Friday Morning September 23

What are we watching on Friday?

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SPX – Yesterday, using this chart,  I pointed out that this confirms the daily cycle low, and it is a bullish break.

This could be considered an Island Bottom reversal. It is a bullish break out, especially if that gap doesn’t fill.

$USD –  The USD actually put in a reversal Thursday too. I had mentioned that a dcl could come quickly, or the USD could be dropping down to find an ICL , since we haven’t seen one since May.  We are still in need of time to see what the USD wants to do short term. So far, bounces to and rejection at the 200sma has been consistent.

WTIC – Oil continued higher on day 2 of a new daily cycle. Look at charts of CWEI, RICE, SWN, RES, AXAS, WPX, MRO, OAS, APA, ANW,  ECA, ALJ, ERF, etc.  These are bullish looking charts.  I like the looks of AXAS too,  it is almost right back at the highs.  I may go through and search for some possible ‘buy set ups’ and add them to the weekend report.

GOLD, SILVER, MINERS

Here we are , back at the volatility zone  🙁 

The metals did fine Thursday, but Miners popped and then sold off. We want to look for follow through going forward. Lets take a look.

GOLD–  On day 14 ,Gold itself continued to give some upside follow through.  I am watching the red & Blue lines for possible resistance, and see how Gold acts around that area.

SILVER – Silver looks to be breaking above a down trend line. That would be bullish.

GDX – Miners, on the other hand, found resistance near the 50sma and lacked immediate follow through. Did the Miners sell off enough to put in an early ICL?  The recent sell off was steep, into the Sept 1st lows, but it has only been 3 months since the ICL at the end of May. That makes it a bit less likely, but when the Sept 1st lows held on the recent dip, and then Miners all took off higher with the Fed decision, I decided to take a couple of fresh positions “just in case” there is an upside run. 

The important thing here is to watch the lows- they should NOT be taken out.  If the Sept 1st lows are taken out, that is a failure of this daily cycle.  A push above the 50sma would be bullish, giving this a good chance to become a right translated daily cycle.

SO I stated that it is unclear whether or not a stealth ICL was put in place due to Fed Policy and the lack of an interest rate hike.  When things become unclear, you have to proceed with caution. I will often trade a leveraged ETF at ICL’s, but in this case the timing of what might be an ICL in miners does not match prior ICL timing.  I am just adding a couple of trades to have some skin in the game.  The trade set ups look fine, even with the reversal yesterday, but it is a time of uncertainty and not a time to go ‘all in’.

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Lets just look at a couple of set ups, and discuss things to take note of in all of the miners until we get some type of clarity.

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PAAS – You can see that the 50sma is acting as resistance. PAAS broke to new lows after the Sept lows, but that is fine and it showed divergence in the R.S.I.  ( I actually expected GDX to do this at one point, similar to what I pointed out in 2009 & 2010 in a report last week).  SO is  PAAS ok at this point?  Yes, reversals do not always lead to a bigger sell off, but this is a down trending channel or wedge at this point too. It needs upside follow through.

PAAS – So I can picture PAAS going either way. A burst higher to break above the 50 sma, or another drop if Gold drops to an ICL. 

The good news is that the recovery in a bull market after lows are in is quick.  Remember GORO, RGLD, & RIC?  The recovery was very quick after lows were in place. Notice that the selling in August lasted for weeks, the recovery took 3 days starting on Sept 1st.  This actually looked like a move out of an ICL, adding to the mystery.

AUMN – I bought AUMN in the morning, and it promptly dropped 🙂  Such is life in the trading world.  The set up is there, the MACD has been rising along with the RSI, but Miners sold off and AUMN joined in.  I still see a constructive set up and an easy out. Price remains above the 10 & 20 sma, the 50sma acted as resistance. The sell off in AUGUST was continual and looked painful  ( I wasn’t in it). Another leg down could break the August lows, so I will keep an eye on the blue trend line as a mental stop for my new position.  It currently has a series of higher lows, so a lower low could be a stop.

THM –  I posted this in the comments section Thursday morning.  I expected THM to drop a bit further to the red line, but it did tag the April & May highs and reverse higher (blue line), so it may hold up.  It also ended lower Thursday after I drew this chart, so it did not break out from this wedge.  A break out would be a buy in technical analysis.

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SO I actually see quite a few of these wedges forming in Miners.  They do usually break out upside and that is bullish, but then they can also do a back test that brings them down to new lows  (ICL?). Also they usually break out when they approach the apex, and some still have a bit more room before they get there.  That does allow a bit more downside.   It will take time to see where the Precious Metals market intends to play out. We have dual expectations –  an ICL in miners is either in place or very close. I have taken a few trades in Miners to have skin in the game, but I am aware of the possibilities of 1 more dip down to wash out the bulls.

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OIL and the general markets look to have bullish set ups, and should have ‘time’ on their side to make some gains. I am going to look for some Energy set ups that look good. WPX, AXAS, OAS, etc look pretty good, but look at WPX –  it also pulled a reversal like the Miners did. I want to see what happens on this Friday.  Thanks for being here and have a great Friday and weekend!

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~ALEX