March 20th – It’s a Fed Wednesday
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DATA – The Fed is not expected to cut rates this time around, but the real market mover may come when he speaks at 2:30 p.m. and then does his Q&A around 3 p.m., so I would just expect volatility in the final 2 hrs.
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SPX -These markets have been very resilient, and each sell down seems to be met with buyers and Tuesday was no exception. We are due for a dcl, and sometimes they form in stealth manner by forming in a triangle or pennant pattern. If we do get a market dip, it should not last long.
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Sometimes a dcl will form in stealth manner by forming in a triangle or pennant pattern. Could we possibly be seeing that here if we don’t break lower with the Fed Mtg? I’ll show you why it is a possibility, but keep in mind that I would prefer to see and I expect to see a more SOLID DIP after the Fed day…
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Why might we have a stealth dcl form here?
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1. THE XBI does look like it dropped into a dcl already. It reversed at support, so we’ll see if the selling has ended. Normally this would be a ‘buy with a stop’, but that is hard to do with the Fed Volatility that we usually get.
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2. Take a look at the THE SOXX: It also looks like it has a drop into a dcl, and it has reversed at support. This makes me wonder if the SPX & NASDAQ are just stronger and a milder dip has formed a pennant dcl? This dip with the SOXX is very clear to me. Also….
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DOW JONES -The Dow practically went sideways at the last dcl, right? When I look at that dcl, it did turn the 10sma slightly lower. I feel that I am actually seeing that here too. So the SOXX is down, XBI is down, DOW turned the 10sma lower, NASDAQ & SPX have triangles or pennants and we are near day 50. IF THE FED STARTS A RALLY, we may have our dcl. I will say 1 more thing though…
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I will say 1 more thing though: If we have such a mild dcl and we simply move higher after a sideways dcl, we will be in the 3rd daily cycle and THAT Daily Cycle might ‘peak’ earlier. The markets have been very strong, but without a good dip to change sentiment or give it a good breather, it may peak with daily cycle number 3 and give us a pull back. .
WTIC – From ‘Choppy” to ‘making progress’. Oil has more follow-through and we are on day 30 as a ‘peak’, and that should make this right translated. The last daily cycle was 35 days long, so this may start to dip soon and back test the breakout, or we go back to longer daily cycles and this can push even higher.
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THE XOP still looks like it wants to break out too, so if Oil is R.T. and can travel higher (either now or in the next daily cycle), we may see an energy sector break out of a multiyear consolidation.
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The USD pushed higher and even broke that downtrend line. As this pushes higher, Gold can drop into dcl. Today is a Fed Day, and the USD is often very much affected by his 2:30 Speech.
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GOLD DAY 24:
Gold is not really dropping, but it has moved below the 10sma. Instead, it looks to be forming a bull flag or bullish pennant. Tuesday was day 24 and a breakout upside through that downtrend line could signal that a stealth dcl is in place and could signal one of those short daily cycles too. In fact, with technical analysis, you buy the break of that apex and place a stop under recent lows, because we can get a false break out too. THIS IS ACTUALLY A VERY TOUGH SET UP ON A FED DAY.
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SILVER really hasn’t put in a dip, so it would seem that we need a dip in this sector for a clear dcl to form. Let me say, however, that if this is one of those 33+ day daily cycles we could rally higher and then dip. In fact…
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In fact, I have already mentioned a few times that we could see this with a 33+ day long daily cycle.
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GDX gave us more of what we expect to see when dcl timing arrives. If the USD runs a bit higher, Gold and The GDX can move lower, but I expect buying to keep this from falling very far. Here I see the 50sma is at the 50% Fib area, and that is a good place to keep your eyes on if we drop further.
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It is a Fed Day and we all have seen intraday how we can get a SURGE higher (or lower) at 2 p.m., and then a sharp drop in the other direction at 2:30 p.m., followed by a lot of choppiness and indecision. These days can be a bit hypnotizing, but what we want to do is focus on the BIG PICTURE. When I look at the current set up for the Miners, this set up could lead to a very strong trending move higher as Miners and Silver play catch up to Gold. Gold itself has a very bullish break out to all time highs. Gold could run up to over $3000, and when that run happens the profits for Miners should increase, with each earnings surprise should be to the upside. So while today is a tricky Fed day and we are looking for a dcl to form and start the 2nd daily cycle, please remember the Bigger Picture.
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Enjoy your Fed Wednesday if possible 🙂
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~ALEX
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BITCOIN is on day 57 with a new low here. Anywhere in this area could be a dcl ‘time-wise’, but I was expecting a deeper dip and there is time for that too. This could be the a-b-c down that I showed yesterday, but we also could get a 5 wave down drop, so that is our set up for now. Bitcoin dropped to a new low overnight, it may bounce to that 10sma, and we’ll see if it can break back above or if that acts as resistance?
