Wednesday March 11
The SPX had a big gap open higher, but it eventually dropped down and broke to new lows, so we have a new low on day 26. The markets then rallied into the close. That is still very choppy but it ended with a strong reversal, so does a strong reversal like this always become the start of a rally higher? Well…
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SPX – As seen here, we did already have a strong reversal that didn’t turn out so well. On that reversal, I had people asking me if I would label day 19 as a dcl (?), but that was just too early. Now day 26 becomes a tad bit more possible for a dcl, but it is still quite early, so this may remain choppy…
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I’m wondering if we might just see the General markets chop around and get people bullish again, and then drop to my measured target (That target has not been reached yet) . It would also fill a cycle count that runs to 35+ days as shown here.
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It seems too early for a dcl, but the divergence in the RSI in the ABOVE chart does look like a bounce could take place, so we’ll have to watch this play out. Longer term I still expect more downside, and I’m keeping this chart below ( and other charts in past reports) in mind.
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SPX looks like it could bounce, but then drop again.
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NOTE: WEDNESDAY IS THE OIL INVENTORY REPORT
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WTIC – Oil did reach my measured targets and then it even reached my long term target near $26 all in 1 giant gap down. THIS gets tricky, because that kind of a flush usually does make a capitulation low. It exhausts selling, so…
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WTIC -I do think that this may be the low for a while, but it can remain very choppy. TODAY IS OIL INVENTORY WEDNESDAY, so can they break this down even further? It does seem unlikely right now, but we’ll see soon enough. The next chart after this one was from yesterdays report…
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YESTERDAY I WROTE – This drop was actually ridiculous! It looks like exhaustion. A $10 drop in Oil in 1 day? 24.5%?? With so much time left in the daily cycle here too, I have to wonder if we will see a possible exception to the rule, so this is what I’d have to think we see.
1. If this is going to be a 40 day daily cycle, then we could bounce & chop around and THEN drop into the DCL, possibly only slightly breaking that $26. Or
2. Maybe this capitulation exhausts here and the lows are in, we bounce & double bottom? OR…
3. This would be so hard to believe, but could we bounce and drop even lower, like near $20? We have to wait and see , but I think we’ll see Oil bounce soon with this high volume gap down and possibly give us clues along the way.
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With the above thoughts yesterday, I actually bought a couple of Oil / Energy stocks yesterday. It may get choppy, but they started popping, so I will discuss that below at the end of the report.
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GOLD – Gold is still managing to hang at the highs and has made a series of higher lows ( unlike Silver & Miners). This double top has divergence (weakness) forming in the RSI, so this may eventually put a ‘peak’ on this intermediate cycle, and then it will start to dip down to find the next ICL. So far it bounced off of the 10sma and may break to new highs again.
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SILVER – Silver has been weak and is still back beneath the 10sma. This remains day to day choppy.
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SILVER – Silver did break out from the down trend line after the crash and even back tested it with a higher low, but this MACD still looks very weak at this point. WATCH THE 10 SMA for Silver, and if that is broken upside, then we’ll watch the 50 sma.
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GDX – When I look at GDX, I see how nicely set up this was until the Markets sold off and Miners became the ransom price, possibly sacrificed to cover the losses / margin calls. It damaged the chart. From here…
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GDX – I wouldn’t be surprised if we just chop around again. Remember the chop in that blue box? That can be frustrating, but…
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I did point out in this big picture chart on March 6 that GDX is under a resistance area. It may need to chop sideways and downward to build energy to eventually break out and run. Once this breaks out for real, the run could be exceptional!
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NEM – It is possible that some Miners out perform while the GDX / GDXJ chops around. NEM looks like it is trying to shape up, but it also remains choppy.
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PAAS -The leading Silver stocks are still broken and struggling however. I’m going to be patient in this area, but I do think that some excellent buying opportunities are going to be coming our way at the next ICL.
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I just want to remind everyone that we are in a period of uncertainty with the rapid spread of the Coronavirus. The markets do not like negative surprises and what we are seeing with this plague is the temporary shutting down of some businesses in China, Italy, etc, and that can spread to other areas. Arenas & movie theaters are becoming empty, so not only ticket sales are affected, but products like Food, Beer, Soda, etc. are also not being sold. Earnings can be negatively impacted with the sales of various companies ‘Goods’ being cut off. Just keep these things in mind and we’ll continue to monitor how this all plays out, but for now Uncertainty can just lead to choppiness, false rallies, and sudden drops. It may be best to keep trades short lived, positions small, or stay in Cash until we see real change going forward.
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THAT SAID, I am going to highlight an area that started Popping yesterday. IT IS STILL CONSIDERED RISKY, so please have that in mind if you decide to trade it. SMALL POSITIONS are best. Enjoy your Wednesday trading.
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~ALEX
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GOING BACK TO A POSSIBLE DOUBLE BOTTOM LOW AS A DCL. This would produce a bounce or choppiness short term…
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If you look at the major Oil lows of 2009 and 2016, they are not v-bottoms- they are choppy lows actually being made up of a few daily cycles. So this goes along with a possible bounce in Oil and then a return to the lows. IF THAT HAPPENS…
IF THAT HAPPENS, some of these beaten down Energy stocks can really pop. I was running though the charts yesterday afternoon and really liked what I was seeing on intraday charts. They started Popping one at a time, so I bought a few that were just getting going. Let me show you some charts that I posted in the live area, sharing what I was finding…
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If you have been with me for a while, then you know that we have traded Oil stocks at the lows in the past. For example We traded LPI, OAS, WTI, WLL, MRO, BE, TUSK, CRK, NOG, DNR, and many many more. Some of these were trading in the high single digits or the teens. As you will see, they have really crashed down with Oil.
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LPI – So I looked up a few and saw LPI trading at 38 cents?? It was $3 in January and has been oversold since then. I’ve seen this before and when these bounce, they can really explode, so I captured this and posted it live. Warning: This can get very choppy too, and that is frustrating. LPI was down 5% when I first looked, here it was up 2.78%, so I bought some.
LPI – By the end of the day, LPI closed up 116%. That was ridiculous!
As I mentioned… I ran through several charts of the ones I listed above ( OAS, MRO, TUSK, WLL, etc) and some were suddenly popping 5% to 10% to 15% within a minute or two. I continued to post my findings in the live area ( with words of caution- this is not a get rich quick set up, but it is possibly a good short term trade or scalp that can be very giving).
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MRO – I posted that MRO was now trading at $4?? We traded it at $13 in December. By the close it jumped to $4.40 as a reversal candle. This sell off with the final gap down was so extreme, that you can easily see how this could bounce back to $8+ (100%) after it stabilizes. A simple overhead gap fill would run MRO from $3 lows to $7.
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OAS – OAS was Red & popped up 27% while I was watching it too. These may be putting in choppy bottoms, but these are huge chops, So…
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OAS – If you look at the 2 lines here, that small jump in price would be a 100% move.
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TUSK was set up to recover in December as it broke above that 50sma with volume. Then it got caught up in the sell off & broke down. It started to rise intraday yesterday too , so I bought it at 70 cents. It moved to 77 Cents on this chart at 3:15 ( up 30%) . By the close it was 84 cents ( up 42%). These move FAST. THEY CAN DROP JUST AS FAST.
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WLL was down too when I looked it up, and was still red when I captured this at 3:17 p.m. Eastern. I was trying to point out how quickly this could make exceptional gains, especially since WLL even doubled in the normal December rally. Look at this potential, so I bought it.
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Suddenly WLL started to run higher and it ended up closing up 14% ( 13.96%). Even that is not very much when you consider the potential upside on just a good bounce. WARNING: These can move very fast UP & DOWN.
AGAIN, By the end of the day, LPI closed up 116%. So this could keep going, or it could drop back down and then go higher. We may see choppiness.
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So I need to make a warning here that these are NOT get rich quick trades, it is better to be safe than sorry. These ould become ‘Go Broke Fast’ trades if one doesn’t keep position size small and may just take it a trade at a time. Maybe trying 1 or 2 small positions and just scalp some gains will work for those in front of their screens? Maybe even trying a small position in 1 or 2 as a buy & hold after we see what the oil inventory does? It is up to you, but just know that some of these can crash too. They could go bankrupt, they may be struggling with debt, etc., with the plunge in oil prices, and they may eventually become de-listed penny stocks if Oil stays down here. Keep this in mind…
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IMPORTANT: Even good looking or somewhat ‘predictable’ looking set ups can reverse quickly or fall apart in choppy markets. If you are unable to be in front of the screens for most of the day, maybe you work full time, it may be best to just monitor the first part of my reports for a while in cash ( usually SPX, NASDAQ, USD, WTIC, GOLD, SILVER, & MINERS) and watch for things to stabilize a bit more , let things calm down, before taking on some bigger trades. Shorting another good bounce in the general Markets may be something that sets up, but also I DO BELIEVE THAT WE ARE GOING TO SEE A GREAT SET UP AT THE NEXT ICL IN MINERS IN THE COMING WEEKS. WHEN WE GET AN ICL IN THE PRECIOUS METALS, especially after a choppy drop lower, we can get a nice sustained rally out of the lows. We would likely break above that resistance area shown here and run —
