yellen speaks at Jackson Hole?

2. Will Gold get crushed and now Miners will just go sideways and bottom?

3. Will Miners bounce here or continue lower?

  Some Miners ran much stronger than gold, and may be simply correcting much harder too.  Miners broke their last dcl, and Gold hasn’t ( yet). I have a few ideas of how this could play out based on what I have seen in the past, and I will explain it in the weekend report.  For now, Miners are due for a bounce very soon.  Lets take a look…

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GOLD – Gold losing $16 is no big deal, right? It is not a failed daily cycle at this point and if Gold holds up on Thursday and then rallies out of Fridays Jackson hole meeting,  then Gold will look different than Miners. GOLD IS NOT UGLY AT THIS POINT, but Miners failed today. Are Miners leading? Or are Miners just setting up a little differently? Either scenario makes sense, so we need a little more time. NOTICE GOLD breaking the B.B. in May. That didn’t stop it, it dropped for 5 more days, so Gold breaking the B.B. now & Jackson hole may just keep the selling going with the USD bouncing.

SILVER – Silver had a Bollinger Band crash 2 days ago, but it continues down. Look at what happened in May. The B.B. crash stopped at the 50sma and people bought it.  Then it sold off for 2 more weeks.  People trying to catch that low in a B.B. Crash caught the 1/2 way point.   We still have Jackson Hole & a possible $USD bounce ahead of us.  Jackson Hole may save the selling in Gold & Silver, or maybe the Miners are leading and the selling would continue into next week after The Fridays Yellen speech. We need a bit of time here.

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GDX – I’ll start with a chart that I posted in the comments section before the prior lows were broken. Read the chart .

GDX broke those $27.44 lows.  I actually got a ‘buy signal’ in GDX Wednesday at the close using 3 different methods. One of those methods is extremely rare and works 97% of the time when back tested.  It doesn’t state THE low is in, just that at such extremes, the trade will go positive in the next few days.  So buying todays lows using that method simply means that GDX will be higher than todays close soon. I used to take this trade every time it triggered, I did not take it yesterday.

BEFORE THE MARKETS CLOSED,  I drew these possible scenarios. Since then I have had a few other ideas that might change this, and I will explain later. Again, having 2 or 3 scenarios is fine at this point, and they narrow down with observations as time plays out. For now, I still expect a bounce for another daily cycle.

Notice how this would look like a double bottom with the MAY lows, and many people do not believe that Miners should drop THAT far if they have been so bullish.  They will think that “Something is wrong” and Miners are going to break down.  They will not dare to buy, they will be saying that Miners are broken.  CAN IT DOUBLE BOTTOM LIKE THAT?

GDX did just that in 2008-2010 run higher, as shown. It was almost a double bottom type sell off at the prior ICL.

THIS STRIKES ME AS ODD– We are seeing extreme selling in Miners that we usually saw at ICL’s in the bear market times, but timing seems to be too early for a drop into an ICL.   THIS is what I am most keenly interested in, this is what I will be studying.  I have ideas that need a bit more research.

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That extreme selling has been found in just about all SILVER stocks Wednesday. The sell right now is steeper than Bear market drops, but again, that may be due to the strong run up. Check out these Silver stocks.  Water falls.

SO I expect a bounce in Miners soon, but it may just be a 4th daily cycle and a drop into the ICL as I have been discussing. That bounce would top anywhere from day 8-12 usually, but you can still get a decent rally, especially after such extreme selling.  Some might lighten up if they got hurt badly yesterday and held on. TRADERS may want to take some short term ‘Miners long’ trades if they see a set up, but for others, waiting for clarity could be best. We have the Fed Speech Friday to consider.  For now I am still looking to buy Oil & Energy stocks as they play out in what appears to be a bullish pull back.  Try to look for reversals in support areas, and dont just jump in as they sell off.

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~ALEX

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I wanted to point out NAK.  I am not recommending it as a buy,  but experienced traders in front of the screen all day may want to take note of this.  I have been pointing out how NAK is holding the 20sma with each daily sell off. 

NAK TUESDAY-  Price bounced off of the 20sma Friday and Monday shown here

NAK WEDNESDAY –  Even with Miners melting down,  NAK sold off again, but didn’t break that 20sma on a closing basis.  I am keeping an eye on this for a quick trade if Miners reverse higher. If this does a double top, that would be great gains.