Tuesday May 2nd

I wasn’t really expecting a whole lot of change in the various markets sectors on Monday, Tuesday, and even Wednesday morning, but we do have the FOMC Decision at 2 p.m.  Wednesday afternoon, and that may cause some ‘changes’. Let’s discuss the precious metals markets.

GOLD – We’ve been waiting for and expecting this drop, so that is nothing new. The stochastics isn’t even oversold, so selling can continue Tuesday & Wednesday too.

SILVER – This has been the kind of sell off that we expect with Silver.  They drop deeper than most Silver bulls expect it to.  Silver is now oversold.

GDX – Miners also continued down and it is not out of the question for Miners to sell a bit more on Tuesday & even Wednesday morning too ( As shown). I think that it would be more likely that the drop to new lows Monday is really a fake follow through and then would turn into part of a bottoming area. Tuesday will let us know.

So as things continue to play out, I’m asked about the 2 charts that I posted in yesterdays report.   ” What about the surge that we saw in AEM & EGO after their Earnings release. Doesn’t that mean that we won’t sell off ?”   I admit that when you look at the bullish reaction to earnings, it seems so strong that it seems to be a sign of things to come.  So let’s address that concern.

EGO after earnings, the surge really looks very bullish.

AEM after earnings, the same here.

Now I want you to notice on this chart that last MAY, AEM released positive earnings at the end of April too.  AEM surged then too, but we all know that Miners dropped into an ICL last May, so what did AEM do?  After a 2 day surge, it went sideways the whole month of May into that ICL.

EGO also released earnings at the end of April and surged higher for about the 1st week of May. Then when Gold, Silver, and Miners dropped into their ICL,  EGO dropped rapidly during May too.  In fact, THAT PEAK last May was the highest point that EGO has made to date.  Ego made lower highs from then on.

EGO MONDAY-  And notice this: With that HUGE pop after earnings on Friday, EGO gave it almost all back on Monday.

My point?  Just because a Miner is looking excellent today, that does not mean that the grip of an ICL sell off will not come along and affect it or that it changes anything.  When an ICL is due, we usually see a sentiment changing sell off.

Monday was pretty much follow through selling for Miners and that may be what we see until the FOMC meeting. Then we will see if things change in a directional manner.  I could easily  see a DCL being put in place in the precious metals on Fed Wed, but we can’t know ahead of time if it will be a good trade or not. 3rd & 4th daily cycles are usually weak and fool traders. I gave a few ideas/estimates in recent reports, like this one below. The green line could be the target.

Now Look at the move out of the last daily cycle from March 7, THAT was the highest point after day 7. It looks easy but it is not easy to buy the low and sell the peak in real time. It is often best for the majority to wait for the ICL.  Do you see the LARGE UP DAY on day 6? Some saw that and thought that we just put the ICL in, and this was going to rocket higher. You may recall that some people asked me in the comments if we just had an ICL , because ‘another cycle guy said we did’.  I said that it was too early and not likely.    If it is true that another cycle person was saying that  (After 3 months?) , then that cycle analyst probably got a lot of people to buy at the highs of that bounce.

I know that many now want to buy the bounce and short the top of it, but that may not be as easy as you think.  Patiently waiting for the ICL  in this sector may be the best trade for the majority reading this report.  4th daily cycles are often best left un-traded by most traders.  They are whippy, choppy, and unpredictable. You will have to think about that and decide for yourself. Enjoy your Tuesday markets!

~ALEX

 LESSON : I wanted to go back to a subject that I have touched on in the past.  That is that…

“Consolidations and sell offs often lead to great opportunities over time, but you need to endure the choppy selling and wait patiently for the set up.”  We have been in a bit of a choppy Precious Metals sector, so lets examine choppy price action again, and discuss the possible reward of patience too.

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AAPL – Look at Apple Inc. This actually spent 2 years dropping and choppy, and I remember analysts calling into question whether AAPL was ‘finished’ as a leader.  Once it got above that down trend, it has now gone from $90 to $145.  That is a good gain, but it is also for the ‘patient’ ones, because that took 1 year ( 60% gains) and it was NOT an easy ride. Look at the chart last Sept to Dec.

THAT BEING SAID…

NVDA – I wanted to point out this chart of NVDA.  I think it is setting up in a similar manner. It may have another drop to go , as shown, but when it breaks out, NVDA could also continue on its bullish run.  Obviously anyone that bought NVDA  anytime this year  has probably been unhappy, but when it breaks out, this may run like we have seen   AAPL, NFLX, GooG , etc. run.  For the longer term BUY & HOLD investor,  this should go on the watch list.