December 18th – Rate Cut?
Today is the day that the Fed decision on a rate cut is handed down, and I think that we all know what to expect by now, right? – Volatility.
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SPX – The red lines on the chart represent the last 2 Fed days. Both of them were followed by a gap up higher on the next day, which was a Thursday. Notice though that in September that Wednesday saw the markets sell off and in November that Wednesday gapped up higher, so the Fed day was slightly different
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The SOXX started to move higher above the 50 & 200sma on Monday, but on Tuesday it was rejected and gapped down.
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WTIC – Oil continues to chop at the lows and this has had a weakening effect on the Oil stocks, so we’ll discuss what has happened there too.
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RECENT DEVELOPMENTS WITH THE XOP:
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XOP – On Dec 6 I pointed out on this weekly chart that the XOP rally to the $150 area may have only been a ‘back test’ of the breakdown from that bullish channel. Please see the chart.
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THE XOP dropped below the 200sma and the 50sma after that back-test at $150 and started to churn sideways. On December 12th I pointed out that with Oil chopping at the lows and more time left in this daily cycle, this could just be a bear flag before further downside takes place.
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THE XOP broke lower this week from that bear flag. By the time we get to the weekend reports big picture, I could be discussing the possibility of Oil breaking down during the next daily cycle and that would bleed over into the XOP also.
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Do you recall what happened at the last fed rate cut? I couldnt remember so I looked it up.
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GOLD – The last Fed rate cut came as Gold was at the 50sma, and Gold bounced that day, HOWEVER, it rolled over on Thursday and Friday and all of the following week until we got what now seems to be the ICL drop. After seeing this, I think we have a bit of a challenge…
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Interesting observation: Right now, the price of Gold is exactly where it was at the last Fed Mtg, near $2650.
1. The challenge is this: Gold sold off for roughly 5 more days after the last Fed rate cut.
2. Today will be day 23, and lately dcl’s have arrived right around day 24 OR day 30ish.
3. THAT ALONE makes this a tough call, because Gold reversed sharply at the last fed meeting and then sold off Thursday and into next week. Will that repeat or is Gold ready to launch? New positions may need a somewhat tighter stop as a result.
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SILVER had that same reversal on Fed Wednesday and then also sold off a little more into the next week.
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THE GDX also finished that steeper sell off that became what looked like an ICL right down to the 200sma. Remember that Gold is priced right where it was on the last Fed day, but the Miners are still at the lows, so we certainly haven’t been left behind at the lows, we are just looking for the lows.
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So the set up on this Fed Wednesday is a tricky one. Gold reversed sharply on the November Fed Wednesday, but it did sell off further after that.
I’ll just mention this:
The last Fed mtg was on day 20, we were actually preparing for an ICL drop, so a dcl there was actually probably just a little too early. It dropped further and only gave us a day 25 low, but it was a steep drop in that day 14-25 drop. We are currently on day 23 today, right? So we are now in the timing where a dcl could take place today in a first daily cycle, or it may come tomorrow or Friday.
So I would say this in conclusion for Gold: In this Bull Market, several dcls have been arriving a bit early, near day 24, and we are due. The last sharp drop which seems to be the ICL came in at day 25, so we could get a dcl anywhere here and you can wait for the swing low since the Miners do seem to be right at the lows, or start a small basket if you don’t have one and can take a little downside if we get a bit more of a drop.
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So it is a Fed rate cut day, expect a little volatility and we may be close enough to a dcl to start positions if you do not own a basket and can take a little downside if we repeat last November 7th Fed day reaction.
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~ALEX
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THIS WAS MY CHART OF BITCOIN YESTERDAY ONDAY 43 (of a possible 60ish), so I said that …
“It has been climbing higher and it may continue to run higher too, now that it is above that consolidation. It does not have to run straight up to $120,000, but you can see that it is not that far away on this chart. The Crypto stocks DID respond to this run over the past few days, but they are at times still a bit choppy and often don’t close at the highs.”
I decided to take a look at what happened after Nov 7th Fed rate cut. THAT was pretty interesting, it rallied very strongly. That said, please remember that it was only at day 2 and today we are at day 44, so it is a different set up, but nice to see that it rallied steadily after the rate cut. We’ll see if that happens again.
