March 11 Weekend Report

“Yes, there are two paths you can go by,
But in the long run,
There’s still time to change the road you’re on.”

 

There are times when various parts of the markets are all falling into place and things are very clear.  There are other times that we get some mixed signals, but by using Cycles, Sentiment, Technical Analysis, and a few other methods mixed together, you can easily see what should happen. Probabilities and things lining up that lead me to expect a most likely outcome.  Right now, however, it is a very rare time when it comes to the Precious Metals, that I am quite divided by my research results.

There are 2 roads that that sector can easily travel, and it is all based on historical fact and probabilities.   Anyone here for the last 2 or 3 years knows that I usually will lean 85 – 90+%  in one direction, even when we get mixed signals.  That direction right now is that first we’d see a bounce, but then things will turn bearish again. As a bit of a first right now,  I feel strongly that we will work our way down into the next ICL over time, but my analysis shows that this could just as easily go full on Bullish after the Fed Decision. As you will see , however, there are also strong reasons to doubt it.  Lets tackle that conundrum after a market review.

 

SPX – Bullish. We have a possible DCL in place with that swing.  I do not expect that this will drop to the 50sma, instead I am expecting another run higher.  This is exuberant and could become a blow off type move.

SPX WKLY – The steep incline will eventually roll over into an ICL, but we should have time to run higher first. I will provide targets later.

SIDENOTE FOR SPX:  The markets were running higher with Oil at one point. Oil is now dropping, and we have a Fed Mtg Wednesday with an interest rate hike expected, so could that all affect the General Markets? It may, so caution is warranted, since at times ‘anything can happen in the markets’, though the set up is bullish.

 

USD WKLY- I’m Expecting a dip short term into a dcl ( Bounce in Gold) , then we should bounce and get a new high on the 2nd daily cycle.  With an interest rate hike, I would expect this to roll over as a L.T. 2nd daily cycle, they have in the past ( More on that later in the report).

 

WTIC –  Bearish. As mentioned in prior reports, I think Oil could drop a lot from the recent consolidation. IF WE GET AN A-B-C CORRECTION as shown, the next bounce can be shorted. Some use DWT, DRIP, SCO or other methods to trade Oil. I will discuss this if we get a bounce. Jumping in here is a bit risky, since it can bounce and our entry would be in a losing position for a while, but notice on the left of the chart how OIL sometimes does just move swiftly in 1 direction.  That is Oils personality and this sell off could also just continue.

WTIC WEEKLY –  Oil is dropping into an ICL, and this 50ma and even the triangle pattern can be broken. I can see $40 oil on this chart as attainable.  Probable target(s) will become clearer in time.

NATGAS WKLY  – Bullish – read the chart.

GOLD, SILVER, & MINERS

 

This is where there are clearly 2 paths being formed.  I see reasons to be Bullish with a possible interest rate hike and other things, but also reasons to lean  bearish too.  That bearish side would mean  eventually dropping into the next ICL over time, and we still  want to BUY that in a big way. When that time arrives, we at Chartfreak will be fully invested in Miners again.

So for the sake of this section, I hope to be CLEAR and let the charts and lines of reasoning  speak for themselves.  You will see bearish reasoning and Bullish reasoning.  You will see at the end of this section that the Miners started looking bearish for some reasons, but could just as easily flip to bullish with an interest rate hike.  I will try to do this in a short clear manner,  Fact after Fact.

 

 

C.O.T.  –  FACT : This is more Bullish than bearish, with smart money not positioned as shorting Gold heavily and are even in the process of closing short positions.

GOLD FOR THE COT CHART ABOVE – The Magenta arrow shows where Smart Money started closing shorts and next weeks COT report should show that that continued, since the selling continued.  ISn’t that Bullish?  Yes it could be.

GOLD – Neutral, because it is bullish and bearish.

1. BULLISH : We are expecting a dcl and a bounce here. That is Bullish and with 2 R.T. Daily cycles & Gold  oversold,  one would normally expect a higher high on the 3rd daily cycle, plus smart money is closing short positions. An interest rate hike is expected, and that has been bullish for Gold too  ( More on that later). So wouldn’t this be a bullish set up?

2. It is somewhat bearish with the RSI below 30 on a 2nd daily cycles low and Miners became far more bearish. Selling is now near the first dcl.

 

SILVER – Rather bearish to be breaking down this much into a 2nd dcl. A break below $16.64 is actually a  ‘failure’.

 

GDXJ –  In Fridays report, I said that I would personally be watching for a move above the 6 sma to ‘buy’ into the expected bounce.  I also mentioned that that bounce Could back test the 50sma, as we keep in mind that a Fed Decision is coming on Wed of this week.

 

So this was obviously ‘my buy’ based on that Friday reports thinking. I posted this in the comments at 3:14 p.m., the time stamp is on the chart. It isn’t too late for a quick trade if we are going to tag that 50sma as I expected. It is a trade possibility, not a guarantee  🙂

 

As an intraday trader- I was actually watching a smaller time frame, and was able to buy this pattern break out when it began on a 5 minute and 15 minute chart.  GDXJ was at the $34.50 area.  I posted this chart in the comments too.

 

GDX #1 – GDX is oversold and ready to move higher short term BULLISH, but that RSI is abnormal for a BULL MARKET dcl – Bearish in the bigger picture.  That RSI is at ICL levels, not 2nd dcl levels.

GDX #2 – So short term could be bullish, but is this the path to expect after a Fed decision?  We need to be cautious if we are long going into the Fed Mtg.  Make up your mind  RIGHT NOW how you will be positioned going into WED afternoon at 2 P.M.  Repeat,  MAKE UP YOUR MIND NOW, before we get there.  Play it safe or take a chance?

 

Remember when Gold looked Bullish above? Smart Money was closing short positions in the C.O.T.,  we had 2 R.T. Daily Cycles, etc. Now a bearish look has begun to show up like we are seeing with the Miners, let’s examine this.

 

NEAR TERM BEARISH VIEW EVEN WITH A BOUNCE THIS WEEK #1 :  THIS IS GOLD NOW & IN BEAR MARKET SELL OFFs INTO AN ICL. They peak on the 2nd daily cycle as seen in 2014 & 2015 ( We dont get cute in the first 2 daily cycles to avoid losing positions, but the 3rd 4th and 5th daily cycle is not a BUY & HOLD situation).  The drop into an ICL is always steep.  Please study this chart and compare the 2 daily cycles now with the former bear market rallies shown.  Now is Very similar to the bear market rallies and not the Jan 2016 – July 2016 rallies.  Please read this Weekly chart.

GOLD BEAR MARKET RALLY #2 – Please study the chart & the GREEN BOXES.  You’ll see Daily cycle 1 peak, then a drop to the dcl, then daily cycle 2 peak, then a drop to the DCL –  then a BOUNCE and drop. We are at the bounce …

 

AGAIN for clarity the green box-  Daily cycle 1 peak, then a drop to the dcl, then daily cycle 2 peak, then a drop to the DCL –  short BOUNCE to 3 peak, and drop to ICL. We are at short bounce to 3, unless the rate hike changes things.

**IMPORTANT – Now that you can all clearly see the Bullish case with a  bullish C.O.T., 2 RIGHT TRANSLATED DAILY CYCLES in Gold, etc.  and also the bearish case with Weak Miners having similar characteristics to a Bear Market rally in the past, one final chart that really has me puzzled at this point in time.  It is the FED RATE HIKE point in time.

 

Studies are showing that there is a 95-100% chance that the FED raises rates this Wednesday. I did an in depth study in the past on interest rate hikes and the USD & GOLD, because so many people are saying that an interest rate hike is good for the USD and bad for Gold.  My findings were the exact opposite.  Interest rate hikes were very Bullish for GOLD, and the USD Popped initially, but then dropped a day or two later and began a long downtrend.  So if it is 90+% chance that they ARE going to raise the rates Wednesday, why would it not be very Bullish for Gold and Bearish for the USD this time? THIS IS MY CONUNDRUM.

 

FOR EXAMPLE : You most likely remember the last 2 interest rate hikes were Dec 2015 & Dec 2016. THOSE were our ICL’s in GOLD.  It marked The absolute Lows of heavy selling and a strong rally followed after the interest rates were hiked.  Read the chart.

 

USD WEEKLY CHART –  Rate hikes in Mid December 2015 & 2016.  The dollar bounced sideways for a bit and trended downward for weeks shortly after. That is NOT a bullish trend for the USD  after a rate hike.

Again,  the set ups seem weaker than normal bull run set ups at this point in time (A second Daily cycle low on Gold), so Precious Metals seem weak and looks similar to a bear market rally. Then we see that Smart Money is not heavily short, we almost have a guarantee of an interest rate on the table for Wednesday which has been bullish for Precious metals in the past, and that seems bullish. Of course things will clear up after Wed, Thurs, and Friday of this week, and all we can do is trade the short term aware of the longer term possibilities. Like I said in the beginning of this report in a quote from a popular Led Zeppelin song, “There are 2 paths you can go by, but in the long run, there’s still time to change the road you’re on.”, or as I like to say,  There is always another trade to take when things change.  Thanks for being here at Chartfreak as we continue learning from the way these markets ebb & flow.  Please read this report at least twice, there is a lot of information to take in here.  Enjoy the rest of your weekend, we probably have a big week ahead of us. 🙂

 

 

~ALEX

 

 

REMINDER NOT TO BE OVERLY LONG-TERM BEARISH:  A Sell off into an ICL can still be part of a larger ‘big picture consolidation’like we had in 2001.   I have repeatedly pointed this out from the past in the following charts and others  It does NOT necessarily flip this to a Long Term Bear Market in the Big picture.

And what I said I can see happening here now in this chart from today report…

 

Was already revealed here what I drew in this big picture chart last week.

 

Finally:  To clarify a possible misunderstanding of my declaration at the ICL “Not to get too cute”  when it came to trading in & out of Miners out of those lows.     When I said that it is best that  ‘we dont get too cute’ in the first 2 daily cycles, and we dont want to overtrade our positions, because we could lose positions on a ramp up and get left behind,  did I mean that we never sell again?  No.  It was also mentioned in reports through out that time that we often lighten up or sell into the 3rd daily cycle peak.   Each of these first 3 daily cycles are expected to peak higher & higher in a BULL market. so…

We say   “Dont get too cute and over-trade positions in the first 2 or 3 daily cycles coming out of an ICL in  bull market.  The 3rd daily cycle is expected to ‘peak, so we WOULD sell the 3rd daily cycle in a normal bull run higher too.”    At the start of the 3rd daily cycle ( day 8-13ish) is usually where one might start taking profit, because the first 2 daily cycles should be R.T.  & the 3rd will be the peak.   Over-trading those first 2 months out of an ICL  can leave you behind at the lows if they ramp up, as seen here.    See   JAN ICL  2016,  MAY ICL 2016 Dec – Feb 2016-2017.  Unfortunately, This last one dipped much further than normal bull runs, but it IS still well above the Dec lows and due for a bounce in the 3rd daily cycle.  Do we see how this could be the final chance to sell before dipping into an ICL over time.  FED RATE HIKE is possibly a determining factor of how high this bounce does or does not run.  Read the chart.

   So that saying isn’t telling us   ” Don’t get cute forever”,  because that would be called  BUY & HOLD forever.   We dont do ‘BUY & HOLD’ on all positions and hold into an intermediate cycle low  ( Unless it was a core position from the 2016 ICL).

  Right now, the first 2 daily cycles really  should have been R.T. in a BULL and they were for Gold,  Miners acted weak toward the end. This run should have peaked on the 3rd daily cycle in a BULL RUN. On this recent run, the 2nd one peaked early for Miners, similar to what I see in Bear Market rallies. That is where my concerns come from.   The 3rd daily cycle would be where you trade or sell some at a peak ( or all )  holdings, depending on how things unfold.  Study the chart below and you will see all of what I just discussed here in action. Notice that with the SLAM DOWN DAY  over a week ago in Miners, things seemed to change character from the 2016 ICL runs. 

Look at those 3 daily cycle runs higher in 2016. Great trades that we took advantage of. This run was great too, it really is when you look at it, but the selling took on a new deeper character, and that RSI is not right.  Thus my concern.

 

In any case, it is NEVER  buy & hold forever in the sell off down to an ICL’ (  starting with the end of a 3rd daily cycle  4th daily cycle possible 5th daily cycle. ) unless you are holding core positions from the ICL.  To be clear,  if it is not part of your core position from near the 2016 ICL, We dont hang on in a sell off into an ICL, because they get very deep at times.