Nov 192014
 

The following charts were all covered in the recent trio of video updates. Starting with US equities, the $RUT (Russell 2000 Small Cap Index) continues to move lower after backtesting the dual resistance level defined by both its primary bull market uptrend line (blue) as well as the Fibonacci fan line that lines up perfectly with the primary uptrend line. As discussed in the recent Equity Market video, these Fib fan lines, generated off of the March 2009 lows, have done an excellent job of acting as support & resistance from above & below. If my call for a major correction in US equities by year-end/into early 2015 does pan out, the $RUT seems to have the most downside potential. It is also worth noting that unlike the large cap indices ($SPX, $NDX, $DJIA), the small caps have failed to make a new high since the March 5 & July 1st double-top high. Mid-caps (S&P 400 Mid-cap Index) are also still below the double-top highs that were printed around the same time although prices are only slightly below those former highs with the potential to form a triple-top pattern.

$RUT daily Nov 19th

$RUT daily Nov 19th

The first chart below is the daily chart of GLD (gold ETF) that was covered in the recent video whereby I had stated that GLD needs to regain the 115 level and remain above that level. So far, as expected, that large gap down from Nov 3rd has been backfilled and GLD is current challenging the 115 area (trading at 114.93 as I type). To reiterate, if GLD can regain & remain above this level, that would be a very bullish technical event that is likely to bring in new buyers as well as squeeze out some of the shorts that initiated positions on the recent breakdown. It is also worth noting the recent strength in gold and especially the mining stocks in spite of a rising dollar.

The second chart below is the weekly chart of GDX which shows prices continuing to move impulsively higher after the third tag (which is often the final touch) of the bottom of the aforementioned descending broadening wedge pattern, a potential bottoming pattern. Just to reiterate, on a valuation basis alone, the gold mining stocks look very compelling. Should gold (and silver) prices also start to move higher and begin to show signs of a likely trend reversal, the miners have the potential to be one the best performing sectors going into year end and well into 2015. However, there’s still a little more work to be done from a technical perspective to say with a fair degree of confidence that this lately rally is anything but an oversold rally/dead-cat bounce.

Moving on to the other dollar sensitive assets brings us to one of my favorite trades at this time,  USO (crude oil ETF), which I still believe is poised for a potentially sharp reversal following a bear market that has wiped nearly 30% off of the value of USO since the June 20th peak. As discussed in the recent video, both oil & coal have an even tighter inverse correlation to the US dollar than do gold & the gold stocks. Therefore, the success of the USO trade is hinges largely on a reversal in the $USD (3rd chart below). The fact that the USO trade is based off an intraday time frame (120-minute chart) is reflected in the fact that I am more confident in at least a tradable counter-trend correction in the dollar vs. an outright primary trend reversal. I still believe the latter is likely to occur soon but as of now, my focus is on a counter-trend pullback with an expected rise in USO from about 11% (T2) to 20% (T4, the current final target), depending on how the charts play out going forward. Also as mentioned in the video, the coal stocks are just coming off a very powerful run-up and KOL (coal sector ETF) recently ran into the former key support, now resistance level (17.25 area) and may need a little more time to digest the recent gains. The next buy signal in the coal sector will come on a solid break above  the 17.25 area as well as a bullish cross on the daily MACD (both lines) above the zero level.

In summary, I remain near-term bullish on crude oil (USO), gold & silver mining stocks (GDX, GDXJ, SIL, etc…) and near-term neutral but longer-term bullish on the coal stocks.  I also favor a resumption of the recent downtrend in US equities, especially small caps, but have yet to see enough technical evidence to justify adding short exposure at this time other than a very speculative/aggressive position. I’d rather focus on the miners & select commodities versus general equities until I get a better read on the broad market. However, I will say that simply glancing at the daily chart of the $SPX, $COMQ, etc.., I think at the very least, US stocks are looking at a period of sideways consolidation from this point and quite possibly, a considerable retracement of the recent sharp rise off of the mid-Oct lows.

Nov 182014
 
USO 120 minute Nov 18th

USO 120 minute Nov 18th

USO (crude oil ETF) was added as both a semi-aggressive long entry on Thursday with the expectation of an upside breakout of this bullish falling wedge pattern as well as a Long Trade Setup with a more conventional entry to be triggered on an upside breakout of the wedge. Since Thursday, prices have continued to drift slightly lower (about 50 cents) within the wedge but remain well within the typical breakout range of a bullish falling wedge pattern. As discussed in the recent Crude Oil, Coal & US dollar video, the success of this trade hinges largely on a reversal in the dollar.

The specific price targets (suggested sell levels) have been added to this updated 120-minute chart of USO. Price targets for long-side trades are set slightly below the actual resistance level (i.e.- where a reaction is likely) in order to help increase the odds of missing a fill, should the trade reverse just shy of resistance. Suggested stops would be based on at least a 3:1 R/R from the average entry price to the preferred price target(s).

Nov 172014
 

The SOYB (Soybean ETF) long trade hit the second target for a 13% gain last week. T3 (the downtrend line) remains the next target with the potential for additional targets to be added soon. As previously discussed, my preference on this trade is to use the charts of $SOYB (soybean spot prices) in lieu of SOYB (the soybean tracking ETF) in determining the entry & exit points on the soybean ETF as the ETF is thinly traded and the charts are not as clear. As with the other agricultural commodity trade ideas, SOYB has the potential to morph into a longer-term trend trade/investment depending on how they trade going forward. Previous & updated daily charts of $SOYB below:

Nov 172014
 

ANR hit the final target, T2 at 2.99, last week for a 45.9% gain. T1 (2.46) was hit for a 20% gain just a few sessions early. ANR may be added back as a new Long Trade idea soon but as T2 was the final target, the ANR trade has been completed & will now be archived in the Completed Trades category for future reference. Previous & updated 60 minute charts below:

Nov 172014
 
CORN daily Nov 17th

CORN daily Nov 17th

As I’ve spend some time away from my desk over the last few weeks, there are quite a few trade ideas in need of updating. As most of these trade updates are not time sensitive, email notifications will not be sent out on the remainder of the updates.

CORN (Corn ETF) hit the second price target last week. Although the odds of a pullback and/or consolidation around this level are elevated, T3 remains the final target at this time. As prices are still trading in close proximity to the Consider booking partial or full profits and/or raising stops, depending on your trading plan. If holding out for T3, an objective stop would be below the 25 area (assuming an entry on the wedge breakout). Updated daily chart shown.

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