Trader Scott’s Market Blog
October 13, 2016
The stock market appears to be benefiting from some sort of “official ?” support, which can certainly continue for 4 more weeks, but that doesn’t change my view on anything. But postponing a very needed selloff in the stock market will likely make a future selloff more severe. I have recently been chronicling the sectors which I am watching for shorting opportunities, for example – all interest rate sectors (VNQ, XLU, JNK, MUB, XLF,XLF/transports/biotechs/energy (not natural gas). And into next month we should see a significant selloff and then a good tradeable low. But it’s next month where the volatility really ramps up. Lastly, to repeat:range compression always leads to range expansion –ALWAYS.
As to gold, a while ago I identified Q4 of 2016 as being the “ideal” time for a retest of the December 2015 low at $1043. And next month in particular for a retest of that low – at a higher low – and an outstanding investable low. So for now, PMs should be a good trading market, but at a bare minimum, I would expect a test of last Friday’s low of $1243. However, the much better opportunity would be under $1200 (preferably under $1191).
For those who have requested some shorter term outlooks, an update on – gold (GDX)and the stock market (SPY below), are included with annotated charts.And I know that some of you entered a short term trade in GDX around last week’s lows. We are currently right into resistance areas, so be aware of that.
I received a question this morning about the recent weakness in the general stock market and gold strength today. The Q and A isbelow. But generally, as I keep saying, I’m very concerned about global stock markets. But on a very short term basis – I have been posting this60 minute chartof the SPY (stock market) for the last 4 weeks. I’ve had the short term support level (212.30) drawn in (which was a level I was watching for atrade only) for the last 4 weeks. We tested that level this morning. While on a very short term basis, there was a long side trade today (on the sell top running), the temporary break below support does also have significance in the bigger picture – as support levels often need to be weakened firstbeforethey eventually give way. And to point out again for those interested in short term trading, today in the SPY is another example of buying into supposedly “broken support”. Buying into “broken support” is one of the highest probability trades out there. But almost everyone is afraid to do it. I was also in my early days. But just be aware, you mustbe adamant about taking, at least, partial profits.
Q: You mention liquidity flows which I have heard others talk about as well to determine the direction of the market. Today, the general markets is looking very weak but the gold shares and gold are holding up pretty well. Is liquidity finally moving from the stocks to miners and gold, like what happened after 2000 when gold/silver stocks blasted higher and the highly speculative technology stocks tanked?
A: Liquidity flow is very nuanced and tricky. But it basically refers to QUALITY demand and QUALITY supply. That’s what we have to judge. And no today itself is not part of that. And I do expect lower lows for PMs, but I do expect those lower lows will see a tremendous amount of quality demand to resurface. Some already appeared last week. But short term, general stock markets are at support levels, so it’s not a great place to turn bearish (short term).
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.
October 14, 2016 @ 11:29 am Martin
Thanks for the update. Don’t stop posting. All good information.
October 14, 2016 @ 11:41 am traderscott
That’s the plan Martin. Thank you.
October 14, 2016 @ 11:49 pm Mark
Hi Scott, you often refer to “PMs” – what’s that an acronym for? Thanks for your valuable sharing!
October 14, 2016 @ 11:59 pm traderscott
Thanks for pointing that out Mark. I have to do a better job with the acronyms. It means precious metals.
October 27, 2016 @ 10:40 pm Karl
Hi Scott, I only recently come across your Blog. Very, very informative; thank you! You mentioned Nat gas on Oct. 13. Am very interested what you think about natgas now?! I suppose it depends mostly on the weather?
Thank you. Karl
October 27, 2016 @ 11:20 pm traderscott
I started talking about nat gas back in March, Karl. As I believed the March 2016 time frame would generally be the major low for the commodity markets, with some commodities having a re-test of those lows in this time frame now , and Q1 2017 for e re-test by the energy complex. But my point about nat gas in that post you cited was I am much more bullish LONG TERM on nat gas than I am on crude oil. But I would NOT buy it now. It needs a much bigger correction first, and I’m only shorting crude, not nat gas. As far as weather, I know nothing about it, and therefore it plays very little part in my work. But I will say that in an overall bullish market, the exogenous factors can serve as a turbo booster. I’ve done some posts about “global warming” talking about that subject.
October 28, 2016 @ 12:54 am Karl
Scott, thank you for your quick and lengthy reply.