What the Doctor has to say about the markets.
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Doc has some interesting views of the markets today.
I spoke at length with LPG shortly after talking with Doc and they both feel the same way about both gold and the conventionals.
Talking about another one this week.
Thanks for asking Peter.
DOC, which indicator you look to conclude a re-testing the lows on GOLD? ($1070,-)
DOWN IS DOWN………….
All In. No Fear.
What did you go all in on Dave?
Peter, I’m looking at a multiple of indicators on this one.
1. The weekly BBs are trending down at the start of this new move along with the 20 week BB MA.
2. The 50 week MA is trending down and will soon intersect pricing.
3. On the daily charts you have a very wide MACD right now that is signalling that you will soon have to move the 12 day MA closer to the 26 day MA which suggests a reversal move. Also the ADX strength line shows hardly any strength to this move. The green directional line of the ADX is turning laterally and the slow stochastics are in overbought territory and looking like they want to head south.
4. There’s some cyclical support lines which lend validity to a move lower in the future to challenge the recent lows but that could happen weeks from now.
5. The monthly gold chart shows no evidence of a significant move higher at this time.
I would agree with that. We have a topping pattern in gold on the hourly chart today that is probably worth respecting.
Great explanation, Doc! ( the voice of reason )
The Black line on the ADX daily should start going vertical soon.
Good technical analysis doc! I like it!
Hello there. Thanks for those comments.
I have been exchanging some thoughts with “A Listener” and have been looking at coffee a bit these days. I read some articles about droughts in the major producing countries Brazil and Vietnam. Those droughts are supposed to destroy a great part of the coffee crops. Also Columbia is facing its own climatic problems. At the same time coffee consume is slowly increasing. Well…You can go on and on about fundamental reasons that prices should rise.
So, does it have to go down to challenge its’ lows again or can fundamentals also overcome technicals? I understand that almost all the professionals and their trading robot pals use technicals to do their trades. However, after all its a commodity in high demand.
If You found the time to answere or comment on it, this would be great. Thanks.
Best regards
Doc could well be right here. Just today for example, the index I follow most closely (CRB commodity Index) has fallen below its long term support on an intraday level. It will most likely close on the support line by the end of the day though. The point however is we do not yet know for certain if the old lows are going to hold as these are not exactly normal times. Sorry if I was getting a little enthusiastic yesterday but some times I just have to get an idea out of my system. Anyway, coffee also breached a low that I did not like to see although sugar made some modest headway. All I can add is it this bears watching. Sugar and coffee are hardly exciting as metals though and right now they are moving a lot more slowly so no panic to get in the trade until the moment feels right. Just watch and wait.
Well, but we are really seeing a washout in major commodities today. Maybe could it be the week to get in?
So many questions and no definite answeres.
good thoughts A listener.
Nic, I focus on technicals since they’re usually forward looking versus fundamentals which are a current snap in time. Having said that, my charts are telling me currently that the general commodity market has further to fall and that will be a pressure on all commodities. Looking at the coffee chart at this time shows a possible double bottom as Alistener has mentioned. Out of all the soft commodity charts I’ve looked at, coffee shows the best chance of holding at these levels then the other soft commodities. I say this based on the monthly chart where pricing is almost scraping the lower BB while the weekly charts look like coffee may be at risk. What you might see over the next few weeks is that coffee slowly edges down to come even closer to the lower BB of the monthly chart. If that happens and coffee pricing on the weekly charts (CAFE ETF) moves down by December to 12-13 on the CAFE ETF (which it has a very good chance) I would probably look at purchasing with the view that if it then takes out the monthly BB I would cut my losses short since it would tell me coffee has a lot further to fall. I figure strong support is present at that monthly BB and the intermediate cycle at this time tells me that coffee pricing in the next 3 months has to close below this week’s intra-weekly low of 13.30 at which time a new intermediate cycle should begin. I’ll follow CAFE closely over the next few weeks to see if it plays out this way. I hope I’ve not been too confusing in what I posted but I look at a large number of variables when I finally decide to take a position. Thanks for alerting me to coffee since I think the chart shows a lot of promise—-and if the fundamentals are aligning, that makes it all better.
You are welcome Doc. And your way of explaining the logic behind taking a position was well worth the time to read. Twice actually. While we think differently we have come to similar conclusions. Meanwhile over on the major indices my gut tells me the carnage is over for now. I would be wary of chasing any short trades for the time being so I think we both agree on that as well.
A Listener, I agree. I do have a conundrum since common sense and some technicals tell me we are in for some consolidation and possibly some move up but my strength indicators tell me we have a lot further to fall. When I see contradictory patterns I just sit back and wait until the technicals give me a better feel.
My sentiment exactly. I had to get up in the middle of the action today and go out for a walk to clear my head. Too many conflicting trends happening at once. I am still in amazement that gold barely budged more than five dollars on the day.
I mean, seriously!!! The dollar has dropped roughly 400 points in a few days, the Euro soared over 1.17, Platinum blew an artery and was off over 50 bucks at one point and WTI hit a 37 handle.
What the hell else could go wrong to mess with my theories when I first woke up and turned on my computer!
All you can do is laugh at a time like this, collect your thoughts and get back in the ring.
That is certainly correct, Listener!
Good discussion. Lots to mull over and some conflicting patterns for sure.
On this chart of the ETF (CAFE) it looks like it has been consistently making lower lows, but it also just put in a higher high followed by a lower low. Based on the RSI, MACD, and Slow Stochastics, it looks like coffee could still fall a little bit further before getting oversold and then turning up.
http://stockcharts.com/h-sc/ui?s=CAFE&p=D&yr=2&mn=0&dy=0&id=p23009360186
That was a 2 year daily chart above, which is long enough of a time frame to ratchet down the noise of daily fluctuations a bit.
Here is the weekly chart for CAFE over the same 2 year period (showing prior lows):
http://stockcharts.com/h-sc/ui?s=CAFE&p=W&yr=2&mn=0&dy=0&id=p75123900499
Thanks Shad. My feeling is we will not have long to wait to see these softs start moving. They typically become go-to trades (if they are in play) when markets hit a bump so you will notice most everything red but some oddballs like cocoa, OJ or sugar will be going up 4 or 5% or more on the day. Most of us miss those bets because they almost always seem to come out of the blue and there is rarely an explanation for their moves. I recall for a few months it was Natural Gas and Cocoa that was getting the rocket booster on every reversal day in the markets. Kind of like those were the thing the majority of traders all bought when there was nothing else rising. Anyway, its time for these others. So its a matter of being nimble and playing along with what the market seems to do best……mess with our minds!
Well, you got me watching Sugar and Coffee more closely, so thanks for the heads up!
Thanks for the explanation. No, it was not too confusing after reading two times at least. I also understand better now that I am still just too ready to take risks.
But one more thing. When I look at the chart of the CAFE ETF that our common discussion partner proposed, I see it hitting a new low while the standard RSI stays up. The MACD is hovering just around zero and stochastics are oversold.
This suggests to me that there is potential to see rising prices. So, I figure You prefer to see all the indicators coming together since You are focusing so much on the Bollinger Bands.
thanks Doc…………..
Doc,
we probably have a top with the US dollar.
When I look at this chart, maybe the ending diagonal is finish and gold will move higher from here.
– abcde ending diagonal
– divergence on the weekly chart
– MACD crossing.
But we can also go to the top (~1200) and get another leg down (1070-1080)
The dollar is not looking good —the near term path of least resistance (the next few weeks) is down although it wouldn’t surprise me if we move up the next few days.
Thanks for mentioning my pet trades Doc. The added input is appreciated.
A Listener, you’re welcome—but also thank you for alerting me to the soft commodities again. We become so fixated on the hard assets sometimes and then we forget about others that may show more promise. See my comment above about CAFE.
I read it and though it was an excellent and detailed explanation which I really appreciated. All the best to you Doc.
TORONTO/VANCOUVER/SYDNEY (Reuters) – Many of the world’s junior miners are laying down their picks and shovels to start new ventures ranging from egg exporting to medical marijuana farming, as they as try to survive a crash in metals prices by shifting away from exploration.
This is good news, Jason, since it’s like when everyone says the PMs are dead. We’re forming a bottom and I love news like this.
Doc, I made 26% shorting the S&P today but missed a chance at shorting the junior miners. Could have pulled down another 10 – 20% by the looks of the way things are going. To be honest, I did not feel like going through the hassle of making a good faith transfer to cover an unsettled fund trade to net a $100 scalp.
There will always be mining promoters who will do that, Jason. The only ones that I have learned to trust are those with a serious passion for the industry!
Sounds to me that lately has been day trading. If a person is not glued to the screen there could be no point, or dangerous anyway.
You really had to have placed your short trades Friday to enjoy most of the benefits of the declines today. In fact most of the money after the open was being made on the snap back rally in the early part of the morning. So there was still a chance to benefit. At such times it pays to ignore the people shouting about doom and mega-crashes because doing so would have kept you from buying back in and enjoying a fat rebound.
Gold outperform the markets, Im thinkin a better way to have said it would be “gold down less than the market”?
BB, very true. I should have commented about the dow/gold ratio. Some very interesting things are starting to happen with that ratio. It appears the ratio is slowly topping and reminds me how we talked over the last few months about how the conventional markets appeared to be topping. Keep an eye on the dow/gold ratio.
Good thoughts on the Dow/Gold ratio Doc.
No more time today but I would love to get at it tomorrow.
OK….one more post. I think this short article (linked) is well worth a read just to note the handy chart appended. It is from Short Side of long and I do agree with his observation. Actually I made the same note to Matthew on another thread earlier in the day so this is just a confirmation of that idea which is that the “price crash” is over.
To make a long story short just take close note of where the declines on the S&P stopped out. Today’s drop is literally bang on the rising trend channel that has been in play since the crash of 08. And that strongly suggests the declines are effectively ended if this holds.
So I am back to bullish the general markets.
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Tiho writes: “Short Side of Long is calling a bottom on this stock market correction. We want to make it perfectly clear that there is a very good probability that one should expect a turbulent bottoming process with more selling. A retest of the lows will most likely be in the cards, as V trough bottoms are very rare.”
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Capitulation Bottom!
https://shortsideoflong.com/2015/08/capitulation-bottom/
The price crash has not ended, we may see the market turn up momentarily but the worst in prices is not over.
Watch what will happen to real estate it is next on the list of deflationary declines. DT
I like Tiho and visit his site often. It is important to note he still expects a lower low in Sept/Oct due to the seasonal weakness, which has been my thesis as well.
He mentioned the following:
“Seasonality for equity markets is usually weak into September and October and we here at Short Side of Long expect either September or October to mark a major low this year. We saw similar outcomes in October 1987, October 1990, October 1998, September 2001, October 2002, October 2008 and October 2011.”
You’ll want to be long volatility on WEDNESDAY.
The Gold/silver ratio broke out from Friday’s low:
Doc this has been fun to watch especially when I’m 98% in cash.
I agree with you on Gold…..
Have a very small bit of Gold shares but they sold off large 1/2 into the day..Boo Hoo.
I may have to cut my loose…
Yes I agree sell the rally’s on the conventionals!
Bill, we’re entering into a very dangerous area. It could be that not much of anything gets a bid. I know we have further to fall in commodities and won’t see the bottom until the end of the year or the first quarter of next year. I’m watching the technicals of a number of companies that yell at me that they’re going much lower. I don’t see how the conventional markets will be able to stay up with everything else selling off.
DOC
I completely agree! Gold just got smashed and Shanghai woke to another nightmare. Its all very telling. Far as im concerened this was all needed. The wheels have come off the bubble bus.
Im looking for oil to the low 30s then a ralley. Possibly a trading range for years. Commodities as i mention last November and was criticized big time for are done for sometime. Maybe many years??
I think I mentioned I love CASH. keep you finger out if the machine 🙂
Thank you DOC
Al, when you’re going to make another webbinar again?