Friday May 3rd
Friday morning is the April Jobs report. We have seen the selling in the General Markets start with the FOMC Mtg, let’s discuss that Jobs report…
SPX – The drop into a DCL that we have anticipated seems to have started. It was getting late with the cycle count and a bearish wedge formed. This was obviously a Right Translated Daily cycle, so the drop will form a swing low (dcl) , and the next rally should break to new highs. Currently we have a DOJI CANDLE in place, and these are candles of indecision.
The April Jobs report will be released at 8:30 a.m. E. T. Friday, and that indecision candle ( Doji) will likely find direction.
I still think that this could drop a bit further, but a very bullish Jobs report may change that. This dcl would be a buy the dip, after a break back above the 10sma is in place.
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Let’s look at QQQ , just the chart, and ignoring the idea that we might see a bullish jobs report affect it…
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QQQ – I could see a drop lower in the QQQ. Volume increased, the MACD crossed, and there is plenty of overbought indications. The last DCL tagged the 34 sma. Let’s see what Friday does after this Doji on Thursday. This dip does not look like enough of a dip for a dcl, but the markets have been strong and many Bulls are riding this and buying the dips.
IWM – IWN reversed at support. It has not rallied strongly, so it is not extremely overbought.
TRAN – The TRAN started selling off last week, so maybe it will give us clues along the way. Does it hold support? Does it break support? It is almost oversold and at support, so things seem orderly at this point.
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USD – Each reversal on the USD that had follow through ran higher for a few days . We have a reversal above the 50 sma.
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GOLD – 2 days higher on the USD, 2 days lower for GOLD. Gold actually broke below the 10sma, and it broke below the day 32 lows, so what does that mean? We are either now on day 7 OF A FAILED DAILY CYCLE breaking down, or this is day 38 and it recovered. There is no ‘action’ to take at this point. Fridays move may clarify this.
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WHAT HAPPENED WITH MINERS?
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GDX – Notice that GDX did not break above the 10sma yet anyway, so it did not confirm a dcl. That means that this may be an extended daily cycle, this would be day 42. Thursday it dropped below the Fed Wed lows and closed under the 200sma. May I just say that We have to View this as bearish for now until further action. This happened in January, and it resolved upside, but for now it is a bearish signal, and I got stopped out of my leverage.
GDXJ – Notice that GDXJ recovered the 200sma and it also DID cross above the 10sma, so it looked like a dcl. I took leverage with this recovery. It then lost the 200sma before the fomc and never regained it. It broke the lows and that stops out anyone that bought at the lows. I do see signs of divergence, so I am watching this sector, but This also has to be viewed as bearish for now – unless it recovers.
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The general markets have begun their decline. At day 37, a dcl can come at anytime, but waiting for a swing low to form is the safer way to ‘buy that dip’ and avoid losses. Jobs report is at 8:30 E.T. Oil is still moving lower looking for a dcl, and at this point, the whip saw seen in GOLD, SILVER & The MINERS continues.
The whip saw, choppy action near the lows makes it hard to read the precious metals sectors short term direction. As of right now, Gold broke the lows and recovered yesterday and that would look bullish, but Miners recently broke the 200 sma and recovered, but then continued to sell down again yesterday while Gold held up a bit stronger. With GDX & GDXJ closing down near the lows below the 200sma, it is just viewed as bearish at this point. I got stopped out of my JNUG trade, but I want to discuss that further too. We now need time to see how these play out going forward, but you sill may see individual Miners acting Bullishly. Below I’m going to quickly discuss my JNUG trade and how it has worked out in the past at ICLs.
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Have a good Friday!
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~ALEX
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THIS NEXT PART CAN BE READ LATER, IT DOES NOT AFFECT TODAYS TRADING. IT IS A LESSON IN JNUG AT ICLs.
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When we get a deeper meaningful sell off into an ICL in precious metals ( happens 2x a yr), I have said that I go heavy at ICLs (even leveraged). To be clear: That doesn’t mean that my initial entry is me going ‘All in’ at all. If I think that we might have a swing low, I may start a smaller JNUG position, and I will add after confirmation comes. I sell on the way up and go heavier at the first daily cycle low, because next comes the wave 3 of the move.
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At an ICL, unless it is a choppy base, you should have the first 2 daily cycles rally out of the lows, and the lows are not broken after an ICL is in place, so Leverage is safer at an ICL. If it ends up NOT being the ICL, you get stopped out with a small loss & try again at the next sign of a swing low ICL. Let me quickly show how this plays out very nicely longer term, EVEN IF the short term causes losses at the stops. One method of a leveraged trade is my JNUG Trade…
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There are MANY different ways to play this. There is a safer way where stops are raised & profit is locked in every time ( I do not do this, because you can get kicked out often for no good reason), or you can accept small losses with stops below the swing lows – low. Note: I do not by JNUG at every dcl, I am definitely looking to go in at an ICL, and especially at the first daily cycles next low. When buying a swing low that could be an ICL, even when the trade sells off and fails like yesterday, one anticipates bigger gains in the long term. This is how the recent failure for JNUG is expected to play out…
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For the sake of this lesson: I am going to draw it on this chart as attempted twice, and failed twice. For the sake of this lesson only, let’s say that a starting position is 500 shares.
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JNUG#1 – Lets say that I thought the early April reversal was a Buy (small starter) JNUG at $9.30 during that reversal day. It moved higher to 10.50, but then broke the lows and let’s say I let it drop a bit and get stopped out at $8.50. Almost $1 loss, so say $500 loss. Next try…
JNUG#2 – Now GDXJ reversed on April 24 & it is late in the daily cycle, so this could be a swing low & it could be an ICL since it has been 7 months since the last ICL in Miners. I buy 500 shares again at that reversal, let’s say $7.50. I could raise stops and lock in gains , but I want to give it wiggle room, and again, GDXJ (orJNUG) breaks the lows . I allow a little room to move, so I don’t get stopped out until let’s say $6.70 yesterday. Let’s round that off to another $1 loss and say I lost another $500. This looks & feels bad, right? Well, if I catch an ICL, it is well worth the short term losses- Let me show you why…
If you go back and look at EVERY ICL in Miners, JNUG ( Even in those bear market bounces) Will run up near 100% or more each and every time out of an ICL Low to Peak. A good run can even be much more! Later I will show you the ridiculous gains in just the first leg that JNUG made in 2016 later. At this point, let’s say that I bought the recent Run In Miners out of Nov Lows. So let’s say that I did this type of buying twice at the lows and was stopped out the exact same way, this is how that would play out…
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Again, for the sake of this discussion, let’s say that I Bought 2 positions, 500 shares each time at the Sept lows, stopped out for almost $1 twice. I lose $500 each time, but now I see that ICL breaking the down trend, a higher low, seems confirmed and enter at $7.00 (see the chart). I buy 500 shares at that higher low, and add as it runs.
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JNUG – so in with $500 shares at $7. I add on the way up , I then own 1000 shares at $8 and it runs to $10.50. Next we drop to the next DCL, and I go even heavier, let’s say 4000 shares at that dcl at $8. It runs to $11, then $12, then $13.50. That is day 23, time to start unloading, but I now have 4000 shares up from that dcl ( $8) to day 23 ($13.50). 4000 shares times $5.50 gains/ share from JUST THAT 3RD DCL is $22,000 gains. The Aggravation of getting stopped out twice at the lows fades away.
So getting stopped out at a few tries to catch the reversal as an ICL ( even $500/ loss) , no longer matters as long as I used stops then and catch that ICL when it comes. I even said that I took $1 losses each time, but you can cut the losses down a lot more than that. It hurts on days like yesterday, I got stopped out, but honestly – I HAVE SEEN MOVES out of an ICL in JNUG run roughly 100% or more each time once it finally gets going.
JNUG – So with my recent stopping out…. Once I Finally catch the lows, the prospect on a leveraged vehicle out of an ICL is for it to gain 100% or more, gaining back those stopped out losses. Now I’ll show you the ridiculous 2016 run…
JNUG 2016 – Who doesn’t remember how Miners ( GDX, GDXJ, NUGT, JNUG) stopped everyone out in January when GOLD had its ICL, and yet Miners slammed down in January? Say you were now Stopped out for a loss after riding a choppy bottom. Gold was doing fine, ran higher and Miners put in a swing low after a 1 week sell off. You grab 500 shares at $8.50 swing low. After it runs strong, you go heavy with 4000 shares at $10.00. It gets very choppy, but your stops , even raised stops, are not hit and it runs to $70. Do the math. $70 x 4000 shares!
Guess what? After an ICL drop in May, it then ran to $130. That was impossible to hold on, and it is not always easy, but that run was breath taking. The next run could be similar, we have to wait and see. That kind of run looks great on charts, but it is not easy to buy & hold when it gets choppy. I sold a few times on the way higher to lock in gains, but $8 to $130 in 6 months was WELL WORTH losing some starter money near the lows. That is my point, and that is how I trade it. You do not need to follow that. You can buy after confirmation is solidly in place. We are expecting a big run once the ICL comes in this time too…
Yes, I am expecting a big run once the ICL comes in this time too. So we may not have an ICL in place yet, but when we do, you can see that even catching the brunt of it out of the second daily cycle low should bring great gains and it is easier to find the 2nd dcl than an ICL, which can be choppy . a small JNUG position could gain back any losses now from being stopped out. This is why I don’t mind a few attempts where I get stopped out with false swing lows- You may want to just play it safe and wait for solid confirmation. THAT would be a confirmed ICL, A break of the overhead trend line . That is a personal decision, but waiting for confirmation is a safer way to play it. That is an adjustment that each one can decide to make , depending on their own trading style. You do NOT have to catch the lows to make good money on a run out of the ICL, especially if we get another 2016 type move higher.
