JAN 31st- The F.O.M.C. RIDE MAY BRING MIXED REACTIONS

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Welcome to another Fed Wednesday. Let’s review what took place on Tuesday, and then discuss what may take place after the Fed Decision (which is pretty much already baked in).

 

DJIA – Finally, 2 down days in a row and a close under the 10sma. The DOW has started a drop into a daily cycle low.

 

SPX #1 – So in the bigger picture we have discussed that this rally has a slope that seems to be increasing, and this can lead to a parabolic blow off top. They end badly, but the ride up can also be quite rewarding, so…

SPX #2 – A gap down below the 10sma indicates a drop into a dcl, and this seems to be a very right translated daily cycle, which means that this will be a ‘buy the dip’ event or add to current positions if you want.  The green line is the 34 sma, and it MIGHT get down there,  or go sideways like it did in November until that MA catches up.  On the other hand, if this is going parabolic, it may not drop that much. So a swing low & break back above the 10sma will be a buy whether it gets down there or not.

 

SOX – Maybe the SOX  just builds the handle, and moves sideways too.

 

WTIC –  Has Oil finally started the drop that Smart Money has been betting on? We’ll see if it can make it down to the trend line back testing the $60 area, and …

XOP –  The Energy sector did drop sharply on high volume.  This could have follow through down. We will watch this day by day.

 

F.O.M.C. Decision and the USD , GOLD, and MINERS

 

UUP – For some reason, I am again asked about the USD being “so oversold, that it must be an ICL”.  I did discuss this already.  This chart proves that wrong again. August was as OVERSOLD as now,  but it was NOT the ICL.   The actual ICL came a month later in  September and was LESS OVERSOLD. Please see the chart.

 

USD – So are we at the same point that we were last August? If so, the USD will be weak, go sideways and roll over into an ICL. This would be bullish for Gold.

 

USD  – Another thought is : Was that a dcl at the first week of January when the USD closed above the 10sma for 2 days on day 5?  IF SO, this is day 19 and it could crash after the FOMC into a day 20+ low. If it crashed for WED, THURS, FRI, and then all next week, that is simply ‘ USD day 27 ‘ by the end of next week. Miners could rally, so there are various ways that this could play out bullishly for Gold & Bad for the USD.

USD POP & DROP –  This could also happen to give us a Bullish Push for Precious Metals. A false break higher for day 4 or 5  that doesn’t last.

 

 

GOLD – So if the USD still has time to drop, and Gold is on day 33 Wednesday, it is within the timing for a dcl. If GOLD drops further Wednesday with a USD POP, Gold could look like this.  So far,  Gold has been stronger than Silver & Miners, but did close below the 10sma.  I do prefer to see miners lead, but for now this is fine.

 

GOLD – I was also told that ‘GOLD is too overbought’ in the stochastics too.  Yes, it is overbought, but they stay that way in bull runs, as seen in August mid point on that Gold run.  It did NOT have to drop to the 20 line before moving higher.

 

GDX #1 – NOTE: THIS IS NOT WHAT I THINK IS GOING ON, BASED ON GOLDS CYCLE COUNT.  I was asked if there was any way that Miners could fail here. “CAN YOU SEE ANY WAY THAT IT COULD FAIL?”   Maybe, Let me explain. Even in Bear Market Rallies,  Miners dont usually just fail after the first daily cycle, but they may peak early in the second one.  If this was the 2nd daily cycle, then it could become weak.   So…

You may recall that I said that MINERS look like they put in a short dcl on Jan 9.  If they had, then this would then be the 2nd daily cycle on day 14.  It could then roll over.  I have to say that this does not match GOLDS cycle count  at all ( see 2 charts above)  on the Gold charts.  Let’s ignore this  for now and look at the bullish side…

GDX #2– Miners do not have to drop further, but they certainly can on a FED DAY. We could see a shake out at the 50sma.

 

GDX #3 – Do miners have to get to stochastics 20?  No they do not, just take a look at August.

 

GDX #4 – In August, Miners pulled back 50%, we are currently at 38.2%.  We MIGHT drop to the Fib Numbers shown at the arrows and that would be fine.  So GDX $22.50 – $23ish would still be fine.

 

So today is the Fed Decision, and we always seem to get some volatility on these days.   The day may just move along & do it’s own thing until 2.p.m. eastern time , when the Fed decision is released.  I’m not sure if Janet Yellen is speaking at 2:15, but if she is, that could add a bit more volatility if she mentions Rate Hikes, Inflation, etc.    We shall see.

I’m not really planning on doing anything today at this point, unless we get a swing low confirmed above the 10sma .  Fed Days can be very volatile  ( I will explain below). I  want to see how this plays out as we get the Trump Speech last night and the FOMC Meeting behind us.  I still have good gains from the run out of the Dec ICL and some of the Medical Marijuana stocks,  but I also  gave back some of my gains over the past 2 days.  True, even Bull Markets ebb & flow, but for sure  I will be looking for the best way to make that money back.   🙂  Enjoy your Wednesday trading(?).

 

 

~ALEX

 

JUST FOR FUN!  FED DAY VOLATILITY. At the DEC ICL (lows),  do you remember what happened around that Fed Day? Were there head fakes or was it pretty clear cut?

.

 DATES are on the bottom of the chart.  On the day before the Fed Mtg-  DEC 12th, Tuesday, Gold actually dropped $10 that Tuesday morning from $1246 to $1236.   So Gold sold off and then midday it started to move higher, all the way back to $1244.   I captured this chart at that time.   We couldn’t tell if this was a fake out the day before the Fed or was it smart money accumulating, but I highlighted some bullish Miners and did buy JNUG WEDNESDAY.  Gold ran higher to about $1258 on the Fed Wednesday.  Clear sailing?

 

ON THE DAY AFTER THE FED /  Thursday DEC 14th – Gold sold off from the WED NIGHT $1258 to $1250 by noon time.  An $8 drop the day after the Fed to scare out buyers!   Wow, that could seem confusing,  but we bought that ICL.

 

And on that same day, Thursday afternoon Post-Fed,  Things started to recover.

 

Friday Dec 15 Gold took off and we added to positions.

 Why am I reviewing this?  You have to admit,  we forget exactly how these things play out.  IT IS NOT ALWAYS JUST A STRAIGHT LINE MOVE ON WEDNESDAY or even the next day.   This is just a reminder that volatility often happens in the days surrounding the FOMC.  Did you remember  a sell off, a rally, a sell off, a rally in Gold back in December?   ‘ Sometimes these big splashes , are just ripples in the pool’, and the  Pool is the Bigger picture.   We need to get comfortable with the bigger picture too.

 

   The set up in Gold looks bullish with a cycle count of day 33 on Fed Wed.   I DO NOT WANT TO BE PERMA-BULL BIASED-  but I need to be ready to buy at a swing low, right?  I do lean to the bullish side due to cycle counts and want to be ready for what follows.    I have held my positions since the Dec lows, and am ready to add if things play out the way that I am expecting them too.

 

 Like I mentioned,  even in Bear Market rallies of old,  these ICLs often had 2 distinct rallies higher. This is a chart showing those BEAR MARKET RALLIES IN GOLD in 2013 – 2015.  That said,  I have to expect one here too, in a more bullish environment.

197 replies
  1. Steven
    Steven says:

    One concern is that big green volume candle on the UUP chart, however there is a lot of green candles at the end of that gold (big picture) chart here at the end of the report.

  2. Kenny
    Kenny says:

    Thanks CF…you laid out a cautiously optimistic road map for us. Will see how It plays out before and after Fed for a day or two.

    • chartfreak1
      chartfreak1 says:

      Thx Kenny-

      I think it would have been easier if Gold dropped more and Miners held up better. The fact that Gold didnt pull back a whole lot (Barely below the 10sma) makes it seem like I need to expect more downside, but the Miners need to slow up on their selling if Gold drops further.

      I’m just hoping that day 33 is enough, let’s get on with round 2 upside 🙂 hope seldom works in the market though

  3. deshy
    deshy says:

    Alex, thanks for the great report! I for one like it when you map out very possibilities with emphasis on the one you think MIGHT happen. Should remind us all that at the end of the day we’re trying to find high probability trades but NOTHING is guaranteed…not even with your amazing charting skills. The things I’ve learned from this site from you and the group has been amazing. Thks.

    • chartfreak1
      chartfreak1 says:

      Thx Deshy,

      My biggest thoughts during tricky or choppy trades are ” Anything really can happen, but there is always another trade”.
      That was we dont ride things down too long, so we have sufficient funds for that ‘other trade’ .

      The Big Picture looks good though, so I’m rooting for the upside post Fed

  4. Peter
    Peter says:

    Thanks, Alex. Can you give us a heads up if you decide to sell any more of your MJ stocks? You did warn us they may retreat to their 50-day, etc., so I’m not concerned, but if you see something else that causes you to sell, that would be helpful. I’m holding OGRMF, SPRWF, CNBX, ATTBF, and MYMMF.

    • chartfreak1
      chartfreak1 says:

      I am holding those too, except I did mention that I sold my CNBX for no other reason that that it was an American company and I was wanting to hold mainly Canadian companies where the business end of it seems more reliable.

      I also sold ATTBF ( It is not bad, it may drop to the 50sma) , but I was using the 34 sma on that one.

      These did drop more than I wanted to see, but they do seem to move that way.
      They look like bullish uptrends on a 1 year chart, but they are in a consolidation phase and that gets tiring.

      • Peter
        Peter says:

        Especially after explosive moves like that, it makes sense that the weak hands and chasers need to get flushed out a bit.

  5. frank yong
    frank yong says:

    Hi Alex

    the dow futures are up 200 points now and up over the 10DMA… do you think it’s likely we have seen the DCL in stocks?

    • chartfreak1
      chartfreak1 says:

      Wow Frank, That is a tough one.

      When I was looking at the DOW, We have a DCL at November lows and then MAYBE I thought we could have had a mild one at the last day of December. If that WAS a dcl at the last day of December, we might be a bit early, but if that was just a mild dip (like a 1/2 cycle low), then we are due for a dcl and the timing would be right.

      So are these markets THAT bullish, that the parabolic stage is in effect and we are not going to get deeper dips ?
      I honestly dont know , but it is possible.

      ANother thing is that a GAP DOWN like yesterday, and then a GAP OPEN is an abandoned Baby and is usually bullish after a sell off, like an exhaustion down gap, but we havent really had an extended sell off leading to the Abandoned baby, so it might not have the proper ingredients ,

      That is a tough one Frank. If you were looking to get long without drawdown, I would say that you could buy a starter position with a stop under yesterdays lows, but it is difficult to tell.

      I hope that helps, but it is rather vague

      • frank yong
        frank yong says:

        thanks for your response… i tried to chart the other markets to get some perspective, and the s&p isn’t that bullish, it’s just up about 10pts and hitting the 10DMA from beneath…

        but as you say, the markets are going parabolic, and it’s possible this is all we get, or we get a further correction to say the 20DMA or 50DMA, but that’s quite a bit of drawdown from these levels…

        • chartfreak1
          chartfreak1 says:

          True. I would actually prefer a bit more of a drawdown, because it also adds a down trend line, and I personally use that too. If the downtrend line is broken upward as the 10sma is broken, it is like double confirmation.

          And I do tend to use the SPX more than the dow, unless I am entering UDOW, because they did all ( QQQ, SOX, SPY, DIA) run in slightly different ways, and the DOW did seem a bit more vertical lately.

          And… it is a FOMC day – who knows what happens at 2 p.m. = (

  6. Chris
    Chris says:

    Hi Alex. Like Deshy I really appreciate you mapping out ‘possibilities’ which is the most anyone can do and our own personal risk management rules should take care of the rest whatever the ultimate outcomes. Just trying to understand the cycles a little better and not ‘muddy the waters’ in any way, but IF…and I stress IF..the 9th Jan lows in GDX/ GDXJ were an early DC low does a breach of that low (as may have already happened in GDXJ) constitute a failed daily cycle? And if so, what would be the implications of that if any. GDX is still comfortably above that low and gold even more so plus I appreciate that you have also made it clear that may not be an early DC because of golds chart and the first DCL still lies immediately ahead. But IF it was and early DCL, just wondered what if any implications if those lows were breached by this next DC low? Hope that makes sense and not too messy to answer here?

    • chartfreak1
      chartfreak1 says:

      Hey Chris – Yes, so this is my absolute least likely scenario at this point, but I did put it in the report so that we could see how MIners dipping deeper than Gold could end up problematic. Again, I would say based on Gold the following is NOT likely to be what we see.

      IF a dcl is in place and then those lows are taken out during that daily cycle, I consider it failed and I then expect a down trending move to start until another dcl is in place. And if that is the 2nd daily cycle, I would expect the 3rd daily cycle to even break those lows.

      So just to avoid scaring people 🙂

      I do NOT think that we saw a dcl that early, because Gold was hardly breaking the 10 sma until now.

      • Chris
        Chris says:

        Thanks for clarifying Alex and like you not trying to scare anyone and appreciate an early DCL on Jan 9th was your least favoured thought.

  7. Bill
    Bill says:

    I’ve been disappointed before with miners. I remember watching gold move higher and miners move lower. Times when this happens are usually associated with the general markets selling off. Probably related to traders covering positions by raising cash. It may not happen all the time, but I definiatley remember it that way.

    • pankef
      pankef says:

      Each situation presents its own unique characteristics. People tend to get too attached to a particular analogue and become quickly disappointed when it fails to play out. For example, the current set-up was getting compared to the 2016 lows yet the current rise has not been as widespread as that of 2016. Indeed, there have been some real good movers but for the most part, prices have remained muted. Also, surprises like NAK are not “common” during a REAL bull market. This may all change (and my money is on that it will change) but one must take each holding and maintain a strict discipline with the proper risk management.

      • Bill
        Bill says:

        Sometimes history repeats itself. That’s why we look for clues in what stocks have done before in certain situations. That’s why we use cycles to anticipate changes in direction.

  9. Bill
    Bill says:

    Any conspiracy theorists here? does anyone else find it odd that the Markets are correcting right in time for the State of the Union address?

  10. Peter
    Peter says:

    Alex, does the multi-year downtrend line of the Euro concern you at all in terms of capping golds upside in this IC? We would be hitting this downtrend at about 1.26-1.27.

  11. BayTrader
    BayTrader says:

    Market breather and big tech names sold off past few days, as we approach earnings today and Thursday in FB AAPL AMZN GOOG PYPL AMGN QCOM MSFT BABA… etc… BA did very well and could be the reason for the market spike

    • MariaVacationTrader
      MariaVacationTrader says:

      hahahah… i lol cause i thought of me on splash mountain…. i was screaming my head off and filming ….
      #HILARIOUS

  15. Ralph Wiederzane
    Ralph Wiederzane says:

    I would not stay in miner positions for this thought alone, but it seems that if this is a bull market in gold, this would be the perfect time to leave lots of bulls behind. Many people have taken profits, some even gloating over those that did not (on other sites I visit). Bulls have a knack for getting people out of position to miss the biggest moves, perhaps we are setting up for that now?

    All that´s left are us nervous longs. I´m not selling, so maybe better not to watch! 🙂

    • chartfreak1
      chartfreak1 says:

      Add to that – I also have been receiving email advertising calling for a double top now in Gold, and encouraging people to buy the dip in a few weeks. If this dip ( Day 33 ) is all they get, and it breaks higher after the Fed- it would leave them behind.

    • cannaber
      cannaber says:

      agree – based on what CF points out you have to look past next two days – it could well be a shakeout DCL….remember the gold COTs this weekend – it means the pros are setting up for exactly that

    • Ralph Wiederzane
      Ralph Wiederzane says:

      It does, I sold half of mine in the recent run up (wish I had sold it all), but might be inclined to buy some back again if I don´t use the proceeds for miners.

  23. Cal S.
    Cal S. says:

    Hi Alex,

    Do you use trend lines on the RSI ? I don’t think I’ve seen anyone do that, but I find it’s one more tool in the box that can be helpful. It helped me with the drop early this month, and I was watching it yesterday, giving me some confidence a low might be forming in GDXJ.

    Just curious – here’s a daily chart of GDXJ with the TL drawn on the RSI as an example:

    https://uploads.disquscdn.com/images/24f9ee9c426ddac6571cfb87889a36f844e7ac17e3147c3dd8b55aab21871e19.png

    • chartfreak1
      chartfreak1 says:

      I was looking to buy it if it gapped open higher, as an abandoned baby, or if it goes sideways and forms an island, and gaps higher as an island bottom- but so far that is not happening.

    • Peter
      Peter says:

      I am. At this point, I’m treating it like Novo. I didn’t sell Novo at $2, and I’m glad I didn’t. I won’t let the bleeding go on forever though.

  34. Trond Tveten
    Trond Tveten says:

    The 3-4 month long IHS in silver with ‘iron clad’ left and right shoulders because of such a narrow long trading-range on both, which price is currently above. This makes for tremendous support just below (which the recent double bottom at 17.10 demonstrates).
    Into silver now is therefore a very good risk reward. + There is the very symmetrical and beautiful larger 1.5y long IHS w multiple shoulders harmoniously arranged, & neckline at 18$.

  35. Rob
    Rob says:

    Just my opinion here, but I think at 2 pm GLD is going to tank, and over the next days it will test 50% retracement level. AND it will still be bullish. It’s how miners fair from now that is important….I hope that they have nearly bottomed…GDXJ, as Alex has said is already at 50% Fib retrace levels. I think how miners respond today and tomorrow is key.

  36. RonB
    RonB says:

    Alex what are you looking for at Fed meeting time. I know you like to listen to the release and possibly react, but how the heck do we avoid overreacting and getting whipsawed?

    • chartfreak1
      chartfreak1 says:

      I look at everything, and just want to see if things are more bullish or bearish.

      Last Dec ICL I pointed out that I was watching intraday charts. They get VERY WHIPSAW, and make lots of false moves, so I try to be patient and if I am gooing to buy something that looks bullish, I try to move in slow and add if things continue to improve.

      FOR EXAMPLE: This is GDXJ on a 15 minute chart, it looks like it ants to break a down trend or maybe had broken above one of them, but what will happen after the FED? Will that break out get back tested on a drop? Willl the break out fail? I will be watching things like this on a smaller time frame .

      Answer to your question: ” how the heck do we avoid overreacting and getting whipsawed?” The only way to guarantee that is probably if you stay on the sidelines until things are confirmed or settle down. If one jumps in quickly to catch a move, it can come back on you and whip saw you out.

      https://uploads.disquscdn.com/images/9b132be22021b73fb3f84400365aa6abac195463c4e5416b4fb9e791a8caef45.jpg

      • BayTrader
        BayTrader says:

        HL, similar chat, same thing pretty much but im in higher, so hoping this FOMC gives it a kick in the ass

          • miller
            miller says:

            Could be,, big volume break of the 50 though and i was carrying too much for a drawdown with no near support below. It was only a trade for me so I dont like to violate my trade rules or stops. Good luck with it, I hope it does reverse and i can always get back in on confirmatiom.

    • miller
      miller says:

      I picked it up as well on smaller timeframe break out, (15 min). I think it could run back to top of trading channel its been in this year, $9.50- $9.60 area pretty quick if gold holds gains, ( which i think it will and even run to 1359 area) and then a breakout above there would rack it up.

  40. chartfreak1
    chartfreak1 says:

    Wow, it has been a while since I looked at AG, and it is at a double bottom, back under $6.

    Did an offering on the 25th and volume selling picked up, right to the Aug lows. Such a shame, this was such a great Silver stock. I wanted to own it when Silver breaks out, but that is just a bummer how it acted in this first daily cycle. Tempted to buy it soon, but I would like to see if prove itself a bit.

    • Peter
      Peter says:

      Seems like a stupid time to sell it for those who took the recommendation. I’m holding it with the hope of it increasing if and when silver rises.

      • chartfreak1
        chartfreak1 says:

        Yeah, the AUG lows are being tested today. A Fed reversal would be great. I didn’t know they did an offering last week. Usually that perceived bad news goes away too.

  41. chartfreak1
    chartfreak1 says:

    MSRT – That looks good

    CNBX – yes, I sold it and it dropped tot he 50sma and reversed strongly – now it is back where I sold it as it broke below the 34 sma 🙂

  44. chartfreak1
    chartfreak1 says:

    SO I Bought some JNUG at the reversal, and that is my stop for this load In at $15.50, but the lows were lower

    EDIT: This is a trade, it is not a safe entry, I’m just talking out loud.

    Most should wait for a swing low….these lows could be easily taken out tomorrow.

  46. chartfreak1
    chartfreak1 says:

    Just talking out loud, again, most should wait for a swing low (This could sell off Thursday & recover and leverage may over emphasize the moves)

    Looking at a list of Miners, I see plenty of green along with the red, so I dont think it is an across the board sell off.

    GDXJ ( SO FAR) Sold off under the 50sma and recovered it . And again THM took off higher, HMY is moving higher, NSRPF & WWR look to be done selling, moving green.

    It just doesn’t feel like one of those sell offs that every one bails out on.

    refresh

    https://uploads.disquscdn.com/images/aeabe0016f780a755b178b60ab683e7ba091cf42c262308059e67c0f19fc9a4c.jpg

  51. chartfreak1
    chartfreak1 says:

    Interesting DJIA, SPX, NASDAQ just went red after being green Dow keeps going green, could be BOEING holding it up

    Miners GDX GDXK went green after being RED

  54. JT
    JT says:

    I’m seeing that if Hecla (HL) even recovers its week, its gains would be on the order of JNUG. So I added to my HL position instead of JNUG in one of my accounts, in case I want to long term it.

    But is something wrong with HL / AG that they sold off so hard this week?

    • chartfreak1
      chartfreak1 says:

      It varies at different points in a price pattern, but you can tell where shorts ‘stops’ are, and when price jumps above it – they know they are wrong and need to cover. When volume starts pouring in and price is being pushed higher above a key point where people would short it, you can assume that shorts are forced to cover as well as buyers may be stepping in.

      • Hawaiifive0
        Hawaiifive0 says:

        Would you provide an example at some point? Maybe as part of a report or something. I don’t want to take up too much of your time though.

  58. RonB
    RonB says:

    I’m waiting. UUP is not moving and it resembles that September consolidation before the USD moved higher

  61. fubsy_cooter
    fubsy_cooter says:

    Ahhh…the joys of visiting tiny schools in the hills w no internet. I missed all the action today. After hours: doubled my SLV and GDX. Will add to GDXJ depending what happens tomorrow. I like that dip and recovery today.

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