Somebody Stop Me

I am fairly heavy in cash in my trading account and with cycle timing being where it is in Precious Metals, I am trying to stay that way going into the Fed meeting.

( I will always have a core position in Miners since admonishing that in early February). We get up each morning in North America and Gold is higher, but as they day progresses, it goes nowhere really. Lets take a look and discuss we we can expect.

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SPX – We have a swing low in the NASDAQ, RUT, IWM, etc., but we still do not have a swing low in the SPX yet.  That DOESN’T mean that the low isn’t in place, it just means that it hasn’t confirmed itself with some follow through. This has the look of a bear flag, but I would expect a move higher soon with this set up.

WTIC – Oil is on day 31 and is under the 10 & 50sma. It has formed as Left Translated, that is often unhealthy, but in a triangle type pattern I often see bullishness remain. Daily cycles in Oil can last for 30-50+ days, so we are looking for a break above the 10sma to get things going upside. Right now Oil is disappointing and Many Energy stocks are showing the weakness.  We were trading RICE, CWEI, REI, WPX, AREX, etc as Energy stocks that were holding up nicely.  Add ANW to that list and I am watching these stocks for clues at this point.

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GOLD WEEKLY :  Timing-wise, we could be close to a low for GOLD, but I am expecting an ICL , which is a quick sharp sell off into a low, and then a move higher.  I have pointed out Prior ICL’s , and you can see that they come roughly 4-5 months apart lately. We are 4 months from the ICL at the end of May, and I have been calling for a Deep Meaningful Trade-able LOW at the end of September / early October for several weeks.

Here I am pointing out the 1 week deep candle in May that came out of nowhere.  Couldn’t we get that on a Fed Week?  I drew that one in September in as an idea of what we might see this week. I am trying to be patient.

GOLD DAILY –  I’m being asked if Gold can put in a short daily cycle, near day 14 or 16 or so.  Yes, anything can happen, but I have to report what is more likely to happen. I am being patient, because we are on day 11, and that is definitely early in the daily cycle.  Since Golds daily cycles can be continue for 0ver 20+days until a swing low arrives, I want to wait for that swing low.

SILVER – I posted this in the comments section Monday morning.  Has Silver bottomed ahead of Gold? I am waiting for a deeper sell off in Gold, so it is hard to recommend Silver long, but this does give a low risk bottom for a stop. NOTE: A steep sharp sell off could quickly drop Silver to the magenta line. 

GDX WKLY–  I pointed this out in the weekend report as a possibility. Sentiment is finally at a point where the majority do not want to own Miners again.  This is what happened right around ICL’s.

GDX DAILY – Day 11.  Did we see an ICL in Miners with that big sell off into September? It does look like it in a way, but it is early timing-wise for an ICL and while it lingers at the lows, we can watch and see if it breaks the lows or tales off higher.  So far, it is lingering at the lows.  If you enter a position here, there is a risk that the FED MTG Wednesday would break the lows and shake you out in a sell off.

GDX – We do have a gap down below price, and if we sell off into an ICL here, it could get filled.  I have been calling for a drop to $22 – $25 for many weeks now. One more quick fed sell off would do the trick. THIS IS ACTUALLY setting up to be a BULLISH looking chart right now , with divergence & a falling wedge pattern.

SO THE BIG QUESTION seems to be, can I take a position here and just ride out the wiggles?  If we drop to an ICL and it is only GDX $22, that is possible if you are experienced, but I find that many CANNOT stand to watch their account values drop for even 1 day or 2.  That is why I recommend patience as we head into a Fed Meeting, and waiting for a swing low.  COULD that last sell off be THE ICL, and the Fed Mtg blasts miners higher?  I never say never, but it is less likely timing-wise. Either way, the next move higher should be profitable , and you wont have to catch THE LOW.

THAT SAID –  Some Miners are back up near their highs, and I found that interesting with that deep sell off in August. Notice GORO. This is what Miners can do.  In 3 quick days in early September, GORO took back 3 weeks of selling off.

And RIC looks pretty good since the August sell off and rebound.  It ran from $8 to $11 and shows positive divergences. It now has another reversal and attempts to regain the 50sma. SO SOME MINERS may have bottomed and they may not break their current lows. Again, 3 quick days took back 3 weeks of sell off.

SENTIMENT is in the dump when it comes to precious metals, and that is what we want to see at an ICL. Some Miners still exhibit weakness or lack of real follow through, but as we see with GORO and RIC and a few others, some Miners are possibly being accumulated.  Even with a Fed Sell off, they may hold their lows.  We really need to get that FED DECISION behind us to gain more confidence in the next direction that sectors will take.  Once an ICL is in place, a move higher will take place that will last for at least 2 or 3 daily cycles, and that is into the end of the year. PATIENCE is my call for now.

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Nothing has changed from the weekend report.  Can someone start a small position  if they do not have a core in the game?  Of course, but only if you realize that volatility is very likely with the Fed Wed Mtg.  If I had a good amount of cash and No Miners in my account, no core position, I would likely take a couple small starter positions in Miners and then add on a dip if we get one. I would be VERY CAUTIOUS with leveraged ETF’s, unless you are an experienced trader.

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~ALEX

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I wanted to point out that Commodity stocks in the metals area are looking as though they could be bottoming out.  Lets look at STEEL.

So STEEL STOCKS should be also bullishly setting up.  This is ZEUS. It sits on the 200sma.  Low risk entry if you honor your stops under the 200sma.

X – This hasn’t quite reached the 200sma, but is very oversold and did get a pop Monday. It tagged the 10sma ( not shown) and sold back down a bit.  A break above the 10sma is a safer entry.

AKS – AKS did break above the 10sma yesterday, but sold off into the end of the day. Again, the 200sma held as support for a couple of days, so a buy with a stop under the 200sma would be low risk.

CLF – Broke above the 10sma and did close there. It did do that once 2 weeks ago, so I am cautious at this point. My stop would be below recent lows, because this could  still drop to the 200sma.

FCX WKLY  – An Aluminum stock that made a nice run from $3.52 to $14.06. We have traded it here, but it has lingered (consolidated those gains) around $10 for Months. The set up is lower risk, but is it ready to move higher yet, or continue this consolidation? It may just be a short term trade for a bounce.

 NOTE: AGAIN, we do not know what will happen with the Fed Mtgs volatility.  Experienced traders may be able to trade these and not get upset or shaken out if they get volatile.  Others may just want to keep these on the watch list until after Wednesday.