Behind The Beauty Cracks Appeared – As Expected
Honestly, not much changed from yesterdays report, except for the depth of the General Market selling. Let’s review and try to discuss at least a couple of new things.
As for what I see in the General Markets: A deep sell off leading to at least a temporary low soon.
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I get requests on ‘ How can I play this coming Low?‘, so in recent reports I have pointed out …
1. The ‘Safer way’ at the 10 sma and…
2. A slightly higher risk ‘Technical Analysis Method’, which also does limit losses.
– The first one you need a close above the 10 sma to enter, the second you buy a reversal with a tight stop. Personally, I am not playing this sell off at this time, and you can decide whether this type of set up is your style or not.
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This selling has been like a mass exodus to the exits after the 50 sma gave way. This week I expected a break of the lows 2 weeks ago as a final drop ( Double bottom or ‘W’- bottom) before we bounce into a new daily cycle. Todays drop extended the 2nd low below yesterdays reversal candle.
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NOTE: A couple of indicators ( like the MACD) do not look good on many of these, but the RSI does show divergence on the 2nd drop. With that, we should be close to a temporary low, but certain indicators shows additional internal weakness. THIS MACD COULD BE WARNING that even though our short term low is coming , a dead cat bounce is all that we’ll get. That does not surprise me. The lows may only be 1 or 2 daily cycles long , as mentioned in past reports. That would be long enough to fool the perma- bulls into thinking that “Everything Is Good Again, buy all the dips”. Then we could see more of this severe decline. Please read the charts.
NASDAQ – The Markets can always drop a bit more as long as there are sellers, but it seems like lows are close with RSI divergence. Again, the SAFER entry is to buy a break above the 10sma and avoid being stopped out too many times. Please read the chart, it points out that we do not know how the next daily cycle will unfold.
Again, Keep this in mind if you decide to go long. It may be Golds turn to trend bullishly higher for a while as the markets roll over. Of course, I will continue to cover this idea & remind us of this possibility in the daily reports going forward.
SPY – General Markets are breaking below the 200 sma and continuing down. The last time we see that was 2015 & again in 2016, and the markets were choppy ( Early 2016).
SPX – Just another short term reminder of how things may play out if conditions do not improve after our next Daily cycle.
IWM – And look at the RUT or IWM. Crash! It broke the 50 sma, sliced through the 200 sma, bounced with a reversal, and went straight down again. That damage only took 1 month to erase the last 6 months of the Bull run.
IBB – Biotech broke down too. At this point, IBB could be experiencing capitulation lows. I wanted to show you something else too…
LABD – 3x Bear Biotech. Picture this as JNUG, NUGT, or even GOLD now. Notice the choppy bottoming base. It would Rally & then drop back to the lows over & over all summer long. That was frustrating action. Finally it went sideways at the 50sma for all of September. That may have been frustrating too. Now it is 100% off of Sept lows. I just wanted to point out that the BASE can be choppy, difficult, and weak looking, but then look at that rally. It can be rewarding.
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AMD Dropped 20% after earnings Wednesday night
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USD – Notice that the USD was up fairly Big Wednesday as it runs toward August highs. I have mentioned that the USD looked bullish & strong and wondered if that would affect Gold. At the same time that the USD popped here, Gold was green too.
USD – I would expect the USD to roll over soon & begin to drop into a dcl – not break to new highs. This is day 6, so this can drop & become L.T., even though it has been strong out of the recent lows.
GOLD – Gold did not flinch with the rally in the USD. This looks like a healthy correction and the 50sma has curled upward. Gold looks like it wants higher price soon.
GDX YESTERDAY – This is from the last report, just to show a possible late cycle count that could cause the miners to back test the 50sma. We had a reversal in the form of a black candle. They usually lead to at least another red day.
GDX – So we had our next red day. Is this a Bull Horn or megaphone? Maybe. We still need to understand that this can drop to the 50sma, and especially since we saw MINERS drop while Gold was higher Wednesday.
And to help prepare us for a possible drop, I showed you that a drop to the 50sma is normal and does not take away from the bullish set up, as seen on AU.
GDXJ – So we have our break down from the Triangle and now a back test. WE NEED THIS to get back inside of the triangle. It is crawling along it, similar to when price crawls along the 50 or 200 sma trying to break higher.
GDXJ – So we could continue to crawl & then break through
GDXJ – Or we could get that dip to the 50sm for a dcl and then try to run higher & punch through.
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GOLD – Again, Gold just looks like it wants to continue higher. Maybe a move like this would lift the Miners and any back test of the 50 sma can come down the road when it is much higher.
So we wait, and for me personally, I want to take a break from day to day trading due to the choppy environment. I mentioned at the end of yesterdays report that I was going to sit on my hands and watch how things play out. So far, I don’t see a lot of change, and I do not want to keep jumping in and out of a choppy environment. Right now I am only invested in Miners, and as mentioned, I have raised cash by exiting the MJ trades and all other short term trades. I was also stopped out of PLG for a decent profit, but unfortunately, it began breaking down and I definitely didn’t get out at the highs where I was holding excellent profits ( Almost 100%) . I want to watch PLG for another possible future entrance, if it resumes its bullishness. It is a bit questionable at this time.
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NOTE: DO NOT feel that you always have to be invested. If the type of set up that fits YOUR type of trading or investing has not developed, wait for a better set up. Even if I post ‘set ups’ for readers, I have a variety of readers with different styels. At times, I often warn that some are very fast trades, need to be watched, can be difficult to manage, Must use stops, etc. Bypass those trades if they are not your style. There will be set ups that fit your style of trading along the way. In fact, a pull back in Miners may be perfect for you.
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I am expecting that if we get a drop of GDX / GDXJ to the 50sma, some miners will pull back to a low risk bullish set up too, so we can watch for that. I would imagine that stronger ones may resist selling and not pull back, so it will take some time to see how these all act in their own ways. I do still own some Miners, and Leverage. Will you decide to trade daily or also sit on the side lines and watch how things develop, hoping for some good low risk set ups? That is up to you. Either way, enjoy your Thursday Markets or take a long walk. 🙂
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~ALEX
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SOXL – Semiconductor trades are found in the SOX ETF. We also have SOXL as the 3x semiconductor Bull, and SOXS as the 3x bear ETF. The SOXL looks to have capitulation type volume as it drops to its 2nd low. And then of course, following the chart of the SOXL , we have the SOX …
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The SOX …oops, where did that come from? Congrats to the SOX for win #2 of the World Series 🙂
