Wednesday September 27th – Waiting
SPX – We had a reversal on Monday and I mentioned that it just seemed to be too early for a dcl. On Tuesday the markets gapped lower and sold off into the end of the day. This is day 26 and I am watching the 200sma as a place that could act as support. Notice, however, that the last ICL in March broke through it and back as a shake out, and that could happen again.
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WTIC – Oil has a pretty solid looking reversal at the 20 sma on Tuesday. It has been chopping sideways lately as a possible 1/2 cycle low.
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YESTERDAY I WROTE:
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Speaking of strong, The USD did break above that prior high in March. I am starting to think that we already saw that 3 yr cycle low, and it may have come in 6 months early. Even if it is, Gold, Silver, and the Miners seem to be ignoring it and setting up bullishly in their own way. As I have mentioned, The USD has moved higher for 10 straight weeks and Gold has NOT dropped for 10 straight weeks. The USD will eventually have to pull back and Gold will likely rally at that time.
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THE USD has been very strong and it held those new highs yesterday. The USD clearly broke above and closed above that prior high in the $1.06 area. We know that last week was the 10th straight week of gains, and so far this is now the 11th straight week of gains.
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I wanted to step back and look at the last Bull Run.
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THE USD had a rally out of the lows and then dropped all the way back to the lows in the last 3 yr cycle low. When it started to run higher, it still dropped & chopped when dcls came due. In the current run, I noticed a bit of a wedge that broke out here (blue line) so I would say that when the USD dips into the next couple of dcls, it could work its way lower & back test that break out as shown. This is just an idea of what we could see, a guess, but the point is that the USD cannot just go straight up forever, and when it starts to pull back, I think that is when we will see Gold rally strongly.
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GOLD -Sold off on day 26 and we know that Gold is dropping into a dcl or ICL. It usually drops into a day 32 low (roughly or on average), and the General Markets still have further to drop, so I have said that I am not doing anything this week. I am just watching how things play out and I have mentioned that even good looking set ups can fail when an intermediate cycle is in decline. The good news is that even with the very strong dollar and drop in Gold, some Miners with good set ups are still acting like a bullish pull back.
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SILVER did not drop as much as Gold did, but it as lower for the day.
The GDX ETF dropped on day 26 and even though it may bounce around, it looks as though it will break the August lows. For GDX to reach a day 32 low, it can drop or chop for another 6 days or so.
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You saw how sharply Gold dropped on Tuesday, but some Miners were still able to ignore it.
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HMY half an hour before the close. Gold was selling off all day long and was down around $18, but HMY was fighting to stay green and above the 50 & 200sma. That is bullish price action on a slam down day in Gold.
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AU was also trying to reverse heading into the close. It closed at $18.18, which is a 20 cent drop for a $18 stock on a day when Gold got slammed. This is encouraging on a rough day for the precious metals.
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So when we are selling down into a dcl or an ICL, all you can do is wait for the reversal and swing low to form within the proper timing. We don’t really know how the selling into that final low will come about at this point. Look at Silver for example:
Right now as I write at 6 a.m. Wednesday, the USD is higher again, but Silver is trying to resist the selling with this tiny reversal candle.
This means that as we drop down into a low, it can be day after day selling in crash mode, or it may be choppy with that Pop & Drop price action. We just don’t know how things will unfold until those lows form. So I am away this week and just watching how things play out. I am not trading, because day 32 is next Tuesday and I would expect a low to develop closer to that time period for the precious metals, and the General Markets can pop and drop lower into next week too. If you are actively trading, Enjoy your Wednesday trading!
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~ALEX
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Sidenote: This is the Economic Data that will be released this week. Thursday looks interesting.
