Jan 28th Pre-Fed Trading
JUST A QUICK REALITY CHECK TO START WITH – “I saw on the news that the Virus caused the markets to sell off?”
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Well, I have been showing the cycle count in the markets for a while as one that is entering a top area. This was last Wednesday JAN 22 on day 33 and I wanted to pointed out that one daily cycle peaked on day 32. Then the next one peaked on day 39, so we really could top & drop at any time, so we expected a pull back and anything could trigger it really.
THIS IS THE REASON? When The U.S. killed an top Iranian leader & Iran fired back, all of the news was that this could escalate ferociously, but the markets didn’t crash then? Now is a virus really causing this drop? Not really. The markets were overbought & peaking on day 33, 34, & 35 and then we saw that bearish engulfing Friday. They were due to fall because of being this late in the cycle count. Certain sources will always try to give a reason as to why a market is pulling back or rising. In reality, it is often just the ebb & flow of the markets…
SPX – It is day 36 and that is late in the cycle count and the last 2 cycles lasted 42 days. A DCL is due soon, so the markets will bounce soon, possibly right after the FOMC MTG Wednesday. The question is : Can we drop further?
QQQ – Yes this can drop even further. The last 2 cycles lasted 42 days. We have a Fed Mtg this Wednesday and that may act as the catalyst to put a dcl in place, since one is due timing-wise. It is best to look for a swing low to develop before jumping in, since This CAN drop further. It would be similar to that July – August sell off if it happened.
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WTIC JAN 22 – I was expecting a drop in Oil, after we lost the 50sma. I drew an a-b-c drop to the $52 area & pointed out the rapid drop in October as a warning…
WTIC – We now saw a rapid drop to $52. Oil is due for a dcl, but it can drop to the Magenta line too, so that reversal candle alone is not a buy, but it is the measured move target.
YES, IT IS A BIT OF A ROLLER COASTER RIDE IN THE PRECIOUS METALS SECTOR. It is a Fed Week.
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GOLD – On Sunday into Monday Gold popped and then sold off slightly, and this is day 8. We can still drop heading into the FOMC Mtg, but the recent lows should not be taken out if this is a successful daily cycle. Breaking that Green arrow would indicate a failed daily cycle. I do not expect that.
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SILVER – Silver popped and sold off a bit too. It is oversold and the RSI looks good , so it still looks ok
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GDX – GDX gapped open and then sold off, closing down 14 cents. At this point, the big picture here looks fine, but it remains choppy. NOTICE THAT GDX IS $29.08. Remember that.
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GDX – I posted this chart a week ago to show that we could climb up & then dip down heading into the FOMC Mtg, and still be ok. So far, isn’t that what we have done? So we have to just ride out this choppiness until it resolves higher or lower, or you can choose to get off of the ride & watch it chop around from the sidelines. IF YOU SELL & GDX just rips higher after the fed decision, it could be emotionally tough to buy back in.
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GDX – The Big Picture here from back on Jan 17 is still in tact, so that helps us to see that we are just chopping around. Remember when I said that GDX IS NOW $29.08? Here it was $28.42, so it is even higher than it was here when the big picture looked great 🙂
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I am going to do a review below that may offer some comfort if the current choppy set up in GDX / GDXJ annoys you. Of course I can’t promise that things are going to play out exactly as they did on another occasion, but I found a similar set up and it didn’t turn out bearish then. I think that that is worth reviewing as we head into the Fed Decision Wednesday.
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Enjoy your Tuesday!
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~ALEX
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There are no guarantees in the markets, but I want to show you a similarity in GDX now compared to another choppy time. It had a positive outcome at that time.
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GDX – This is our GDX set up as of Mondays close. If I had to describe it, it could be possibly setting up as a double top. That would be concerning. So let’s just say this…
“Monday reached the prior highs, the MACD & RSI went flat and it sold off. I admit that it looks a bit concerning. This was day 8 above a dcl”
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Now look at GDXJ from July 2019 ( not 2018)– This looked concerning too…
It looks like it also reached the prior highs with the MACD & RSI flat too. Then it almost formed a bearish engulfing candle at that double top. So this also was day 7 sell down after a dcl. MY POINT? THIS IS SIMILAR TO OUR CURRENT GDX SET UP ABOVE.
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GDXJ 2018 The next day – After that possible bear engulfing, the next day priced moved up , so that was a bit of a relief.
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GDXJ 2018 – This is 3 days after that possible ‘bearish engulfing’. Obviously I can’t guarantee that we see this exact move higher, but it holds out the possibility that our current set up with Mondays drop can remain Bullish and even take off higher after the FOMC MTG.
