Talking About Drops

Seems that lately we’ve been hearing a lot about “Drops” in the markets. Remember when CNBC was reporting that Shanghais drop  may never end until it hits the lows again? Its collapsing!  All drops end, and this one looked like it may just return to the break out.

It did..

And the stock market itself just had a drop, blaming the concerns of China,  Greece , etc as the problem. Lets discuss these drops since GOLD / MINERS starting dropping rather rapidly last week too. Will it end? Of course. Where and when ??  Lets discuss drops …

  The DROP in the general markets stopped, and no doubt you recall that was predicted here based on the Extreme bearish sentiment, Put / Call Ratio,etc.  These extremes lead to trade-able lows, and we learn from them.  Look at  the rally that followed the recent sell off in the stock market.

SPX–  Nice rally out of the lows.   It could pause  / go sideways soon as it is approaching it’s highs and B.B.

SPX WKLY

As a reminder:   I do think we just saw an ICL, so I would expect the markets to look good for a few weeks.  However, this is what I am still watching .  I have been wondering if we are seeing a topping process in the markets.  Maybe just a 10% correction is needed? I have pointed out the wedge pattern and this arc for weeks, so I will show that it I still currently in tact.

QQQ– If we gap open Monday ( higher)  that is actually an exhaustion move that is a sell signal,  a 3 gap play.  ESPECIALLY if it gaps open and reverses lower. That doesnt mean its a ‘short’ candidate, it may drop & just go sideways.

USD – here is 1 of my charts expecting $98

USD – we are in that area now. This does remain a bullish looking chart, but…

UUP – This chart says a pullback is very close.  This ‘Drop” ( likely temporary ) could put the bottom in the Gold “Drop”.

WTIC–  tough one here. I was looking at OIL like it could be a bear flag. It has been rejected at the 10sma, but this looks less bearish short term. Mini reversal on light volume? Neutral & just Watching for now. I expect more downside, but it may tag the 20 or even the 50sma first , as mentioned in prior reports. 

NATGAS– has looked bullish and remains bullish. Tagged the 50sma again.

GOLD SILVER, MINERS

QUICK REVIEW FROM LAST WEEKS REPORTS  ( I have clipped the Wed charts & wording)

GOLD – Wed July 15 had a reversal candle, but it would be better to see a sell off and stop run below $1130.49

GOLD  July 17–  we broke down below $1130.49 & reversed higher.  I would like to see More selling, to really run the stops. It was day 29, we are due for a low very soon.

GOLD WKLY –  At this point it is likely that Gold will sell off sharply and recover, and  I prefer that scenario.  Yes, I said I didn’t think it likely we go to under $1000 yet,  with everyone saying they want to buy Gold down at $1000, but I wish it would drop fast and get it over with honestly.  I wouldnt even mind saying  , ” I was wrong, we hit under $1000 and reversed”, because the Buying opportunity on that reversal could be Huge!

1. Fast drop now to below $1000 ?  ( Still what everyone expects,  so I would be surprised)

2. We just drop a more this week & reverse above $1100 and rally?  I think this likely happens this week.

3. We bounce here and have 1 more daily cycle, a 4th   ( I dont think so, we are seeing extremes in this “Drop”. I expect a more durable rally when it ends).

C.O.T. – this was as of last Tuesday and it already reads at levels where prior ICL’s took place.  After the selling at the end of last week,  this is even going to be lower now.  This isnt a perfect “timing” tool, but it shows that SMART MONEY expects a Gold rally soon.

Miners –

GDX from the Wednesday chart (wkly).  Pointing out that we broke down in OCT below prior lows, and the RSI & Stochastics and a few other things looked similar.  THAT break down in OCT could be what we see now, into an ICL.

Notice that the break of those lows in October didn’t lead to a waterfall sell for many weeks. It was a flash drop & recover .  That Break down was 1 strong week down, and the next week went lower and reversed.

I would expect a reversal in Miners this week, similar to the where Green arrows are pointing out.  I’d like to see Miners start the week selling off, and then reverse.

In my Friday morning update I pointed out that we werent seeing the “Gap” that usually occurs between price and the 9 or 10sma. I had clipped this chart to show the gap I am looking for.  The time of this chart was 9:51 a.m., seen in the upper left corner.

20 minutes later the gap was appearing, the selling was accelerating.

GDX by the end of the day- see the gap we now have between the 9sma and the price. We  accelerated in selling. I see this at ICL’s, but DCL’s are usually not so dramatic.So I think we are seeing an ICL.

I had a few more observations, but this is sufficient for now.  It is 10:30 Eastern time and I want to release this now.   Tomorrow will say a lot and I want to release this Sunday night so that there is more time to read it in the morning or for late night readers and friends in other countries / time zones.  To wrap up the precious metals section,  I am seeing signs that we are nearing a low.  A good trade able one is what is most likely, the ICL, not the DCL.   Time will make that clearer, but the C.O.T. reports, Extreme sentiment charts,  the acceleration in GDX opening that gap between price and the 9sma, and more shows a good buying opportunity is rapidly approaching.

I tried to show in the last chart of GDX that the reversal often happens and the a low is put in with a few days of up & down to shake out weak hands. Buying above the 9sma is a bit easier, to ensure you havent bought a reversal that then breaks to a lower low & stops you out.

WHOA!!!  As I was writing GOLD dropped $50+ and hit $1080, and reversed higher, now down only $25.   They broke the $1100 round number and bought it back.   This chart was just captured at 10:45 Eastern time.   This may just run higher and leave us all behind and crush those who chose to hold their shorts over the weekend  ( Dust or JDST), or we may just bounce and then keep capitulating lower.   This should be interesting!

We’ll have to see how this plays out overnight, it is more volatile than expected,  but you may have just seen the lows at $1080.    Time will tell.   Tomorrow could get very exciting in the precious Metals market  🙂

~ALEX