October 30th – Blue Skies Ahead

I want to start todays report by thanking a good friend of mine for sending me this theme picture that he took showing the beauty in New England at this time of year. Thank you Kevin! 🙂

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Our General Markets have a slightly mixed appearance, so I’ll discuss that next:

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SPX – For well over a week I have been saying that we need to expect choppy sideways trading as we approach the US Elections and the next FOMC Meeting, because the markets hate uncertainty. We are seeing that choppy indecision reflected in the charts. Notice that the September lows were not broken…

 

Now take a Look at the DJIA: The lows of September WERE broken. That shows additional weakness and calls into question whether we saw an ICL in September or was that a dcl that will now fail in the SPX & NASDAQ too? With that in mind…

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With that DJIA break of the September low in mind, a bearish outcome becomes just a little more possible.  Will the SPX & NASDAQ break September lows after next week too? I wrote a Bullish and Bearish possibilities in Yesterdays report and will re-post that below.

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#1 NASDAQ BEARISH SCENARIO  – As noted yesterday, we are early in the daily cycle, so we could have 1 month left for this drop to occur.  The a-b-c style may not play out clearly, because the markets didn’t drop further Thursday, they already reversed.  So basically this would be saying that we have another month of trading that could allow for the break down (After the Elections, Earnings season, The Fed Mtg, and Covid affects play out).

 

#2 NASDAQ BULLISH SCENARIO WITH ELECTION JITTERS – Believe it or not, this can remain bullish and the lows may not break.  I have been saying that I expect pre-election choppiness & uncertainty, and we could be just seeing this major choppiness without breaking the prior lows too. This would lead to a post election rally and this would actually be a normal W-Pattern chart set up too.

 

Note: It is possible that the SPX & NASDAQ Hold up and the DJIA just did an undercut that doesn’t reflect weakness through out the rest of the Markets.   At the same time it is a warning signs to me that the DOW was weak enough to trade below that September low.   THAT is how downtrends start, right?  Lower lows and lower highs going forward.

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WTIC – Oil sold off and reversed into the end of the day. It remains choppy and sideways .

 

The XOP is actually starting to show further signs of Bullishness, but I haven’t traded this choppy sector yet. Look at the new lows here with MACD divergence.  I am not trading this sector yet, it could continue to just chop, pop, and drop like it has been over the past few weeks. I’m watching the 34 sma  (red line)

 

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BLUE SKIES AHEAD!   THE PRECIOUS METALS SECTOR IS A LITTLE ‘MIXED’, BUT WE ARE CLOSE TO WHAT SHOULD BE A GREAT PLACE TO FULLY ENTER SOME LONG POSITIONS. I AM EXPECTING AN ICL, MINER ARE RELEASING VERY POSITIVE EARNINGS REPORTS FOR A CHANGE, AND I AM THINKING THAT THAT IS GOING TO ATTRACT SOME OF THE BIGGER VALUE INVESTORS TOO.   I’LL DISCUSS THIS SECTOR CLOSELY  IN THE WEEKEND REPORT.  LETS GO TO THE CHARTS.

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GOLD did not break the last dcl yet. I mentioned that this could be an ICL and now we are back at the lows.  We have an FOMC Mtg next week and we are in the timing for a DCL ( ICL?) at that time and as you all know-  anything can happen with this current set up. I’ll discuss the possibilities in the weekend report.  So far gold is a break out and back test.

 

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Gold looks like a Bullish break out & back test, but SILVER actually still looks more vulnerable. We have discussed the drop to $20ish as a solid possibility. Some Silver miners like HL, EXK, AXU actually still  made new 3 month lows at the open yesterday  (Yet they still look bullish).

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GDX -I am asked: Can this be a dcl?

My Answer: Yes it could be a day 25 dcl, that has happened in the past.

However, lately we have 30+ day daily cycles and that leads us to the fomc mtg.

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  I am not opposed to people having starter positions with a few Miners that they like, especially if they have reversed at support levels.  My job here, however, is the need to remind everyone that in the past we have had very bullish looking set ups that gave way and sold off for 3 big down days, and then recovered.   We could still very easily pop & drop as drawn on the above chart of GDX  for a day 30+ dcl/ ICL. Based on past experience, the FOMC Mtg can be a day of whip saw and slam downs, and for some it gets very emotional if they are riding that out with heavy positions.  Since we are on day 26 on Friday,  I still have to recommend caution, but feel free to test the waters if you feel that you can handle some chop & whip saw heading into next week. With that thought in mind ( can I buy miners and handle the whip saw?), you can think about this too…

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  I mentioned last week that this week could be volatile, choppy, and tough trading with the Elections ahead. Well, what do you think?  Was this a fun week? Did you own anything and get stopped out or decide to sell due to the uncertainty & choppiness?   I did.  Choppy uncertain trading is not really all that much fun  🙂  and so that is what I am saying we could still see with Miners right now as we approach the  FOMC MTG /elections, etc.   Yes, I DO think we are close to the lows. Yes, it is possible that some Miners still will not break their lows (I ‘ll discuss that briefly below),  but being heavily invested in choppy down days and possibly being stopped out on a flash fomc drop is not fun. We have a couple of trading days left to decide how we will be positioned next week.  Each will have to choose based on their risk tolerance. Enjoy your Friday trading.

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~ALEX

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Coeur Mining reported quarterly earnings of $0.16 per share which beat the analyst consensus estimate of $0.09 by 77.78 percent. This is a 900 percent increase over losses of $(0.02) per share from the same period last year.

The company reported quarterly sales of $229.70 million which beat the analyst consensus estimate of $209.36 million by 9.72 percent. This is a 15.16 percent increase over sales of $199.47 million the same period last year.

 

 With good solid earnings, CDE was only up 2.6%.  I would have expected more, maybe this lack of strong buying was due to the FOMC ahead?

 

NEM was up 3% and reversed above support. If the ICL is ahead, we could still see NEM do what it did last May- A shake out.

I WILL WATCH AUY, EGO, CDE, KGC, NEM, etc as they released earnings.  The reports are coming out very strong when compared to past earnings reports.  Look for strong reaction or lack luster.

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YESTERDAY AUY REPORTED AFTER THE BELL:  “Yamana Gold Reports Strong Third Quarter 2020 Financial Results; Highest Operating Cash Flows Since 2015 of $215.0 Million; Year-Over-Year Free Cash Flow Up More Than 300%; Net Debt Declines a Further $148.9 Million”  It was up after hrs about another 2.5%, lets see what it does Friday. 

 

EGO reported solid earnings and I only saw it up 10 cents last night at one point. That is less than 1% for a $12 stock. I will watch how these Miners act today .

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Some Miners like AAU are simply holding up very well with the recent selling. A Miner like this may not break recent lows at the 50sma. At an ICL drop, this may just tag that 50sma again, since this is in a reliable uptrend.

 

AGI reversed right at the 200sma with a bullish earnings release.  This alone is a bullish reversal and in technical analysis it is a buy.

Can you buy this? Could this just push higher, even if Gold sells off?  Sure, it can resist the sell down and if you wanted to buy this you could as long as you understand that it also may break these lows 1 more time after an fomc mtg sell off, if we get one.   It would be a temporary dip that should recover if it happens.

 

FGOVF also reversed off of support and you can see that this one has seen prices slashed.  I look at this and I think to myself- “IF this just returns to former highs, it is a triple!”  It popped 15% yesterday, but you can also see that it sold off day after day after day recently from $1 to $0.50.  If you bought this just 2 or 3 weeks ago, you already got cut in half, but that also shows  how quickly you can also double your money when it rallies.   This may be the final lows at support,  but you know the drill: It could still break down & recover with an ICL ahead.

 

LOMLF – Ralph mentioned this one yesterday and when I looked it up that does have a Bullish Engulfing candle.  These are often representing the lows as being in place actually, and it happened as a shake out.

This kind of reversal is known as a Buy with a stop at the lows. A break higher above that trend line is also a Buy, so I am wondering…

  A break higher above that trend line is also a Buy, so I am wondering  :  Have some of these smaller Miners that have already been cut in half found there lows ahead of the FOMC?  That IS a possibility, since they have already pulled back  quite a bit.  Any further selling around an ICL may be quickly recovered too.

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  I am not opposed to the idea  ( only because we are in a bull market) of small starter positions with Miners that may look promising, even before the FOMC,  but you have to know that the FOMC Day in the past has been a Flash of indecision. We can get false moves in both directions, and it can be difficult to watch if you are heavily invested.   That said, Earnings reports are being released with really good news compared to what we used to hear, and some of these miners could be at or at least very close to their ICL lows.  I will discuss a few other things in this sector in the weekend report.

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NEXT WEEK COULD BE ANOTHER BUMPY RIDE, BUT WE ARE VERY CLOSE TO WHAT SHOULD BE A MULTI-MONTH RALLY IN MINERS.  THERE ARE COUDS OF UNCERTAINTY WITH US NEXT WEEK, BUT THERE ARE ALSO BLUE SKIES AHEAD!