Weekend Aug 20

I’m starting off the weekly report with 2 charts that I used in the comments section of a recent report. Then we will cover the markets and especially Oil & Precious metals.

These 2 charts were used last week simply to point out the phenomenon that often happens in the markets.  It is the round number phenomenon, where markets tend to find support & resistance at round numbers.

SPX –  Here you can see how traders temporarily sell at round number resistance or buy at round number support and this affects price action.

GOLD – And my point is that this can just be a temporary pause. A sideways move may begin and build energy for the next break of resistance. Gold was near 1300.

NASDAQ – We are now within the ‘timing’ for a dcl to be put in place, but I am not convinced that that is what we are going to see. A Doji is an indecision candle and it can reverse or continue the current trend, so patience is needed here again.

NASDAQ – The weekly shows a drop that could continue too. We considered the “parabolic run’ possibility, but right now I see weakness in the weekly chart, so patience is my recommendation.

USD – The USD hit support and has gone sideways.  It is ( in more than 1 way) in need of breaking higher soon, or it could be forced to break down. It is quite oversold on the weekly chart.

WTIC – I pointed out last week that Oil is due for a DCL, after coming out of what I believe is an ICL and a YCL in June.   That means that Oils yearly lows would be in place and it should not break down to new lows.   Also on day 40, if it breaks back above that trend line, we could expect that a dcl formed and  it should move higher. It Burst higher on Friday, and that is likely day 1 of a 2nd daily cycle. (The XLE is still ugly, so I’m not trading Energy stocks yet).

WTIC WEEKLY – A nice reversal candle formed on the weekly chart at the 10ma, and resistance is right overhead.  A break out here would be bullish.

NATGAS – NATGAS has been sideways and choppy, and looked like a possible H&S may be forming. A strong push higher above my blue trend line would be bullish however. I am neutral.

PRECIOUS METALS

1. GOLD FED MINUTES –  Before the Fed MINUTES, I used this chart to point out that after the Fed Mtg on Aug 27, gold went higher. This was to encourage us that with the ‘minutes’ of that same meeting, the result could be the same, a move higher.

2. GOLD FED MINUTES – After 2 days higher at the end of July, it did meander and go sideways, so it wasn’t a rocket launch.  Why do I bring this up?

Gold did move higher after the ‘Fed Minutes’ on Wed, Thursday, and on Friday Gold shot up, but then put in a reversal candle, closing at the lows.  It may lead to a drop, it may just lead to a sideways move… so let’s discuss that now.  The question is,  Gold sideways or Gold drop from here?

The answer still depends on the answer to this ongoing question, “Was that a day 21 DCL? Or is this all 1 daily cycle out of the ICL, and we are now ready for a dip to the dcl?”.    The good news is that either conclusion still looks bullish.

GOLD #1 post Fed minutes – If this was a dcl on day 21, then we are on day 8 and it could drop for a day or 2  (or go sideways) to the trend line or another close support. This would be Bullish in day 8.

GOLD #2 post Fed Minutes  –  If Gold did NOT put in a day 21 dcl, then we just saw a peak on day 29. Is that bearish to you? No, we could dip into a dcl, but I would not expect the dip to last too long  ( roughly 32 – 26 days?).

GOLD WEEKLY – The weekly chart is not overbought, and I can picture it running to $1400 area eventually.

GOLD WEEKLY –  We do see a reversal type hammer candle on the weekly chart. Do they ALWAYS lead to a steep drop? No, but often  lower price follows and we go from there. From the JULY lows, Gold has gained $100.  Gold had a new price high for 2017 last week?

GOLD WEEKLY – So a dip may look like this when all is said and done. Please read the chart.

GDX – We got our break out, but it closed back inside  🙁    I’d like to see that 50sma support price again like it did in early August.

GDX –  Bigger picture, The Miners were in a solid downtrend from 2011 into Jan 2016, but that downtrend was broken and we now have a higher high and a higher low.  We just need another higher high here to build on the move higher,and this sideways move is just wearing people out.

So I am not overly concerned about Fridays reversal, but it could have its short term affect. A pullback of unknown size, and we will watch things as they play out. Obviously if you are leveraged in any way, you would need to take defensive action by watching closely, tightening a stop, selling a portion (or all if you prefer)  until this plays out, etc.  If you bought Miners at the possible DCL or way back at the July lows,  your Miners may not even be affected very  much.  I have seen  (and I have pointed out in last weeks reports) that some Miners even moved higher while Gold sold off last $10 Monday & $10 Tuesday.  A pullback in Gold might not affect all of the miners.

We also have a Solar Eclipse on Monday in a large part of the US and surrounding countries. At times natural phenomena do alter so called ‘normal’ behavioral pattern.  During an eclipse it is reported that birds go silent and return to their nests as it gets dark, other animals also may get quiet or act peculiar, and human behavior can be affected too.   Since the markets are a result of human behavior, we’ll see what Monday ( and the Eclipse) brings to continue to shape our ongoing market  action.

Have a great Sunday and enjoy your Monday trading!

~ALEX

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I traded NUGT for couple of weeks coming out of the possible ICL in July.  Recently I discussed GDXJ or JNUG in the comments and a couple of times I was told that I should expect GDX to outperform GDXJ due to GDXJ re-balancing.  With that comments, I now get emails asking about this re-balancing and do I think that ‘ GDX will outperform GDXJ because of the re-balancing?’

Maybe I will discuss it in more detail later, but for now my personal studies lead me to believe that GDXJ could still easily outperform GDX once this bull run gets moving.  Time will tell.   As an interesting side point, GG, NEM, ABX closed down on Friday. Some Juniors surprisingly ignored Golds sell off.

GFI – Fridays reversal in Gold didn’t bother some Juniors like  GFI, PGLC, KL, HMY, AKG, ASM, etc.  If we get a pullback next week, these may become buying opportunities, since they may only return to the 10sma.

KL – Up 27 cents and another 15 cents after hours.  A pullback would be a buy.

Some Juniors have outperformed since I bought GDXJ, and this could continue with earnings behind us.  Again, time will tell, but at what I thought could be a dcl recently, I chose GDXJ over GDX , based on my own research.

GDXJ VS GDX