General Market Analysis contains charts and commentary relating to all aspects of the financial markets including: US and Global stock and bond markets; gold & commodities; bonds & currencies; key market moving stocks; etc…
I’ve covered gold & the mining sector quite extensively lately so I figured that with SLV breaking below it’s mid 2013 & mid 2014 double bottom lows today, I will focus on the “other” shiny metal. By all accounts, today’s price action in SLV (Silver ETF) is bearish… a breakdown below a well defined, uber-watched support level on above average volume. Sell signals don’t get much more clear than that. However, as with gold, I would not be the least bit surprised to see silver break down & even trade below that key support level for several days, possible even several weeks. Assuming that gold & silver are in the latter stages of the cyclical bear market that began in 2011, such a break of support could prove to be a very bullish longer-term event, serving as a wash-out move to shake out the last of the weak-handed longs & usher in a new wave of short selling, the latter of which could provide the fuel for a strong short-covering rally should silver manage to regain this broken support level. Ditto holds true for gold although the “shiny-er” metal is still trading somewhat above its comparable mid & late 2013 double bottom lows.
In this weekly chart of $SILVER (spot silver prices), I have outlined what I believe to be the three most probably scenarios for silver. The first & most likely scenario would be a reversal from at or very near current levels, with today’s break of support being reversed relative soon, by the end of next week latest. That allows for a little more downside in silver as well a gold, which would likely bring to gold to a test of the mid/late 2013 lows. The second most likely scenario (which I’d have to give nearly equal odds to the first now that support has been lost) would be for a half-decent washout move lower that could last as long as a few weeks, although probably not much more than a week or two, bringing $SILVER down as low as the 16 area. Such a move would still have very strong bullish divergences in place on the weekly PPO & RSI, as well as some other key indicators. The most bearish scenario would be that the recent consolidation in silver prices since the late June 2013 lows was simply a bearish consolidation pattern (a large descending triangle) in a much larger bear market, possibly even a new secular bear market. If so, prices are headed much lower over time and may work there way down within this large descending price (bounded by the blue & red downtrend lines). Note: $SILVER is an end-of-day (EOD) chart, with prices updated each evening. The live, annotated version of this chart is also available from the Live Charts page.
Another reason for allowing a little more wiggle-room on gold, silver & the mining sector before throwing in the towel would be my take on the US Dollar. The inverse correlation between the $USD & gold, along with an analysis of the dollar, was recently covered in this Sept 10th update. The 10-year weekly chart of UUP (US Dollar Index ETF) is similar to the monthly chart of the $USD from that previous post and also shows UUP at the same multi-year downtrend line resistance as $USD. Besides the fact that the dollar has
Let’s take a look at the charts of gold from a top-down approach, starting with the weekly chart. As mentioned in some of the previous updates on gold, a solid weekly break & close below the long-term uptrend line on the weekly chart of $GOLD (spot gold prices) would likely open the door for a move down to test the mid & late 2013 lows in gold prices. With $GOLD closing slightly below that uptrend line last week and, barring a very sharp rally into the close tomorrow, it looks like $GOLD will print another weekly close below that key support level, hence, I remain open to the possibility of additional downside in gold before any meaningful reversal. I had also previously stated that because so many eyes are on that mid & late 2013 double bottom, that I wouldn’t be surprised to see gold either reverse just shy of that level or to break below that level (either intra-week or for up to a few weeks) in order to shake out the last of the weak hands via a bear trap/flush-out move before a lasting bottom is put in place in the shiny metal. Of course that is making the assumption that the bear market in gold that began in Sept 2011 has run its course and that it was just another cyclical bear market within a much larger secular bull market in gold that has more room to run. Only time will tell if that proves to be the case but one of the factors that keeps me in the longer-term bullish camp on gold at this time (other than fundamentals) is the fact that even if we do take out the mid/late 2013 double bottom lows, gold prices have a very, very long way to fall before negating (i.e.-undoing) the very powerful bullish divergences that would remain in place on both the weekly PPO (similar to the MACD) and the RSI, as well as several other long-term price & momentum indicators and oscillators.
Moving down to the daily time frame on GLD (Gold ETF), a case can certainly be made that, at the very least, the chances for a short-term bounce in gold are quite elevated at this time. Although this chart only shows 2 1/2 years of price history, if you look back over a decade on a daily chart of GLD you will see that, without fail, every single time the RSI 14 moved below the 30 (oversold) level,
After hitting the first target/resistance level shortly after breaking above the 15 minute bullish falling wedge pattern last week, GDX pulled back to make a marginal new low. Although we didn’t get the immediate upside follow-thru that I was expecting, a potentially bullish case can still be made on GDX as even larger bullish divergences were put in place on yesterday’s new lows. I’ve redrawn the wedge pattern (new uppermost downtrend line) and the divergences on this updated 15-minute chart (the old lines from last week’s chart are now yellow) and my thoughts are summed up in this reply to a question on that unofficial 15-minute GDX trade from last week. Typically, “unofficial” trade ideas are those where my confidence is not a high as it is with the official trade ideas (those assigned to the Trade Setups and/or Active Trades categories).
Q: Randy, You had recently posted a short term trade idea for GDX bounce, resulting from oversold conditions along with three potential targets. Normally I sell my positions when each target is hit but this is such a small time-frame that I am debating if I should hold till T3 or to sell the same way when it reach a target and buy back at the pullback. What do you think ?
A: Tough to say as there isn’t a “one-size-fits-all” answer to that question. It’s really a matter of personal preference (trading style) and you overall take on where GDX might be headed . Although I had thought GDX would have already hit the second or third targets on that recently posted 15 minute chart by now, the trade is still intact with GDX only making a slightly lower low since entry (about 2% below the posted entry level). With that marginal new low even more powerful positive divergences were formed so GDX still has some bullish potential at this point although this trade can still go either way.
The bottom line is this: The second target/resistance level that I posted on that 15 minute chart which comes in around 25.00 is at the bottom of a thin zone. Therefore, if prices can manage to punch above the 25.10ish level, then GDX will likely hit the 25.70ish 3rd & final near-term target from that chart. As far loss mitigation, a move below yesterday’s lows of 23.68 could spark some additional selling so a stop slightly below that level, say 26.60-26.65, would be prudent.
The QQQ has now pushed back to the aforementioned 99 resistance area which is the base of the rounded top pattern which prices broke down from yesterday. This push back to resistance may possibly offer an objective short entry with a stop not too far above, preferably on either a 60 minute or 120 minute (candlestick) closing basis as those are the time frames in which this pattern is best viewed. However, we also have a breakout in the SPY that may pull the Q’s above that 99ish resistance level.
As the Q’s are now testing the recently broken support from below, the SPY has also just broken above this bull-flag pattern shown on this 60 minute chart. My expectation is that this bull flag breakout on the SPY may prove to be a false breakout (bull trap), although until/unless that happens, a short trade on the Q’s here at resistance is likely to fail if the breakout on the SPY sticks and prices continue to move much higher. Although I’m not adding a QQQ short as an official trade idea, I may take a short position but ONLY if the SPY reverses today or early tomorrow and prices move back within the flag pattern (and of course, the Q’s are at or below the 99 level).
It’s been a long time coming and this may be one more in a long string of false alarms (sell signals) but it would appear to me that the QQQ/$NDX (Nasdaq 100) may be in the early stages of the next significant correction. This first chart below is the same $NDX daily chart found under the Live Chart Links sidebar on the right side of the home page of the site (click here to view the live chart). Note how prices seem to be finally rolling over after the recent extreme overbought reading on the RSI 14. In fact, if we look at the only other such extreme overbought readings on this nearly 4 1/2 year daily chart, we can see that although the initial extreme readings were immediately followed by a correction, it was the second, lower 70+ reading on the RSI that preceded the most powerful corrections. As of now the RSI 14 has just clearly rolled off the second, lower overbought reading following the late June/early July extreme (black arrows on RSI). The blue primary uptrend line remains my next major downside target in the $NDX/QQQ.
Zooming down to this 120 minute chart of the QQQ, the Q’s look to have broken down from this rounding top pattern on the break below this horizontal support line around the 99.00 level (now resistance). Unless the Q’s manage to regain that level soon, my expectation is for a move down to at least the 94 area, a drop of about 4.4% from current levels.
AA (Alcoa Inc.) will be added directly as an Active Short Trade here around the 16.62 level following the breakdown of this very steep, nearly 12 month old uptrend line. Targets are shown as T1 & T2 on this daily chart and the exact suggested buy-to-cover levels & stops will follow soon. To add to the case for a reversal in the steep advance in AA over the last year would be the fact that the Dow Jones US Aluminum Index ($DJUSAL) has run into the bottom of a significant long-term resistance zone while at rarely seen overbought levels that have historically preceded major tops in aluminum prices.