September 24th – The Buckets Got A Hole In It
I did a little buying recently on the set ups that I had in the reports ( DOCU, SQ). Things started out very nicely, but then some selling came in and it picked up in intensity as the day went on. We never closed above the 10 sma in the SPX or NASDAQ, so that selling has me wondering if we have that DCL in place or not? We also saw the Precious Metals sell off lower, but that was expected and that will become an excellent buying opportunity eventually. We now have the set up in place for this selling to lead us to an ICL developing over time in Miners, so lets discuss these developments today.
SPX – Same old song and dance here. We had a swing low but it could not get above the 10sma. This could mean a number of things, so let’s take a look:
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1. I do think that it may be possible that we DID have a dcl and it rolled over very quickly at the first arrow and now we are just slowly dying here with every bounce becoming false rally. We may be looking at a very weak daily cycle. That is one idea. Or…
2. Another idea is simply that we have an a-b-c down complete (or it will become complete with a lower low Thursday), and then it moves higher as a dcl & confirms by closing over the 10sma? This is possible if all of those Bullish charts like DOCU, TWTR, SQ, etc. are leading the sector in bullishness. (Some started to look weak yesterday though). Or…
3. A drop that plays out as 1-2-3-4-5 and then a dcl forms. I View this as This is least likely, because the daily cycle low would then develop around day 70 by the completion of the wave 5.
So basically at this point The General Markets still look like a bullish falling wedge, but these can fail. Yesterday I pointed out many Bullish set ups, some still look good, but a few did drop & undo some of their bullishness. See charts of DOCU, TSEM, SQ, SNAP, LULU , etc , and you’ll see what I’m talking about. I honestly liked those set ups as of yesterdays report, but it is now obvious that it will be important to keep position size on the smaller side until we find out if we are getting a DCL confirmation (by closing above the 10sma) or is something more bearish happening here. Some areas completely fell apart, while other stocks are still ok.
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I Bought DOCU for example and it took off higher in the morning, but it sold back down with the markets. I still own it, but Now I need to be careful, just in case our General Markets sell down. This could easily go either way at this point, and I do think that it will follow the markets.
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After the Oil Inventory report, OIL Popped higher, but I posted in the live area that the XOP & XLE dropped . By the close, Oil was red too. I’m not interested in this sector yet.
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YESTERDAY I WROTE: GOLD ( & Silver) did not drop further, but on day 29 it should not surprise us if the selling resumes.
The selling certainly resumed in Gold and especially Silver. We are now on day 30 and often these daily cycles drop down into day 33 or so. A drop into an ICL could see Gold plunge lower as seen here.
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SILVER did what Silver often does – it suddenly plunged. We did see some gradual choppy declines into an ICL in 2019 (Red Arrows) , but those apparently followed more gradual inclines. It seems that with a steep climb we are now getting a sharper pull back. IS IT POSSIBLE that Silver could drop to that $20 support area? I do not think that it is impossible, so let me show you why I say that…
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Lets take a step back and review our Big Picture for SILVER. For the past few weeks I have discussed the similarity of the small choppy area in 2010 above $26 and compared it to what we were seeing now. The plunge on Wednesday broke that $26 support. If we don’t quickly reverse & make that a shake out, it becomes a break down and yes- $20 is not out of the equation as a logical support area.
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SLV – Using fib numbers, we see that a 61.8 drop of the entire run from March leads to a support area much lower. We are now at the 38.2% area, but Silver can free fall to that $20 support and SLV can gap fill & drop too. SILVER STOCKS CAN FOLLOW.
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SAME CHART: I know that when people are bullish they don’t think a drop like that can happen so they buy this dip, but during an ICL drop, it can and it has dropped sharply in the past. If you were fully invested over just the last 3 days, your account would already be bleeding bad enough. Look at this chart, it could get a lot worse. Waiting for a dcl / ICL is recommended.
GDX – GDX broke the last dcl. This is what I have been waiting for, to give us a failed daily cycle. That can eventually lead to an ICL, BUT I WILL NEED TO EXPLAIN FURTHER THAT AT THE END OF THIS REPORT.
So this chart of GDX was in a recent report and is a valid visual. We wait for a dcl to form as a low, and that can happen this week or even next week.
GDX – I also drew this chart of a 3 day slam down. That is possible too and could even form an ICL.
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I am going to predict the future here. IF GDX bounces today, someone would probably ask me in the live area, “Alex, is this the dcl and if so, should I be buying? Is this also the ICL now that we had a failed daily cycle?” Look at this chart: Do you know what the answer is if we bounce? The answer is …
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The answer is , ” Please understand that There is No Way that I can know whether a 1 day reversal today is a dcl or not until we start with a ‘confirmed DCL’. Yes, a reversal could be a dcl on day 30, but we could also chop & slam down again on day 33, 34, & 35, right? So a reversal may or may not be a dcl on day 30 if we do see a bounce.”
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To explain further with a visual: I want to look at the General Markets and explain that with a visual, since we just went through this with the General Markets. The SPX was LATE for a dcl, yet the bounce did not hold as a dcl on Sept 14. It bounced & rolled over. Choppy lows are the worst! IF GDX BOUNCES TODAY, this can help you to remember that a reversal can fail, just like we have been seeing in the General Markets recently.
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Another thing to remember is that this upcoming daily cycle low may or may not become the ICL.
I will explain that further in the weekend report, but basically this dcl can start too move higher for a few days, form as L.T. again, and drop into the real ICL at the next dcl in October. How do we play that? We would basically have to buy the next dcl and watch it play out just in case it is an ICL, but use stops. That is all that you can do, but that is also why a deep sharp drop is better. A sharp crash would be more likely to become the final drop into an ICL. Choppy bottoms at a stealth ICL are the worst! For now, we need to be quite cautious in all sectors. I am over 50% cash and depending on what I see happening in the general markets today, I may cash out of a few other trades to play it safe. If the general markets take off upside, I will stay invested and see if we finally get a confirmed dcl there. I am also eagerly waiting fo the ICL in Miners!
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Below I will discuss a few things. Enjoy your Thursday trading, but Stay Frosty and protect your funds. An ICL in Miners is a low that usually leads to at least 3+ Months of upside in the Miners. You have plenty of time to load up when an ICL forms, and you do NOT need to catch the bottom tick to make great %-Gains. The drop can be steep, so waiting for a reversal / DCL can actually save you a lot of pain emotionally. The good news is that an ICL in Miners comes twice a year and for many it is often the best trade set up of the year!
~ALEX
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Discussing what I said above , that “An ICL in Miners is a low that usually leads to at least 3+ Months of upside in the Miners. You have plenty of time to load up when an ICL forms, you do NOT need to catch the bottom tick to make great %-Gains.” Let me just show you a few charts and discuss what I have been saying all along – that buying early can be painful to the account & emotions. I do not like to ride my miners down in an ICL sell off. I sell after a good solid run and trade with stops after that. You will remember that I sold all my leverage from the march lows near early August ( entering after the railroad tracks) & sold the Bulk of my miners basket in the early August time period too. After that I just traded a few Miners here & there with trailing stops. Basically I had sold out of my good sized basket of Miners with locked in gains. This is why…
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ELYGF – This does not look like a big drop, but $1.50 down to 82 cents yesterday is almost 1/2 priced. If I owned $10,000 of ELYGF in July, I now would own about $5000. Why give it back when I know an ICL will eventually give me sale prices again? 🙂
MRDDF– 10 cents to 65 cents was an awesome run, but if this is on your shopping list it is on sale at about 50% off, with support at the 30 cent area.
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HL -I don’t know if HL will fall all the way to $3.50 (it is at $4.72 now) , but HL could do that drop if SILVER falls to that $20 support area. What a nicely discounted price that would be from a high of $6.50+! If I bought this all the way up though, I’d probably now be back to break even. I do think that it is important to lock in gains before an ICL.
RSLV.V – Reyna Silver actually dropped to 90 cents today, but I grabbed this chart at 10:00 a.m. when it was $1.00.
In 5 days this went from $1.50 to $0.90 cents. What a savings ! It was $1.70 on Sept 1, so it also has been basically cut in half in 1/2 month. When Miners have an ICL due, they do not mess around. I pointed out this gap fill possibility in the live area around 5 days ago. IF SILVER keeps dropping though, you may see RSLV at 70 cents again.
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Could EXK drop to the 200sma if Silver drops to $20? I do think so. There may be a bounce in between, like an a-b-c type of drop, but what a bargain price for the next run higher if it gets down there. I’ll be watching Silver itself for clues.
SPAZF had a massive run from 10 cents to 60 cents too, but it also went on sale recently. So look at it this way: a $1000 investment at 10 cents became a $6000 investment by August. Holding into an ICL drop has it now valued at $3000. That is only if you bought it at 10 cents and didnt add though.
Buying all the way up and Not selling to lock in gains makes this even less valuable when an ICL comes due though. I always recommend locking in some gains and using stops for that reason. Imagine buying at 30 cents & 40 cents and 50 cents and price is now 28 cents and could drop even lower. Over time this can recover, but whats my point? Buying near an ICL time period and sell some later when the time is right locks in great gains. That said, truth be told, I started a small starter position a week ago with no stop, so I felt the sting with yesterdays 17% 1 day drop! 🙂 If this drops to the 200sma ( 15 cents) even my small start would be cut in half if I held on.
MTA – Like ELYGF, this is another Royalty company going on sale but this one may not drop much further, since it is near support. If it drops to the 200sma, the price will be from $10 to $6. That will be a bargain.
AG has already dropped to the 200sma. It can go lower if Silver sells off further. We all know that Sprott bought this above $12 to 412.50 U.S. , it is now under $10 as we approach a dcl possible ICL. He is a Billionaire so he’ll be ok, we will get bargains prices by waiting for the ICL.
I am pointing these out for a reason. This is why I sell when the profits are in and an intermediate cycle is getting late and shows signs of weakening. I try to be patient and re-enter at bargain prices of the ICL. Silver can still drop sharply and Silver stocks can follow if we drop to day 33 or 34 or 35. A drop to an ICL can be painful emotionally when you see your account drop thousands of dollars day after day after day. Many of those stocks above are cut in half now, and if you were fully invested with $50,000 a few weeks or a month ago & held on, you now could have about $26,000- $30,000 in those same stocks instead of $50,000. Ouch. Yes, Bull Markets can correct this , and those gains should come back, but these stocks now need to run up 100% to get back to where they were. Buying here near an ICL & running up 100% is really very rewarding emotionally. I know many have been waiting to buy the next ICL, there is time and you will make money for the months that follow once it is in place. 🙂
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MARKET DROP – EV & SPAQ Sell off:
KCAC, LCA, TSLA, WKHS, SPAQ, BLNK, etc sold off with the markets yesterday, and they move fast too. Lets look at SPAQ & WKHS. I mentioned that I sold my SPAQ and WKHS I sold most. I sold the rest at the open as it slightly gapped lower below the 8 ema / 10sma.
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SPAQ – I sold my SPAQ the other day as mentioned in the live area & yesterdays report, but this sector got hit hard yesterday. Stops would have protected some gains, but this was a sharp 11% drop out of nowhere.
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WKHS -This sector got hit too. I was watching this climb the 8 ema beautifully, but yesterday it broke down ( Crashed really). Again, this is showing us the importance of stops to lock in gains. It is still at $22.50, but it quickly erased a lot of the gains .
