Feb 10 – Running Again

The weekend is upon us, let’s review what the last week brought our way and what we should expect going forward.

The NASDAQ continues to climb upward and it is hard to tell if this is forming a wedge or is it rallying into a blow off top? I want to look at the SPX and discuss a thing or two there .

SPX – I had drawn this wedge inside of a long term channel for last weekends report. I said that the markets do have the potetnial to keep climbing, but eventually they would reach the top at what looks like $2400 ish. Here it was at 2280.85.

SPX WKLY – Now at 2316.10 and I would just be cautious, since this CAN top at anytime. It should definitely top by this spring.  If you are long, you can use a trailing stop…

Trade it, Ride it, whatever you want, but let’s be aware of where the markets are at, even though they feel very bullish ( And actually have been quite bullish).

SPX – I used this chart earlier this week to draw a blue trendline. Draw this on your daily charts and stop out on a break of this trend line, because then the SPX would likely roll over into a break down.

VIX – I see a pattern in the VIX, so I have been occasionally pointing out that we are at Vix lows ( bearish for the market). It is not an exact timing tool, but let it indicate to you that these markets are rather toppy when the Vix is low and then the Vix can SPIKE, and this would have me expecting a spike into March & April. Time will tell on that one.  You can use a loose trailing stop, but often those huge spikes in the VIX are accompanied by a sharp drop in the markets.

$USD– The dollar is having the bounce that I expected, and I am not expecting it to last very long. A Left Translated daily cycle can top in 8 days or so. I looked at 101.50 as a possible target.

USD WEEKLY – The weekly doesn’t look very weak, but I do expect it to drop into an ICL and that will break that blue trend line and likley surprise the majority.  Big Dollar drop, Big Gold Pop?  🙂

WTIC –  Oil has been difficult and  just has not dropped as expected by many, due to the C.O.T. readings.  Cycle work does have me expecting a drop in the next couple of weeks to a dcl, but Oil cycles can be 30-50 days long, they are a little harder to time using cycles alone, and that is why I dont just use cycles with Oil. So here we are and Oil is again near the highs of the consolidation. This is just a trading range at this point. I can only report what I have in front of me, and with Oil a rather neutral beat goes on. It held support at the 50sma.  The Energy stocks have been pulling back though, are they set to crash?

XLE WEEKLY –  Guess what? After a rather convincing pullback, that is a rather convincing reversal at support. Energy stocks now look to be turning bullish and I would be very careful with shorting here. This can move higher to the upper magenta line.

NATGAS – I have been pointing out this H&S pattern and I wanted to wait until it tagged the 200sma before considering a long idea. I recommended still waiting, and it rolled over again Friday.

NATGAS – A bullsih set up could be forming and this shows again that possible target area?

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I posted that the Uranium stocks were looking bullish again, and I do see bullish set ups forming in many  UEC, URG, DNN, UUUU, URRE.   I understand that some of us ( Actually Ken and myself included) think that a 5 wave completed.  I actually thought that, you can see possible  5 waves complete  here. Look at that bounce though, isn’t that a bit zealous? It looks strong so …

I’ve often seen people change their E.W. counts in hindsight, so I am going to do this and will just see if it plays out.  I bought URRE as a low risk entry, and am changing my Uranium count of URA for now. Using Technical analyses, this cup could get up to $20 or $21.  If this fails, I will sell URRE and buy something else : ),  there are some nice set ups out there.

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GOLD, SILVER, & MINERS

GOLD – What a sweet reversal off of the 10sma Friday. This sector is acting very well. I think we just experienced a 1/2 cycle low and that means that we should go higher next week. Running like a Cheetah.

SILVER – Doesn’t Silver look like it has started the break out push here? Nice Friday volume too.

$GOLD WEEKLY H&S ?  People have asked me about what others are pointing out here. “Is that a valid H&S, thus Gold is bearish.”  I don’t think so, and the reason is…

MINERS have just been plowing forward through every resistance so far, week after week. I would say that they are being accumulated & bought up by smart money ( and us ) with the smell of inflation in the air. Metals like Steel, Aluminum,  and copper have been forging forward too. To me that means that Gold & Silver should continue higher with Miners leading the charge.

GDXJ chart #1 – Nice bullish reversal Friday on day 11 of it’s daily cycle. These can stretch to let’s say roughly 30 days, so I think that we can expect a continuation next week. My initial target was the 47ish area, but that is an initial target for this daily cycle. There are others to discuss as we go forward.

GDXJ chart #2– Less likely in my opinion , a bull flag forms as the USD pops a bit higher.

GDX – So let’s take a look at the 2016 run. I would read the 1st numbered remark & look at the chart, then the 2nd, then the chart, etc.

1. It was a 3-4 month run, before we saw a bit of a deeper drop into the May ICL. We could do that now, peaking on the 3rd daily cycle.

2. The entire run to top peak lasted for 1/2 the year ( purple box). Can you imagine this run lasting for another 4 months?

3. Using an E.W. projection, 2016 that was only the first run higher, with 1 &2 of the 1-2-3-4-5 complete now. WOW.

4. So this chart points out that we saw an ICL last May 2016, 5 months after Gold bottomed in Dec. 2015 Gold bottomed this time in Dec 2016 too, so we could see something in a similar time frame.  Do you remember how nervous people were in May with the selling? Looking back it was a steady sell off for a couple of weeks in May, but it was rather shallow for an ICL.  We may get that this time too. I saw other cycle guys refuse to call it an ICL ( until much later). Here at Chartfreak, we caught the exact lows at the end of May and off it went straight up again.

GDXJ – Look at the Big picture of GDXJ.  This is not out of the question and there would be huge money to make going forward. There will be ICLs and Dcls along the way to navigate, I will continue to do that for us.

So things are remaining on track very nicely, and it looks like we may have just seen a little mini 1/2 cycle low in this 2nd cycle this week.  Again, we didn’t try to get too cute and trade around it, and thankfully so. That 1 day drop on Thursday, which would have had many panic selling expecting a deeper drop, recovered on Friday. It has served us well to fasten our seat belts and enjoy the ride with a solid holding, and maybe try some trading on the side.  There have been buying opportunities at various times, because different Miners do set up at different times. We will continue to take advantage of these set ups as the Miners continue to run again.  please read on if you want to hear my thoughts on selling, it is the hardest part of this whole situation, trust me.

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~ALEX

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So when do you sell under the current conditions?  I am more of a traders that knows when to sell when I see what is happening in real time.  I do use formulas and price projections as a guide, but I also feel that at times I have a good gut feel from years of experience.  I look around and things do not seem quite right, weakness shows up, etc.   Let me just say this, we will probably NOT catch the very top unless it is obvious, but often it is not that obvious.  It is similar to the ongoing NAK trade, it will pullback and that may or may not be the final peak.  Here is my thinking for the current situation though.

As a basic forecast when I am using cycles, I look for an ICL to start ( We had one at the Decembers lows).  I go VERY heavy at that point and I actually can allow 2 daily cycles to play out and try to get out of leverage or overly large positions near the top of the 2nd daily cycle.  For me personally, I may hold “Core’ positions and trade at that point. In a bull market, that 2nd daily cycle is often right translated ( So it tops maybe on day 17? 22? 25? ) and then when it drops into the next Daily Cycle low ( DCL), you can buy it, because it should make a new high.  That run to new highs in the 3rd daily cycle COULD be, MAY BE , the peak of that Intermediate cycle. A 4th daily cycle may bounce and roll over early into an ICL.   So last year we saw that in April and then we drifted down into the ICL in May.

SUMMARY: My formula has always been, in one form or another,  Put the pedal to the metal in the first 2 daily cycles ( or even into the peak of the 3rd daily cycle)  and then look around. I use price projection formulas, technical analyses, sentiment, etc etc to see what we have , is it toppy, over extended, and time to lighten up? By then you’ll notice that EVERYONE is Bullish and no one thinks that miners can even slow down. Cries of  “GOLD $2000” fill the air.  Then when the roll over into a dcl & eventually ICl happens – weeks of gradual selling gets everyone  bearish. People start reading all of the reasons why Gold is now dropping ( false).  They become afraid from these articles and reasons why Gold will now crash.  “Gold under $1000” is declared all over the newsletters again.  People start sending me article after article near an ICL saying  ‘SO & SO’ says that the banks are doing this, or the government is doing that, so many reasons why they cannot buy , etc etc etc.  AND IT IS THEN THAT …

I know its time to look to put the pedal to the metal & buy again 🙂

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Cycles in the market for my newer readers. I drew this up when cycles were shorter. In the past a 4th daily cycle could be the peak too. Cycles seemed shorter then.