Timing

It certainly looks obvious that various sectors are starting what could be a significant decline.  I pointed out the VIX and the elephant in the room last week, indicating that one should be coming, it was just a matter of time.  Lets look at the charts …

In this chart of the VIX I was pointing out that tops (maybe just temporary ones) often started with the Vix in the 12-14 area. It also did a reversal Friday

 

So this is what has transpired…

 

The VIX jumped

 

And the markets dropped

  Please Scroll back up to the VIX chart and then that SPX chart. In the past, every time we get a sell off in the markets and a pop in the vix,  the BUY THE DIP crowd comes in and saves the day.   It has been very difficult for those going short to make money,  and those going long have struggled too.  Will that BUY THE DIP reaction happen again now?  I do not think so .  Why?  Summer doldrums say sell in May and go away.  We  also saw  The Dow Theory with transports selling off first  ( That Elephant in the room that was calling for a drop),  and now Volume increased the day after Memorial day/ Holiday.   Thats rare.  Lets review –

 

The NASDAQ is breaking down

 

IWM –  is that a perfect break down and back test?

 

RUT – Same thing? Plenty of room for selling in the stochastics

 

$TRAN – leader of the pack broke down

 

These markets have been really devious,  breaking down and getting people to go short,  only to recover when the buy the dips team steps in, but this looks a little more convincing.  Shorting can be more difficult for some,  because many  like to wait for a trend to start  (A stair step move down)   and then they short the bounces, but at times there are straight down moves that do not offer entry.   Scroll back to the IWM, RUT or SPX chart.  See the sell off in OCTOBER.  VERY hard to short a bounce.

 

Some just take a chance at this point with a stop in place and buy the leveraged ETF such as TZA, SOXS, SDS, DXD and so on. They Popped with volume and are oversold.  I wanted to buy TZA , but I didnt. I’m watching to see whats next,  either follow through or the Buy The Dips team to step in.

Though I feel that the selling will be the winner,  I see a lot of Biotech stocks setting up nicely. The IBB consolidated here and had light selling so far.

MNKD looks bullish.   (See also chart set ups in  CBLI , GALE , BPTH, ANTH, ONTY, BLRX, etc I’m not saying they are all “buys” , but they are bullish for such a RED DAY)

CBLI

The USD – had 3 strong up days , but met resistance last week. Could it break through?

 

Yes, this has strength and so is likely an ICL as mentioned in the weekend report.  The question is, what kind of Cycle will this turn out to be?  That will be important to watch as it unfolds.

 

And the FXE  did break possible support at the 50sma

 

The NATGAS sold down, that was expected . It actually re-gained the 20sma at the close and put in a small reversal candle.  It has been strong, I still like NATGAS longer term.

 

 

$WTIC –  also dipped a little, but OIL has been very strong.  Still eying a possible test of support at the 50sma and prior break out in the $54 area.  While I liked the look of many energy stocks, holding up with the Dollar rocketing.   see  REXX, BAS still above the 50sma,  NADL went green, etc etc  the XLE broke the 50sma and volume was increasing, so keep an eye on that.

 

GOLD/SILVER/MINERS

 

There was damage here, but it was quite odd. With the Dollar surging higher, and the SILVER COT projecting heavy shorts by Smart Money,  Silver did NOT look as bad as it normally would.  Usually Gold drops 1-2 % ,  Miners get CRUSHED , and Silver is down 5%.  Lets take a look-

 

GOLD-    I didnt short GOLD even though this looks ready to slam down.   Why not short it?  It did have high volume selling and its only day 16. The last cycle went 32 days , that could be plenty of downside.  I will explain with the Silver chart.

 

SILVER-  this was  (So far) a normal correction. Silver usually Slams down when Gold drops, so it made me wonder if GOLD could just do what it did in the first daily cycle.   See in that Gold chart  that it did drop hard and then went sideways in the first dily cycle.  It then went sideways.  Look back at the chart of Gold above in April after day 16.   Easy money short?   No.  I do not need to be trading Metals /Miners all the time, and if a set up looks great and questionable at the same time… I need to wait.  Silver will tell me more , probably even today.

 

GDX-  I think this looks ugly and GG & ABX are breaking down too.  This could be a great short using DUST / JDST,  but my gut has me holding off personally. If Gold is in its 2nd daily cycle and continues falling  (Not going sideways) ,  then the  3rd daily cycle will be a much clearer short.

  GDX view #2

  Since the Miners and Silver held up well in April & May,  I can view the miners in a second way.  Until this is negated, I dont want to short GDX.   I want to see the 2nd daily cycle end,  bounce with the start of the 3rd, and possibly short that.

I’m looking at individual Miners and some of the Juniors do not agree with the selling.  Look again at  EGI, TRQ, BAA, GSS  weekly charts.  I still own BAA , GSS, from lower accumulation points.  I see many that look like they are bases, so I will watch to see if they hold or break down .

MUX for example.  Will this break down?

XRA was green with the dollar surge.  This looks like a bullish set up of a base so far , and even looks like it had a shake out in March.

SO here is what I am thinking.  I  feel that the DOLLAR has started a new ICL . Moves out of an ICL are strong, but the dollar can still struggle near highs, go sideways ,  and top out with divergence at those highs.  Then a 2nd daily cycle and then a 3rd unfold.  Will they reach new peaks , or will the dollar top out?  I wonder because  I see many areas in commodities that have looked like they are bottoming for months.  OIL, NATGAS, METALS, The CRB, etc.  I am looking for possible trend changes.  SPX, DJIA, IWM, RUT, etc  ran strong with the strong dollar,  now they look to be floundering .  I want to keep an eye focused on this big picture.  If it materializes, you are going to see huge opportunities to make great money materialize in the Metals/ miners.

 

For now we trade the wiggles  if we are traders in front of the screen.

 

~ALEX

 

MDR

CYH – 9 month consolidation

 

 FMSA

 

SODA- I pointed this out May 8 with 2 charts.  This was may 8 , and it Still good

SODA now

JRJC–   in Tuesdays sell off.  I have traded this. It runs well, but has been jittery lately.  Nice volume higher on a sell off day in the markets.  In October it almost doubled on that run .  It looks to be breaking from its base now

Pointed out SEM WKLY may 20

SEM yesterday after the sell off

 

See also  AKAO, JD, ABIT