Tuesday October 27th
I expected choppiness going into the US Elections and the FOMC Mtg, because the markets do hate uncertainty, but to be honest…
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The DJIA MIDDAY drop was not really what I was expecting. I thought we could Pop & then drop day after day, not drop and break the 50sma, which has been acting as support, but that is what we did…
The General Markets then started to recover into the close…
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NASDAQ – The Nasdaq has been holding up better, and using the 34 sma you can see that the NASDAQ bounced off of that 34 sma.
THE SPX broke below the 50sma and started to recover into the close. The RSI looks unsteady and the MACD dropping down, so we could continue this choppy ride.
SPX – Basically it is not the end of the world at this point. It remains a normal 50% pull back from the run out of the ICL, but this can remain choppy.
I cut some of my longs last week & I even cut some heavier positions in half yesterday simply because I hate choppy trading and I think that that is what we have ahead. The next week heading into the US Elections might be very choppy, up one day and down the next. When you move to mostly cash you accept the fact that if things run higher, you can’t make money, but you also can’t lose any if the chop drops. Cash is one way to stabilize the account in unstable conditions, smaller position size is another way. I want to have more cash on hand for after the FOMC MTG too.
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WTIC – Oil dropped on Monday too, but no surprise there since Oil has been choppy all along.
As a side note: Try to picture the General Markets moving like Oil has for the next week or so. THAT will not be fun if this is what we get there too. Oil is on day 34…
WTIC – Oils daily cycles can run to 50+ days, so I can picture this continuing as more likely than a 15 day sell off from here. This chop could simply look something like this. This is not a prediction, it is a guide with the likelihood that chop can continue.
GOLD – Now that 22 days has gone by we can see that Gold has simply been a sideways chop too. There was a chance that a very mild ICL was put in place since the down trend line was broken, but Gold has made No Progress and remains under the 50sma. If price drops below the red arrow, we get another failed daily cycle and that should be our final daily cycle into the ICL ( FOMC/US ELECTIONS ahead).
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SILVER #1 – Silver is also chopping sideways and the daily cycle is getting late ( Day 22 of usually 30+). Let me show you what I think is reasonable to conclude…
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SILVER #2 – Just looking at the last DCL crash in September, we see that the daily cycle in August to September was sideways chop that made Silver look strong, but suddenly it crashed for 4 days. We know that when Silver drops into a dcl, it can crash and we’ve see that often. With that idea I have been looking at that $20 area possibility and we now it seems that we could see a crash around the FOMC Mtg, which is day 29. Silver stocks might really go on sale next week.
GDX #1 – GDX looks like it is curling down as it continues to bounce off of the resistance area of the 50sma. GDX looks to be weakening.
Note: Interestingly at one point GDX actually popped above the 50sma on day 14 and I considered that rather impressive for a final daily cycle. The RSI also crossed above the 50% line briefly. I actually thought that if GDX was breaking through & continued to run higher that would signal that that September 6 day sharp sell off could be an ICL, but then GDX lost that 50sma & has now even struggled under the 10sma.
GDX – So this can continue to chop sideways also as we head into the FOMC MTG. That was day 14 when it pierced the 50sma, so we are now on day 23 Tuesday. Day 29 is the FOMC meeting, and these daily cycles often last 30-33 days (roughly).
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The choppiness is very hard to trade and very frustrating at times. I have personally traded choppy markets where I am stopped out at the 50sma and then things reverse & run higher for 2 days. That is frustrating as I wonder if I should just get back in or not. It is then hard to get back in because the chop can quickly drop you back down toward the 50sma. OTHER TIMES, I have been stopped out at the 50sma as a shake out & then price just runs away with out me, straight up. THAT is very frustrating too.
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So what am I thinking right now? The same thing that I have been thinking right along and even mentioned in the weekend report: At this point with the US Elections & FOMC next week – I lean toward thinking that we are just going to continue to see ‘uncertainty chop’ in the markets. Yesterdays drop was bigger than I expected since it broke the 50sma support, so we seemed to have More sellers than we do on the normal pull backs to support. Or Algos tried to do a shake out.
The best thing to do is keep position size reasonable or small and keep positions minimal. Some may even want to go to cash until the storm blows over. If you owned a Gold miner and a Tech stock yesterday, the drop probably seemed minimal. If you owned 10 miners and 10 tech stocks? It probably felt like a major earthquake of uncertainty. So let’s expect more sideways choppiness and be positioned in a way that is most comfortable for your style of trading.
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Enjoy your Tuesday trading!
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~ALEX
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RIOT #1 – Dropped to support midday and I posted this while it was near the lows.
RIOT #2 – It bounced nicely into the close. I was heavily positioned in RIOT buying low and adding too, so I did lower my position size for now, just to make the ride more comfortable.
MARA also dropped after gapping open higher on good news…
MARA also held support so far though and does not look damaged. I don’t Love that the down sloping 50sma is still low, but that can be reversed if price rallies.
