Nov 26th Weekend Report

There are many things to keep an eye on going forward, lets take a look.

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SPX – The SPX has had a very strong 3 week move coming out of the recent lows.  We did see this in Feb 2016 and that became a real nice run higher.  We also saw it out of the June 2016 lows, and then it stalled and rolled over several weeks. Are the U.S. markets renewing their bullishness after this past election? It does look good.

IWM – This inverse H&S consolidation has had very nice follow through.  A back test may offer a great lower risk entry  in this area down the road.

In last weekends report, I used this chart to show the break out, and I did have 3 potential targets for a daily cycle high.  The first one was 101.93, the second was 102.61.

The USD hit 101.97 Friday, close enough to the 101.93, but also the  102.61 is right above. On day 14 we are near an area that I would expect a daily cycle top and a dip into a dcl (and this could help Gold to bottom). We’ll monitor the USD as time goes by.

WTIC WKLY – I have been saying for weeks that based on what I see, Oil would be weak for a while. I mentioned that we should get a back test of the break down, and then be cautious. 3 weeks later, that is still what I see happening.

WTIC-  Way back on November 7th, I foretold that we could possibly see a H&S pattern form with a back test if it didn’t break out, so I was cautious on Energy after a daily cycle bounce.

WTIC – The daily chart shows that yes, we could be forming a H&S now with that back test.

It is still very early in this daily cycle, so 

1. Oil could bounce around for days and then drop, or

2. Oil could head lower in stair-step fashion  for many days if it doesn’t turn bullish quickly. It is overbought too.

NATGAS – Natgas experienced 2 sharp selling collapses into what  I believe was an ICL. Notice that it then recovered  almost all losses in days once it got its floor in place. THIS is what I would like to see GOLD do, but I am getting mixed signals with Gold, as you’ll see in this report.  Time will tell.  For now, I just wanted to point out that a drop into an ICL can be dreadful as we see here, and then it could recover in days.  Note: It did spend about 8 days under than trendline at lows. Gold could do that too. Time answers all questions.

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GOLD , SILVER, and MINERS

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If I tried to post EVERYTHING that I researched so far, it would take so much time to write up that this report would not be released this weekend.  I want to be release this report Saturday, because of the sharp market movement post election. It may take time for our readers to digest both sides of this coin. That in mind, I hope to share just enough to accomplish that and be able to release this report on Saturday.

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GOLD – Let’s talk about a break down in Precious Metals and things that I will be looking for.

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Usually when you get a break down, you get a back test of that break down.  It is odd to consistently watch it happen, but it almost always does.  Using T/A and Cycles, you understand what is happening,  so it is not magic  it is probable market movement after a break down.  First, lets take a look at examples.  This is a break down and back test on the S&P 500 in 2008.

I just showed you this one in OIL, and it was called out before it happened.  In other words, they are expected.

Why? A back can be an oversold bounce, a daily cycle that is just too weak to get to new highs, a dead cat bounce out of oversold sentiment, etc.

Gold broke down like Oil above.  I’m not panicking, because it can recover as a shake out , or as mentioned, Gold should  back test that break down during the next daily cycle. This is why I said last week, We need more time to see if this is really a change in character for this sector, or is it a shake out below Mays lows.  IF …

IF it is a change in character, we should still get a bounce higher that may look like this.

And in fact, morph into this pattern at the same time.

The Gold Bull recovery could look like this after a move out of an ICL, if the break down is not a change of character.

Recovery of that BLUE TREND LINE is KEY. 

SILVER – Guess what Silver did too? So next week is important to my analyses.  In fact, the next couple of weeks may be the key to what is going on. I know that everyone wants to know the answer right now, but the markets are based on ‘time’ often.

So, a break down is usually a bearish sign in my book. It can recover as a shake out, or back test and follow through to the downside is confirmation that something bad has cometh this way.  Right now, it is NOT ideal for a bullish outlook, and it has me cautious and watchful going forward. We will dig deeper, because a break down can come with ‘clues’ attached, but first let’s take a look at Miners.

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GDX–  This chart was Wednesday, and it was in my Friday report. The 61.8% retrace has been hit.  While Gold broke to new lows Friday, GDX held the these recent lows. My Friday report even pointed out some Miners that are not breaking down at all. I expect a bounce now out of a daily cycle low.

 I expect a bounce here ( DCL or ICL).  I want the GDX to hold above this support ( yellow area).

GDX – we do see a H&S and the neck line broke . Huge implications downside if this is not invalidated on the next rally higher.  This is truly where “TIME WILL TELL”.  Selling the rally and watching what happens is a choice that may suit some best.

GDX – This would be the ideal outcome for a bullish recovery. This is a down trending channel, and any further downside is bearish in my opinion.  let’s allow the market to tell us what will happen. Yes, unfortunately, that takes time.

That is the Precious metals market at a glance.  That is a surface view, but it may not tell the real underlying story. Lets just go a little deeper for a few more clues in the underlying story. There are good and bad things that I am seeing. This is where I have to try to keep it a bit brief, so that I can release this on Saturday.

 

In prior reports I said that there was something specific that I was looking at in the HUI expected pull back. It Never closed below the 100MA on a weekly basis in the first years out of the bear market selling.  It did in 2005, but by then a long consolidation was needed.  I wanted to see this hold for the HUI.

HUI did not close below the 100 last week.  That was encouraging, because it was back tested in the past, but no close below it in the first few years. Was this a back test?

 

Look at the blue line here, it is the 100ma on Golds weekly chart. It did act as support and resistance often. See the red arrows.

Gold closed the week below the 100ma (blue line) . That wasn’t encouraging.  It may not be the end of the world, but it is a sign of weakness to me. A crack in the armor so to speak. The purple support needs to hold.

This is where it gets a bit uglier. I’m not going to simply wear a Bullish hat just because it fits. I see something concerning.

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I did extensive research last Dec and again in February, and showed a decades long relationship that GOLD & the YEN have shared. I also used the GOLD and the USD to show a change taking place there.  I used step by step charts to show the relationship of Gold , the Yen, and the USD in the past, and updated it at the MAY ICL for a June report.   I will share just a few of those charts and their bullishness then, and I will show how they are looking as of right now.

 

In Dec 2015 –  I had shown that when the YEN bottoms, GOLD has bottomed in the past, so I expected that Gold would  bottom.    I used this and other charts to show my conviction that the bottom in Gold was near.

In FEB I pointed out this relationship to Miners.  The lower box is GDX.  This is the YEN VS USD. 

KEY POINT: AS THE YEN BROKE OUT AGAINST THE USD, MINERS BROKE OUT. KEY KEY KEY. I had called the lows in Mid January to many Miners using Technical analysis, and this break out was confirming the Miners lows in February.

I hope everyone follows this so far.  So I had been watching the YEN VS THE USD, The YEN & GOLD, and GOLD & THE USD and a few other areas.  This chart below then showed important break outs that actually corresponded bullishly with GOLDS ICLS, or MINERS starting to break out higher in the next run.

Notice that I said that the FEBRUARY USD VS YEN CHART showed that a drop in the dollar vs strength in the yen would cause the Gold bull to re-emerge. (Do we have that now? Will it return?)

 

And in the Feb 5th 2016 YEN VS USD CHART –  A bottom & now a break out in the Yen / USD  above the 50sma is BULLISH for Gold & Miners.   This was KEY to my studies at that time and added confidence to all of my other work.

YEN VS USD –  This summer when the MAY ICL was in place, I looked again to see what I could find.   The first break out of a downtrend ( red line) was near the ICL for Miners in Jan.  Now the XJY:USD was possibly topping in July at the blue downtrend line, so I mentioned lightening up on Miners this summer ( hold core) and getting ready to buy the dip.   This was in line with the thinking that a Bull market has emerged and a big break out was coming this fall.

I re-visted this in September , seeking out a possible ICL in late Sept or early Oct.  I drew up this chart for myself. By now I wasn’t adding this to my reports, because I had many new readers that didn’t see my Dec & Feb Yen reports about the Yen/ Gold/ USD. The point is this…

AS OF SEPT & OCT, The bull set up was still very much in tact.  IN  FACT, with this chart I was even more bullish that a HUGE break out was about to take place. A break above the MAGENTA LINE after the ICL was in place. VERY BULLISH.

 I showed the important break out that should be coming  to my readers this way on the following 4 charts.  A very important break out in Gold would be coming too, but it should be accompanied by that break out in the YEN : USD.

 

NOTE: Even after the Trump slam down, Things were not broken yet.

In October :  I expected the ICL in October to break GOLD from that down trend line, and the XJY / YEN to break out too. Through October everything was lined up very bullishly for a huge move higher.

SO THE USD : YEN – The KEY to the success of this Gold Bull in much of my work, was absolutely fine going into what I called the ICL in OCT.  Everything lined up ….until D.Trump won the election.   What does he or his policies have to do with Gold, the USD, or the Yen?   TIME WILL TELL the whole story, but here is how the story goes in my book.  The first 2 Chapters of the Gold Bull ( 2 Bullish ICLs) were great chapters from dec 2015 to Oct 2106, and then I see this…

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XJY:USD –  YEN/USD crashed to Jan lows rapidly.  Gold didn’t, so does that mean Gold is stronger because the YEN & USD are about to reverse direction? Or did Gold hold up because an ICL is due, and will eventually follow the Yen lower? Please read the charts ( Click to enlarge if necessary).

 Please understand, I have been doing this for almost 20 years, so I don’t panic.  It is important for me to look at the markets without emotions, and just find out what the reasons might be.  I was being asked real time ” What is happening and why?”  I can throw out any random answer or ‘guess’ to just satisfy the moment, but honestly it takes time to know what is really happening here in the big picture mixture.  Is this just a Knee jerk reaction, is it a shake out to fool the majority, or is this a real directional change?  We are now programmed for instant messaging and instant gratification, but unfortunately it often takes time for the real picture to develop.  No one likes those old Polaroid pictures anymore, they want to click the & see the picture instantly, but the markets just aren’t that accommodating.  Trust me, I’d love to know exactly how all of this is going to play out now too, my curiosity is killing me. Time will tell, it always does.

  For us, trading became very difficult short term when the sell off suddenly change.  The big picture quickly becomes hazy, so it is important to adjust back to your comfort leve  That is at times all that you can do. I have said it before, there is no shame in lightening up & waiting for the clarity to present itself, even if it means taking a loss.  Just don’t ignore the stops that you had in mind when you took the trade and refuse to make any changes.   I understand all of these feelings, I have been there too. For me, I just didn’t get stopped out of any of the positions that I bought in Oct , except for MUX and JNUG.  That is an odd coincidence that I bought several miners that didn’t break their Oct lows.  Other stocks have dropped and stops should have taken traders out of the way. 

 Conclusion:   Something might have changed in the precious metals market, and I see it clearly in the Yen/ USD trading.   Is it a permanent directional change, or is it just an anomalous moment in time? The next move by Gold & the Miners should answer that question in my opinion.  A trading plan is something that should not change. November saw  exaggerated market moves, they are rare, but they do happen in todays fast changing environment.   This recent smash down activity was pretty much unexpected by me after October bottomed and moved higher.  I was using several methods of market analyses and the bullish set up was very good going into the election in all areas of my research.  A break of the May lows as a ‘run the stops’ was expected as a possibility all along, but once I saw Octobers lows, I went in heavily and Nov 4th & 5th was like a flash flood when a dam breaks. Now you can see from my report that going forward we have both bullish and bearish hallmarks now.  As of early October,  I loved everything that I was seeing in this sector. Very bullish characteristic with a super break out possible. That changed quickly, and time will tell if it changed momentarily or longer term.  This may be a sell the bounce scenario with the next DCL.

 If something has changed, we will change with it. We are seeing construction metals and their stocks moving quite bullishly out of consolidations.  Buy the dip may be the next move there for FCX, CLF, VALE, etc.   Some have been mentioned here that could be bought now, since we also see weekly break outs.   See last weeks reports.   If the Gold bull remains in tact, it could be that the YEN got overdone to the downside while the USD puts in a topping process, but we don’t know yet.  It is not a healthy big picture to me.  The break down now looks real with the above Yen charts showing it in one way. The YEN crashing to Jan lows and the USD breaking to new highs was rapid and bearish,  yet Gold was able to hold the 61.8 retrace, and Miners held also. If the USD tops, The Gold bull may be fine and the Yen will resume upward movement.  If the USD runs to $120,  Gold may test those lows in the mean time. There is a lot to take in, huh?

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 I will try to put more in the Monday night report. This review is part of my Bigger Picture Analyses, and we do see sudden winds of change creeping in. Follow through one way or the other over time will be the next real Key. 

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Enjoy the rest of your weekend!

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~ALEX

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Please review the Gold part of this report again. Look at how bullish everything in this area of my research was right through October. The big question is what does it mean going forward, and time will tell.