Fed Wednesday Again

Lets discuss Fed Wednesday

Nothing really changed for the SPX  Tuesday. I am expecting a break one way or the other , and I would think that the FED Decision should give the SPX a push ( I am expecting a break Higher).

I’m just re-posting the Oil chart from Tuesdays report, because nothing really changed.  We are another day into the daily cycle and cycle timing is acceptable for a low. We would look for confirmation with a break above the 10sma ( and a close preferably).   The Inventory report comes out at 10:30 and this could cause a break out or a break down followed by a directional move.

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GOLD – What else can I say about Gold? Please feel free to go through the last several reports and see what I have been pointing out. I want to do something different today. I researched the past Fed Day moves in Gold this year and found that basically anything can happen, including a realistic POP & DROP. Lets go to the charts.

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I thought that it might be beneficial to look at the last several FED day reactions. This shows how tricky this day can be. 

1.Look at June 15th in the middle of the chart below. That was a Fed Day and Gold spiked to $30 up to $1318, and then dropped back to close at the lows of $1280.  That was a $38 point daily swing all in one day, and then Gold then dropped from there for over a week. 

2. March 16 also spiked a lot higher and gave it up, dropping for over a week.  

3. April 27 Gold surged for 2 days and then dropped for weeks into an ICL.  These were all Fed Days.

My point? I have been mentioning that we have not had an ICL type of sell off in the past few weeks in Gold, and we are now due for one.  I have pointed out for months that we should be due for one at the end of Sept / early October.  This means that even if Gold pops and you decide to take a trade, you need to use stops and even raise them after a day or two to hold some kind of gains. We have seen these initial POPS roll over and drop for days in the past. 

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GOLD could get a small Fed Day pop and drop to an ICL like this.

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Gold may look convincing like it did on April 27 and still roll over into an ICL. I didn’t expect new highs, but it actually happened in April right before dropping to an ICL.  THAT was tricky.

GOLD $1270 –  At this point I have to still expect that a deeper sell off is still ahead for Gold. A normal  ICL. This is a chart that shows an ICL support  (dotted line)  in Golds prior Bull runs. It is calling for a possible dip to $1270- $1280.  We shall see.

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GDX – GDX does look like it had an ICL type sell off in August. Could that be it for the selling in Miners?  Maybe, I have discussed this in recent reports.  Miners may hold up better and simply do a shake out / under cut. Time will tell on that one.  It is only day 12 of possibly 20+, so there is plenty of time for another dip.

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HUI – GDX does not go back very far beyond the 2008 lows, so I used the HUI and this support feature. This points to HUI 194 on this drop,  and would be GDX $22, but I do not know if this can be applied to this new bull run yet. The TAG of this support is not always complete, so it is just a guide.

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GDX – Fib retrace targets. $22 to $24 roughly.

So the conclusion of the matter is this.  I didn’t think that the Fed would raise rates in September.  I thought that this would be good for and even spike Gold, but the above charts do show me that in the past this year, that spike can be short lived.  If you take a trade in your favorite Miners, use a trailing stop until a trend higher gets established.  We COULD run higher for 2 weeks and then roll over, but we cant tell at this point until we see what happens after the fed Decision  ( nio rate hike is likely). If Gold & Miners sell off or Pop & Drop, we know that the downside has had specific limits and a great buying opportunity emerged. If it rallys higher , it should be limited too, so I would use trailing stops loosely, just to lock in some gains.   This is a tricky area for Gold & miners.  I will have buy recommendations and chart set ups for low risk entries when they present themselves. Right now, some Miners look attractive and rather low risk with limited downside, but I can’t call them ‘low risk entries’, because today is Wednesday September21 – a Fed Wednesday.  The risk is that stops could quickly be run in the volatility and frustrate traders.  Individually, some experienced traders may want to take small starter positions in a few miners that they have wanted to own for a while and have pulled back to support. Knowing that the downside has limits as shown in the above charts of prior bull markets,  some have written that they feel that they can handle a little draw-down in a dip, and they dont have a core position yet. Others want to enter with a semi-tight stop. That is a personal choice based on your trading style and risk tolerance.  As a trader, I don’t always wait for the lowest risk set ups, just reasonably safe set ups.

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 So I have been encouraging patience and so far we haven’t missed anything important or explosive in the Mining sector. We did see that GORO and RIC took only 3 days to recover weeks of selling, so this gives us confidence that a quick recovery should follow any sell off.  Sentiment in Miners is extremely negative, so this may be a good buy area. People are afraid to own miners right now after Augusts sell off, that is bullish.  If you have been here for a while, you probably own a core holding from the springtime rally. It should continue to be profitable over time. Stay Frosty and expect some time of volatility or action to pick up around 2:00 P.M. eastern time. Enjoy your Fed Wednesday and thanks for being here!

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~ALEX

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3 more charts –  I don’t want the report to be too confusing and show a bullish case and a bearish case, with the timing for an ICL coming up. As I began looking things over, however, I do see Bullish implications for the short term too. Now that you have digested the fact the Gold is due for an ICL (deeper drop & Low), we ask, ” Can Gold POP first and then drop?”  To the Gold charts we go.

 If the Fed doesn’t raise rates and Miners have sold off to extremes, and sentiment is in the trash, that is usually quite bullish.  Let me show you another observation for short term bullish Gold and how this may unfold. Hint: We saw the exact same thing in April & May before that ICL.

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GOLD – Look at April – May 2016. Follow the 1,2,3,4 on the chart, and you should be able to see a FED pop & run, and THEN a roll over.  That was also mentioned in the report above actually.  The APRIL 27 FED DAY POP was when it ran to new highs and stayed there for a few days, and then rolled over into an ICL.  THIS MEANS that nimble ‘traders’ may be able to trade miners for quick profits. 

So when I was looking for Golds ICL, I assumed just continuing down like this chart below (4).  The above chart shows what happened with an April 27th Fed day pop and then into May with the drop to the ICL. That gives it a valid place in my reporting.

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A pop in Gold would have to elevate Miners, and with the sentiment readings so low for this sector, we may get the surprise to the upside. Miners did just experience a steep sell off, and we now see divergence on the bounce.