…When To Hold ‘Em, Know When To Fold ‘Em

Volatile markets and choppy sideways action, which way will the markets break? As daily cycles begin to age and the FOMC meeting approaches, it may be best to listen to the words of the gambler – You’ve got to know when to hold ’em, know when to fold ’em, know when to walk away, and know when to run – Kenny Rogers . I am scaling back on trades going into the FOMC meeting next week and wait for the fat pitch, the ICL in Precious Metals.

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SPX – DCL? Bear Flag? FOMC? The general markets are due timing wise for a dcl, but I’m looking for a  sign of strength.

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WTIC –  Oil has been struggling. Do I think the bullish move higher back over $50 is finished? No, but short term I have my concerns.  The current Daily cycle looks left translated, and that leads me to another thought since Oils daily cycles can go on for up to 50 days at times…

WTIC – I thought that this was an ICL, but if this doesn’t start to fly higher, I now need to re-think things, and have found a couple of weaknesses. 

1. After an ICL , the first daily cycle is usually strong and right translated.

2. Is this an ICL? So far it is very left translated, so it doesn’t act like a 1st daily cycle.
   

3. Could this be a 4th daily cycle rolling over into the real ICL? Possibly.
   

NOTE:  Since we could see upward of 50 days in a daily cycle for Oil, it could still burst higher and become right translated.  I keep that in the back of my mind, but lets also consider this.  Todays Inventory report was bullish, and Oil spiked and then rolled back over.  That is obvious weakness.  Also the XLE has been very strong, even as OIL rolled over and sold off, it was holding up. For example:

As of last Friday SEPT 9th, the XLE was bullish looking

XLE – Suddenly this week the XLE and energy stocks are sucking wind. Running in place. Losing ground fast.  Does this seem like action from a 1st daily cycle out of an ICL, or does this seem like Oil is now seeking out an ICL with the XLE , XOP, etc. reacting to that?  IF you have ‘stops’ in your energy stocks , honor them or just lighten up if you cannot endure draw down.  OIL may be dropping into an ICL.

Gold

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It was mentioned in the comments yesterday that a reader thought that I was ‘just too positive on these markets’ all the time, so let me address that here.  Yes, I have been Bullish on Gold and Oil in 2016. I do believe that we have seen MAJOR bear markets in Oil and Gold, and I have stated that I believe they bottomed this year. We have made lots of great trades and money coming out of these lows, but we have also had normal bull market re-tracements. These are not a time to be too afraid to trade, and scaring people at ICL’s is not healthy if you understand the opportunity that an ICL presents.  I’m not an emotional person while trading, but I do try to constantly keep us on the right side of the trade, so I am not always Bullish short term.  I do call for ‘caution’ when timing indicates that we are close to dropping into a DCL or especially an ICL.  If you have been with me for more than a few weeks, you’ve seen that some trades that I mention I add that one should only be taken by experienced traders, or those in front of the screen, due to their volatility.  I do take some of those Trade set ups and clearly state that these are for those in front of the screen all day if they are higher risk. I look for the low risk set ups when they present themselves at DCL’s and ICLS, and normal pull backs to support. Am I bullish or positive on GOLD & OIL in the long run?  Yes.  Have I mentioned that caution was needed trading near the FOMC and when timing is due for an ICL? I absolutely have.  If someone then takes a trade and loses money on it in a 3rd or 4th daily cycle of an intermediate cycle, the risks were known and hopefully you allowed your loss to be small with a reasonable stop in place. In the Long Run, if Gold runs to $2500 or so in the next few yrs, most of these Miners are still much lower than they will be then. I mention that for those readers that also email me and tell me that they ‘have been holding XXXX since 2011, will it return to the highs?’  Wow, that is patience! In the long run they should  be profitable again, if they are managed well by management .

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GOLD–  On August 26th I was saying that a drop to an ICL is steep.  I even drew what a drop to $1250 would look like.

GOLD  did bounce from there, but with the FOMC mtg next week and lack of follow through now, I am not sure that Gold has much more upside before seeking that ICL out, so I am cautious again.

GDX –  DO you remember this AUG 31st chart? I pictured us bouncing to the 50sma and failing, rolling over into an ICL.  Maybe Just a bounce, not a huge rally, but I was taking the trade set up as a late DCL in case we got more follow through than I expected. I was still telling readers to be cautious, maybe it was only for experienced traders, and make it a short term trade.

GDX SEPT 2 WEEKLY – Maybe just a bounce, but this reversal was trade-able.  I don’t feel that I was all positive, but as a dcl, I did expect just a bounce and a short 8-12 day trade for traders.

GDX SEPT 9th– Not all ‘Positive’  🙂 – I have been calling for downside possibilities into an ICL.  We did get the expected bounce, and I was playing the trade set up in Miners. Some Miners could out perform, but caution was advised.

GDX – The bounce is all that we got so far. Hold them? Fold them?  With the FOMC meeting coming up next week, I will be lightening up assuming that we could drop to an ICL.

I was asked, “What if Miners put their ICL in ahead of Gold, and they take off upside with out us?”  If it were to take off upside and the ICL was in place, we would have 2-3 months of good trading gains ahead of us and that is plenty of time to get in to a few nice profitable positions. Missing  THE LOW  is not Missing the profits.  Look at the chart above and look at the run from the January ICL and  look at the run from the May ICL.  We are close to another one of those, and you wont miss it – they last for months 🙂

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It is now getting later in the daily cycle and the FOMC meeting is next week. If we got another bigger bounce, we could be making a peak on day 12, but there really is no follow through so far.  An ICL is when the Bears start getting brave and begin shorting Miners and the longs get frustrated and start selling, so trade set ups do not follow through. Miners can drop a good amount when they are seeking out an ICL.  If one owns a core  position from months ago, they can ride it out and price should still be higher in a month or so.  If you took a recent trade like I did (  Like my BTG trade), one has to ask if it is best to hold ’em or Fold ’em?   Next weeks FOMC mtg could push Miners lower.  I like to say ‘Enjoy your Thursday trading’ – but I admit that trading has been very difficult in this environment.  Up one day, down the next.  It may be time to fold ’em, knowing that better days are ahead!

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~ALEX

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ADD one more thought.  I took a trade in BTE a while back and got stopped out for a small loss.  IT NOW HAD HIGH VOLUME YESTERDAY AND LOOKS LIKE A H&S BREAKING THE NECK LINE.