Aug 15th – They’re Back…

If you need to know how I feel about Miners,  check the reports from the last several weeks, but I will add one more thing to that discussion at the end of this report. 🙂  First let’s do a market review…

SPX – After breaking below the 50sma as expected, A gap open Monday has put a  swing in place, but it is unconfirmed at this point.  Another day of follow through may help to clarify this picture.  Day 29 is on the early side in the daily cycle count, so let’s see what Tuesday brings. See the chart and we’ll look at the NASDAQ.

NASDAQ – I’m  re-posting the Aug 1st chart to point out that back then I expected a drop to the 50sma area at least from what looked like a bear flag.  In June when price dropped to the 50sma, it lagged in that area for a while.

NASDAQ –   So now the NASDAQ has dropped below the 50sma and quickly put in a reversal Friday.   Then we saw a strong  Gap open on Monday that re-gained the 10sma. It could be a dcl as mentioned above with the SPX, but the timing seems early, so I am personally not taking the trade. Follow through higher Tuesday could indicate that an early DCL  was put in with a break of the overhead trend line.  I feel as though we will see sideways chop, but lets allow the market to explain this one on Tuesday.

NASDAQ side point – In the June drop & July recovery, those gaps have filled and now we have another left behind.

USD – Each low for the USD has been unable to get the follow though higher, they have basically  meandered sideways. If this was an ICL, I would expect a stronger push higher soon.  If it continues sideways, it threatens to drop again.

WTIC – OIL peaked on day 27 and looks to be dropping into a dcl.  There is support possible at the 50 sma and if it holds in that area, this would likely be a right translated daily cycle.

XLE –  The XLE gave us a false break out in March & April that I bought and got stopped out of.  In July it broke out convincingly again, but I  have not bought into this sector again yet.  Suddenly it broke down again last week. Many stocks did look promising, but now we see the XLE in a double bottom area, threatening to break down again unless it bounces immediately.  If Oil drops further, I dont know how this will hold up.

GOLD & MINERS

GOLD –  From the weekend report, obviously this is a bullish chart. Notice that the run out of the ICL in Dec 2016 was longer than the other 2 daily cycles, and it had multiple pullbacks.  The other daily cycles were basically 2 legs higher like a-b-c’s.

GOLD MONDAY – Again, You can see that the ICL run from Dec to March had a few pullbacks along the way, so that is likely what we are seeing now. I wondered if this would be another 2 legged daily cycle and then a drop into the DCL, but I believe that this could just run higher in a similar manner that the run out of the Dec ICL played out. We would see small dips along the way.  A rally in the USD does seem to indicate that this would drop further.

GDX from the weekend report–  Last Tuesday saw a reversal at the 50sma, and then GDX gapped higher on Wednesday to put in a swing.  We had another gap after that, so it is not unlikely that we would see a pullback to fill that gap and maybe even back test the break out.  I pictured the 50sma holding as support if the DCL is in place.  A break down below last weeks low would indicate that we still have work to do.  My stop for GDX is below $22.

GDX CHART #1 –  GDX dropped on Monday and so far it has not damaged the chart.  It filled the gap and is still above support of the 50 & 200sma.  Did you notice the quick 1 day dip in July out of the lows on day 3? It is not abnormal to see a quick drop at the start of a new daily cycle.

GDX CHART #2 –

So the question is: was day 21 an early DCL?  It is possible, but even if it isn’t a dcl,  the set up is bullish either way.  Let me explain.   IF day 21 was NOT a dcl, Friday would have been a new high on day 24.  That is bullish , but we would still have a dcl  ahead around day 30 or so. Please read the chart.

GDX CHART #3 –  IF a DCL still lies ahead,  we would have a peak on day 24 ( At 5) and then it could drop like this, breaking below 4 by day 30 or so. That low would be a strong buy.  It may be too tricky to start a leveraged position for many unless that happens, but positions in a few individual Miners on this pull back could be entered, if you aren’t holding anything yet.  I have pointed out a few Miners in past reports ( RGLD, IAG, FNV, etc).

GDXJ –  GDXJ is a long sideways triangle and I feel that this is going to break out & run higher very nicely when the time finally comes. 3 months sideways builds up steam, yet I hear many saying that GDXJ will not move higher with Gold now that a re balancing has taken place. I am betting that it does.

You can re-read the weekend report and Monday mornings report to refresh yourself of my overall thinking in this sector too.  I still think that it is a tough call as to whether or not a DCL was just put in place, or just a minor dip.  We should have a trend line break in Gold for a dcl to come about, and it is tough to say whether we had that or not.  Notice the following 2 charts…

The trend line can be placed in 2 different areas.   I drew this to show that it could have been broken on Aug 9th.

HOWEVER, if I draw the line along the first 5 days, it does not appear to have been broken, and a DCL would still be ahead with a break of this line. That makes it a bit tricky, but bullish both ways.

SIGNS OF LIFE – ENCOURAGING

GOLD was down $10 Monday and AUMN looks to have put in a bullish engulfing.  Isn’t that impressive?  It indicates that  even these Juniors may be  starting to get the ‘surprises to the upside’ that a bull market enjoys.

GORO –  This also moved higher while Gold sold off $10.  I am not saying that this is a buy here, I am saying that it is encouraging to see ‘surprises to the upside’ while Gold sells off.

The 2 Junior Miners above may be indicating that GDXJ will begin to perform as expected in a Bull market after it breaks from the triangle, especially now that earnings are mostly behind us.  Currently we are still dealing with the triangles and a possible run higher in the USD, but this is 1 more vote of confidence for buying the dips now that the ICL is behind us.

Enjoy your Tuesday trading day

~ALEX