WEEKEND REPORT- RECALCULATING ROUTE

Have you ever been driving along using your GPS and you decide that maybe you’re going to take a short cut to your destination?  The GPS detects that you have left the designated course and immediately needs to compensate by announcing, “Recalculating Route!”.  Well last week sectors of the markets took sharp detours right after the elections. Using over 50 charts, this weekend report will discuss the road we find ourselves on now.

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SPX – Nov 1st , Expecting a trade-able  ICL, maybe in the 2070 area.

SPX – The ICL seems to be solidly in place, with a break out from the downtrend after the election results were in. Futures shot down immensely during election night, but the chart simply reflects the time that the market was open. Volume was huge after the election.

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SPX WKLY – This could be a huge breakout from a 2 year consolidation, and it is oversold!

SO here is my current thinking…

 Recalculating route:  Trumps policy has been to promise to build a better infrastructure, add more jobs, boost the economy, etc.  Can he do that? Time will tell, but this 2 years consolidation of indecision seems to be breaking out with confidence at this point that the U.S. economy is being invested in.  I DID see some changes with the election results, however, so let me quickly discuss that. Obama promised better health care, and after his election health care stocks did well. Will that now change? Trump promised infrastructure repair and Metals stocks blew up higher.  We discussed X, AKS, FCX, VALE, STEEL, ALUMINUM, etc in reports last week, and their explosive moves.  The bonds seem to think inflation will come about too, and wouldn’t inflation be good for Miners too?  Gold shot up $50 after the election, but gave it all up in 3 days falling toward a Dcl  ( which is likely extending into the ICL. We need to look at the path of many things and see what the markets are telling us. Lets continue…

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NASDAQ –  I pointed out the sad looking charts of GOOG & AAPL last week . Will Tech suffer now? Should some Tech investors be recalculating their route?  Time will tell, but what I am saying is that we may be seeing some shifting and we have to be ready to alter our route if necessary.

NAZ daily Thursday, I didn’t like this drop and Tech did seem to be having trouble, but Friday it went green again. So lets look at the weekly.

NASDAQ WKLY – This is still a bullish weekly chart, so the ‘trouble’ that came up after the election may just be a bump in the road, NOT a change of direction.  Time will tell.

 

The IWM actually broke down a week ago.  This election week it recovered. Was that a shake out?  This is how a Bull Market throws people off ( Think Gold & Miners too). This chart was a false break down / shake out.

XLU – The XLU looked like it as breaking down From July to now, after a very bullish run from Jan to July ( Sounds like Gold, huh?).  This week it crashed after the election results. The Big picture says to keep an eye on it, but it may still be just a back test and consolidation before resuming upward. It is oversold on the weekly. This break down may recover.

USD – The USD is due for a pullback using cycles, but currently the chart looks like a bullish break higher.

 

USD – We have seen this type of top before, with divergence.  I am of the thinking that when the Fed sees markets breaking higher, they may actually do another interest rate hike in December.  The USD may roll over with an interest rate hike.  Trust me, I have studied Gold during times of interest rate hikes – It was bullish  for Gold.

WTIC – Oil continued lower as expected.

WTIC – Oil broke the intermediate trend line, so it is falling into an ICL. The weekly chart has plenty of room to drop, we’ll have to see if it can bottom & turn higher, but I would watch for a back test of the trend line, since a dcl can do that and then the real dip into an ICL would be deeper. 

WTIC BIG PICTURE – We are not rocketing higher like 2008. I originally thought that we may see the same type of move higher, but Oil is putting in a bullish base. This looks like an Inverse H&S.

NATGAS – Natgas also began to break down.

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GOLD, SILVER, & MINERS!!

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Huge question this week has been, “Is gold still in a bull run, or did the Elections alter it?”  Do we need to recalculate our route and go short?  Will Gold finally drop to under $1100, and Trumps election is bad for Gold? Lets examine 1000 charts and see what we can discern.

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PALLADIUM looked bullish to me, it seems to have bottomed in October.

It dropped pretty sharply from July to November before it took off higher.  Is it leading? Gold was doing that too, dropping from July Highs to now, and we played the daily cycle ( unfortunately, the last DCL did not hold as an ICL after the election, we need to examine that now.

 

GOLD – After the elections, Gold initially reacted by shooting up $50. We then saw 3 days of solid selling, as the ‘timing’ was correct for it to head into a dcl.  We knew that, but I did not think that the Oct lows should break. Why? Everything that I compared it to as former ICLs was actually happening, but Gold certainly did break the Oct lows. Let’s examine GOLD.

GOLD – The selling was normal for an ICL in October. With the Election results, is Gold now bearish and breaking down?  That is important, we will watch this very closely. I want to discuss scenarios.

  Could “they” (Big Money)  slam this into an extended ICL to run the stops? A perfect shake out that will have everyone believe that the election of Trump is bearish for Gold, and give theirs up?  In my opinion, the election of Trump is NOT bearish for gold, but again, we will watch this closely.  In order for big money to scoop up a bigger slice of the pie, they would drop Gold & run stops. When the job is done, they mop up positions and it runs higher quickly.

GOLD – I would personally hate to see Gold at $1150 due to the fear that would come with it, but a normal back test would do that and would run the March & May stops.  When gold breaks the daily cycle low, it is looking for an ICL eventually.  When the Intermediate cycle trend line is broken, it is looking for a yearly cycle low. We seem to be doing that now. Note: That trend line was already back tested, a drop below 1200 would actually be enough to run stops, the back test is not necessary. Then we’d look for a recovery.

GOLD WEEKLY – Gold was hitting long term resistance. Often resistance is hit & hit and then a pullback gives it a running start to finally break out. A break above that trend line will be very bullish. We can watch for that.  A drop to the red dotted line would not be pleasant at all ( in my opinion).  I do not expect that drop though. We are oversold on the weekly though, and due for a DCL ( ICL ).

GOLD IN A BULL MARKET

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GOLD CHART #1 from  2000 – 2016 peak – In the past bull run would often hold up at the 66 MA. LOOK AT THE 66 MA here in the bull run of 2000 – 2006.  Steep drops have dropped to the 66ma repeatedly.  At times I use the settings  22, 44, 66 ma for longer term reasons, because the fluctuations can be large in a long bull run  ( look at 10 yr charts of AAPL, PCLN,  or NFLX  if you need proof  that Bulls buck a lot).

GOLD CHART #2 from 2006-2012 peak – This steeper run from 2008 onward actually tagged the 66 within the first year, and then held the 22 from then onward. We are now within the first year of what should be the resurgence of the Bull. 

GOLD CHART #3 – Let hope prevail.  That 66 became resistance in the bear market ( red arrows), and then support in the new bull run. We are there now, slightly above it. A quick drop for that stop run below 1200 and recovery is fine, but if Gold trades below the 66 ma for too long? We need this support to remain in tact in my opinion. Right now, Gold is above the 66MA.

SILVER – Silver is breaking the intermediate trend line.  This means it could be looking for a yrly cycle low, and then we would expect a recovery if the Bull remains active.

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MINERS

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GDX – In September I drew this expectation.  I wanted to see strength and for this to hold, but also knew that we could drop into the yellow area for an ICL.  My Sept charts show that I was discussing an A-B-C down at that time, to about $22 area.

GDX OCT 19th – When buying the OCT lows, I said that I felt the selling had dropped it into an ICL. I pointed out that a L.T. daily cycle would mean one more deeper drop.  our daily cycle was R.T., so I was deceived into holding on believing that the OCT lows should hold on.  I was wrong, we got this instead.

 

GDX NOV 11 –  So here we are, with Miners rallying Wednesday after the elections, and then taking a 2 day puke that felt like 10 straight days of selling to many.  They were big drops down, because for GDX,  8% is big.

GDX Friday intraday, I posted this in the comments to show possibilities in this sell off. 50 – 62% pull back is possible in Bull markets. That would mean more selling is possible next week to get us to a DCL  ( ICL?). Notice past drops of equal length with the blue lines. You never want to be holding leveraged positions in these kinds of drops, but at least you can see that they do recover in the coming bounce. Please examine the chart and then lets continue…

GDXJ – Same set up. 62 % pullbacks of an entire yrly move can take place in bull markets. 50% is excellent if it holds.

GDX – Capitulation drops often lead to lows and a bounce. We may drop this week and then see a reversal in the same week.

GDX – Is this a back test into a yearly low?

GDX – The dips in 2009 & 2010 were not steep, but the ride higher was much bumpier. They were 38% pull backs.  This one has been steep from July, but it was also quite a straight up shot from Jan to July.

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MORE RESEARCH AND FACT FINDING HISTORICALLY

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HUI FIBS – The HUI did put in steeper drops in the bull run, even 62% pull backs. Those must have concerned many buy & hold investors. Look at the 2004 drop. This is a weekly chart, 4 straight weeks down.

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HUI – Lows were broken and recovered and the bull remained in tact.

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HUI – I was asked about the 10MA on a weekly, because I use the 10 MA for short term bull runs. The 10MA can be broken in the steeper sell off.

HUI – Here I am ONLY looking at the first part of the move out of bear market sell offs. In 2001 and 2010 the 100ma acted as support. HUI 174 is where the 100ma is now. Notice that that steep sell off in 2010 looks a lot like the one we have now.

HUI CLOSE UP-  I see that H&S and it does concern me since the neck line broke last week. HUI back above 200 will negate it.

HUI – This bothered me.  The 10MA is now acting like resistance at each daily cycle high. We broke above it after the Election results, and I was quite happy about that.  Then the drop started. 

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 Is this Sector ‘Finished’?  It’s time to look at the reasons why we can still be bullish.

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Miners are reporting earnings that are beating last year and showing signs of recovery. Are they all now crashing down?

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TRQ WKLY –  This and a few other Miners does not seem to think the bull is done.

 

On OCT 18th, NAK hit the 62% retrace point ( like GDX is now). People hated owning NAK then ( like Miners now?).

NAK – NAK turned higher off of that 62% drop and is still recovering.

NAK – I drew this on Oct and I cannot say enough about the implications if this plays out.

MUX –  I broke a rule and did not allow myself to be stopped out of my MUX position above $3.00.  I bought it in October, rode it higher to above $3.50, and yes, gave up more than just the gains. It is now at $2.67.  It is often painful when I break my own rules.  I am now in the RED.  Why didn’t I sell?  This chart is 1 reason. I will sell the bounce out of the next daily cycle low if it doesn’t act correctly, but I expect that it will go to almost $3.50 on a bounce  (overhead Trend line).

MUX – I also made a lot of money on the first run higher, so I felt that I have some “House Money” as a cushion.  The 62% is $2.27, so not allowing my stop to take me out was probably human error – emotions –  hope.

1. If this Bull remains in tact as shown,  I will never remember that mistake.

2. If this bull dies, I will never forget it, and I will have to learn from it.  🙂

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Some miners seem like they are breaking down in a big way though. 

CAN THEY REMAIN IN A BULL MARKET WITH THIS SELL OFF?

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When I was posting how strong Steel and Copper looked, look at what CLF did.

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If you owned CLF just over 1 week ago ( like Miners today) You’d be crying. Look at that volume, it looks a bit like GDX now. Hopeless? Bear market?  ” I’ll Never buy this piece of crap again?” I am reading that in the comments section for Miners. “I just want to get out and go away”.  Maybe so, look at this horrible chart. 

CLF – Will Miners sell off Monday a bit more, but start to recover the shake out lows? Was that a stop run in CLF, recovering a day or 2 later?

CLF – Is this possibly what our Miners are going to look like, going into the end of the year? Was that a stop run to panic bulls out as STEEL looked Bullish? Are we in a stop run now in Miners?

Calculating route: By the way,  we made great money last spring on the run from $2 to $5, and CLF ran very strong this week. We may see a pullback on a daily basis, but  CLF WKLY is still so bullish and oversold, even after that shake out. Do you see the potential? 

FCX – We made great $$ in the spring with FCX, but look at the sell off this August and October.  2 shake outs that broke the lows in Sept & Oct.  “I hate this stuff, I’ll never buy it again!”  Was that just a stop run / Shake out? And then came last week with Aluminum bullishness.

FCX WKLY – And yes, it is just about to break out with huge potential again.

CENX –  Ditto

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 So we have a bull run occurring in the Metals like STEEL , ALUMINUM, and COPPER now, or should I say Continuing after months of consolidation.  Gold, silver and Miners have also been consolidating for months sideways and we need to discern whether or not anything has changed. Rising interest rates have been bullish for Gold in the past. Inflation is bullish for gold. Did electing Trump really change anything there? The Bond market is calling inflation and Gold usually does excellent under those conditions.   Gold shot up $50 when it was announced that he was elected, and then sold off sharply into a what should become a DCL ( ICL). The drop was due in cycle timing, the degree of the drop is extreme.  Did Big Money run the stops on those shorting gold by pushing it higher first, and then flip short to run the stops on the downside?  My goodness, if they did, they are mopping up the profits left and right. We saw this action in the metals market and off they went higher last week.  An ICL / DCL is due in precious metals and I want to be prepared to act correctly as things unfold, unemotionally.  I agree that that is not always easy, but when you trip and fall down, you basically have 2 choices.  1. I can lay here and feel bad, or 2. I can get up and walk.

 At this point, we have seen extreme moves Thursday and Friday and it does ‘appear’ that things have changed, but have they?   I think that we may be witnessing a huge shift from weak hands to strong hands, a flush out before the Precious Metals sector begins the next launch higher after putting in a yearly cycle low.  Look again at the chart of CLF and FCX.  from ugly to beauty in no time. Lets see what the coming week brings ( I hate to say this, but we might  see a bit more downside before a reversal). I’m holding on to a few non leveraged recent purchases and feel the pain of the selling too. I will have to decide whether to sell the bounce or add to positions as we move forward, but I lean strongly toward Gold, Silver, and Miners rallying out of these lows when they arrive. 

 For the past 2 years we have really nailed ICL’s and DCls alike. This one had so many hallmarks of an ICL , that I must admit that it fooled me a bit with the post  election drop.  It is not the end of making big profits by any means.  ‘Recalculating route’ means that we will find the way.   Scroll back up to the last 2 charts in this report.  The weekly charts of FCX, X, AKS, CLF, etc are telling a strong bullish story that we can turn to to make money going forward too, but if nothing has really changed in Precious metals.  I personally think that we are about to see a very strong rally in Gold, Silver, and Miners soon,  just like we just had in CLF, X, AA, FCX, AKS, etc. 

 A ‘wave 3′ of 1-2-3-4-5  was shown here in September. Wave 2 would be ending soon.  I remain bullish in this sector at this time for reasons shown in the many charts above. As usual, Time will reveal all’.  Thanks for being here and enjoy the rest of your weekend.

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~ALEX

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A Wave 3 example again