October 28th – Spinning Wheels
Todays report is going to seem like a review of yesterdays report, because we really didn’t see a lot of change. I mentioned that this week could simply be a choppy week ( WEAK) and that is what we are seeing. We may just continue to spin our wheels until the US Elections pass next week. That can be very boring and frustrating. Let’s look at the charts…
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THE NASDAQ didn’t really gain a lot of traction, but it did close above the 50sma, however…
THE SPX closed down and closed below the 50sma. Not only that, but that MACD is warning us that the General Markets are losing momentum here.
The Dow Jones looks even worse. It closed near the Monday sell off lows. If you look at the Green Arrows, the 50sma has been supportive in the Bull Run, but we are starting to see a bearish look here and the MACD is bearish. This could be a warning sign and needs to be respected. The other sectors in the General Markets may start to follow.
Oil is just plain old choppy and popped higher on day 35. It IS interesting that this reversal came on top of the 200sma, but the XOP dropped yesterday as Oil reversed higher. So far this sector has been spinning its wheels too.
YESTERDAY I SAID ABOUT 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).
GOLD moved up .33% and is still chopping sideways under the 50sma. IS IT STILL POSSIBLE AT ALL that the ICL lows are in at the Green Arrow? …
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IS IT STILL POSSIBLE AT ALL that the ICL lows are in at the Green Arrow, since this broke a down trend line?
That does remain possible, but at this point we have gained no ground if this is a first daily cycle and with the FOMC ahead on day 29, we would be expecting a dip soon too. Gold may even land on the trend line as a higher low DCL if an ICL was already in place. So IF the ICL was in place, we would probably see the major upside move in the 2nd daily cycle, but the first daily cycle would have just been choppy. Right now everything is just choppy, but overall it is definitely a bullish chart.
YESTERDAYS GDX I WROTE: 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).
GDX DAY 23 reversed yesterday and I have drawn a possible bounce and then a drop after the FOMC, since that would be day 29. An ICL ahead would likely give the GDX a tag of the 200sma.
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I want to discuss the set up with the Miners below just a little bit more. Why? I am still seeing such a mixed picture, but so far most of them are chopping sideways and could still really give us good ‘on sale’ prices as they drop into the next dcl (which can be the next ICL). Some miners have already been cut in half from the highs, so that will be pointed out too.
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Yesterday I discussed holding Smaller Position sizes in all areas of these markets as a way to control risk. The market cannot take what you do not have invested if surprises come to the downside, even though that can minimize upside gains. Smaller position sizing also gives you Cash on hand, and Cash on hand & a shopping list heading into the FOMC & US Elections is a great idea too.
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It looks like many areas will just remain choppy as we head into the elections and FOMC MTG next week. Enjoy your Wednesday trading.
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~ALEX
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Let’s be honest here, This set up on Nova Gold (NG) is exactly what I normally look for & buy. We see a reversal at the 50sma and a break of the downtrend that is bullish. So to be honest, this looks like it wants to run to former highs at $12.
If that is the case, why is it hard for me to say that this is a ‘buy’? What is the ‘ICL Ahead’ Scenario?
Notice how bullish NG looked in April & May, but then it dropped. A bullish set up can roll over, especially when a dcl comes due, or especially an ICL dip.
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Now we consider “What if the Miners sell off after the FOMC?” We could see a pop this week for NG and then this drop to back test the trend line and back test the 200sma. So buying here above $11 would see your position at $10 next week. THIS IS WHY CHOPPY MARKETS ARE SO TRICKY.
THIS IS WHY CHOPPY MARKETS ARE SO TRICKY. So I leave it up to the reader, and just explain the situation with the DCL (possible ICL) Still ahead. Anyone can buy a small starter position if they want and just see how it plays out and add later? Or just wait until the FOMC & Elections pass when the DCL is due anyway.
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AG is another set up that I really like. It is sitting on a downtrend (back test) and looks ready to get above the 50sma. So will this run? Or will this pop and then drop to the 200sma again next week when aa DCL is due and the FOMC MTG finishes up? Well…
AGAIN, A MINER LIKE AG could push higher and roll over at the dcl next week like this and the price could get cheaper, so the choice is up to the reader. Start a small position? Wait and see what happens next week?
HMY – Basically we are in a downtrend on many of these Miners since the highs. I rode HMY higher on the last run out of the ICL and sold near the highs. Personally I’m glad that I didn’t ride this chop over the past few months just because I hate riding choppy positions for weeks. I find that frustrating.
IAG really sold off after peaking in August and now does appear to be forming a base along the 200 sma that will become the bottom of a cup. I do see progressive action in many of these miners and a break above the 50sma is bullish, but it could still drop next week after the fomc mtg too, so I have to mention that.
FGOVF -Do you see what has happened by exercising patience here? Freegold dropped from $1.50 to $0.50. Let me explain something about these sell offs..
1. IF YOU BUY HERE at 50 cents and it returns to the highs, you tripled your money! Wow!
2. IF YOU BOUGHT NEAR THE HIGHS, you now need this to double & triple just to break even.
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BKRRF – Blackrock is another of the smaller Juniors / Explorers that has been cut in half.
1. If you buy here & it runs to the August highs, you double your money.
2. If you were buying it in July & August, you now need this to run 100% to just break even. Waiting for an ICL can really pay off for your basket of Miners as they double & triple out of the eventual lows.
So I wanted to discuss Miners briefly here just to show the potential that is coming up in the near future with this sector.
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It is exciting to see the potential with these Miners, isn’t it? Many of these that have been selling off can double, triple and even more than that from here. Even Miners that held up well and maybe pulled back 25% can still double & triple too. The ones that sold off 50%+ (as shown above) can run up 100%+ just to get back to recent highs, forming a bullish cup. They can then continue higher as they triple and quadruple from these current levels over time.
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You can see how a BASKET of Miners can greatly improve your trading account coming out of an ICL. The current count for GDX showing that day 29 is next Wednesday and that is when the FOMC MTG is. I would just have to expect Miners to drop into the DCL from there and offer a nice buying opportunity. Let’s look at GDX one more time with that thought in mind.
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GDX –This can continue to chop sideways or even pop as we head into the FOMC MTG. We are now on day 24 Wednesday and did you notice that we are finally back down to the oversold area on the stochastics? Day 29 is the FOMC meeting, and these daily cycles often last 30-33 days (roughly), so…
1. A sell off to the 200sma after the FOMC MTG would likely be an ICL.
2. If we chop around and sell off to a higher low (landing above the Magenta arrow) what might that mean? That could indicate that the drop in September was the ICL for GDX, but since this sector has been choppy we are still at the September lows anyway. We would expect a rally that lasts for months out of the next low.
3. Overall, we appear to be very close to a strong rally in the Precious metals sector, but it may be choppy and difficult until we get past the day 29 FOMC MTG . The potential gains are great. 🙂
