March 21st- Post Fed Observations
Last year it seemed like we were hearing about 4 Rate Hikes in 2018 and 3 or 4 more possible in 2019. Wednesday Fed Chairman Powell said that the US Economy is doing well, and no rate hikes should be expected in 2019. So now we will take a look at what happened to the markets after the Fed Decision and his speech, and then we face the question…
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Is this leading to expectations postponed in any area? Could this be a Game Changer? Let’s take a look at what we currently have.
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NASDAQ – So we see a DOJI candle again, and this looks like no big change on first glance, but let me show you something that caught my eye…
SPY – This is a DOJI on the daily SPY chart, but by taking a closer look…
SPY 15 Minute chart – On this chart we see the initial POP at 2 P.M. with the FOMC Decision looked bullish, but notice how it sold off after 3 p.m. In the final hour of trading, the General markets could not hold the gains. When we keep seeing ‘DOJI CANDLES’ , it seems like buyers are being met with Sellers unloading at the top.
TNA – Jump over to the TNA, and it was rejected Tuesday and had follow through selling on Fed Wednesday. The MACD remains weak and this looks weak at this point…
TRAN – The Transports actually broke below the 50sma and recovered, but this MACD looks weak, and this chart does not reflect “the Healthy Economy” that we would expect to see from what the Fed Chairman said. This looks like a H&S.
The above market reaction was AFTER the FED gave about the most Dovish, Bullish out look possible. It Popped on the news and rolled over into the close. We’ll just have to see how this plays out, but it seems that weakness is evident.
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LABU AND IBB – This will need to be watched going forward too. The IBB volume selling actually looks like distribution, and the 2nd peak has a little less strength on the MACD & RSI.
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So again, I have wanted to watch the first 2 daily cycles out of the ICL and see how they play out, looking for signs of strength or signs of weakness as time goes on. Some individual stocks look good and had good earnings, but we have to admit that behind the beauty cracks appear. Recently I said that the General Markets are set up to be played ‘Long with a stop’. The FEDs speech sounded very bullish, yet The TRAN, TNA, and now Banks look to be struggling, so stay alert and add ‘cautious’ to that view.
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WTIC – Oil continued higher as expected.
XOP – The XOP popped and broke higher with volume, and GUSH could be a long idea here, along with the many Oil / Energy stocks discussed recently.
See SWN , WLL, GTE, ERF, NOG, OAS for example. SWN reversed on the 50sma with strong volume.
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And then we get to the Precious Metals –
The Fed reaction was a large POP in Gold & Miners, reversing right off of support levels. While I did mention an idea that fits the POP that we got, it is not the reaction that I would have expected first and foremost. Why? Using cycle timing, we are due for an ICL, it has been 7 months since the August ICL in Gold. That said, I have also been discussing other Bullish factors using technical Analysis to consider too. Let’s start by discussing what we currently have in front of us?
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GOLD – I did mention that a burst higher could take place with current expectations. This was in yesterdays report, and a back test could be a ‘double top’.
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GOLD – Notice also that A VERY short lived POP would be for Gold to top right here and give us a false break higher after the Fed. I personally want to give this more time to see how things play out.
Honestly, The question is- Could the Fed change their stance with the ‘No 2019 rate Hike’ change things in ICL expectations? Or will we still drop to an ICL sooner than later? Time will tell, but I want to discuss this sector from a technical analysis view for now, and what we have currently.
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GOLD – Gold popped to a new high on day 9. A reversal off of the 10 sma in technical analysis is a ‘low risk’ buy, because you can put the TIGHT stop under the 10 sma. So even though cycle timing would call for a drop soon, this would be an entry with the possibility of getting stopped out or riding a runaway move higher to back test that trend line ( Double top?).
GDX – That goes for GDX & GDXJ too. This would be a buy in technical analysis with a tight stop. It may see some follow through.
GDXJ – This even broke the down trend line. It does seem that if this gets to recent highs, the MACD will have strong divergence.
BELOW IS AN IDEA THAT HAS BEEN DISCUSSED HERE TOO– a ‘shake out & recovery’ often does not fail again. Many individual Miners are acting bullishly, so even though an ICL is expected timing wise, it could just be a back test of the Magenta Line or 50 weekly MA. That would still have involved more downside from here though.
GDX WEEKLY – I pointed out in a report over 1 month ago that the 2nd ICL after the Oct 2008 ICL was not a Deep drop, and we could see that again. A sideways choppy consolidation and a strong break out and run. I may discuss this again in the weekend report.
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I have also been mentioning that some INDIVIDUAL MINERS have been acting Bullishly and held up well during times of pull backs, so the sector does seem to be acting bullishly. You’ll recall discussions of AU, KL, AEM, etc., so lets look at a few other ideas or examples:
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AUY – During the recent sell off, AUY formed a triangle. Wednesday it recovered the 50 & 200sma, so that reversal would also be considered a buy using technical analysis, with a stop under recent lows. It may break out and back test later, it is hard to say, but it looks like a bullish set up right now.
IAG – A Miner like IAG is actually still down near the lows , it is forging a base. I also see a triangle forming here, and that reversal regained the 50sma as a technical buy too.
AG – AG was one that I pointed out as breaking above the 200sma, and that is where the stop goes. It never would have stopped you out, and looks bullish too. It is holding up well.
KGC – KGC also got above the 200sma and uses it as support so far ( it slightly breaks it, so a loose stop would be needed on this one).
AU WEEKLY – Though I expect some Miners to hold up better than others, I would still have expected more of a pull back from here in AU for example. So we may get a POP & DROP, but it just may nott be as deep as a normal ICL.
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So it is hard to say exactly what we have after the FED DECISION SO FAR, it has only been 2 hrs of trading, so lets see what Thursday gives us, but…
– The General Markets ( even biotech) are above support, but we saw the warning signs. They need to be watched closely.
– OIL & Energy remained Bullish.
– Precious Metals reacted bullishly, so even though my expectations timing-wise would be to expect a drop into an ICL, reversals at support are considered a buying opportunity in technical analysis with a TIGHT Stop. I am not buying Miners right now, because I have to believe that the bounce will be short lived, and I have other positions open currently. That gives me a little time to see how this plays out a bit more.
And we will allow a little time to go by and see if the reactions that we initially have are going to indicate true short term direction. Enjoy your Thursday trading!
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~ALEX
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CGC #1– I just want to point out that in the live discussion area, I pointed out ( And bought) CGC with this break out above the 50sma. Then it started to sell off, and I took another look. It is possible that …
CGC #2– I should have drawn the upper trend line from the first peak and considered the 2nd peak as a false break out, as shown here. Either way, I still like it, and I would expect a break out & run higher if this sector remains bullish.
DQ – I just wanted to point out an observation with DQ (I do own it). DQ often starts off slow and choppy at the lows, and then picks up speed as it finally gets moving higher. It did break out, so we’ll see if it now can pick up speed.
IDRA – Many Biotechs still look to be set up bullishly ( LJPC, TENX, IDRA, GH, TWST, etc)
