Rebounding Gold and the Many Triggers

Everything good comes to its end sooner or later, and no ascent lasts forever as Icarus would confirm. That could very well apply to the current situation around PMs.

Speaking of indications pointing to the situation being excessive, let’s take a look at the USD Index.

Remember when in early 2018 we wrote that the USD Index was bottoming due to a very powerful combination of support levels? Practically nobody wanted to read that as everyone “knew” that the USD Index is going to fall below 80. We were notified that people were hating on us in some blog comments for disclosing our opinion – that the USD Index was bottoming, and gold was topping. People were very unhappy with us writing that day after day, even though the USD Index refused to soar, and gold was not declining.

Well, it’s the same right now.

The USD Index is at a powerful combination of support levels. One of them is the rising, long-term, black support line that’s based on the 2011 and 2014 bottoms.

The other major, long-term factor is the proximity to the 92 level – that’s when gold topped in 2004, 2005, and where it – approximately – bottomed in 2015, and 2016.

The USDX just moved to these profound support levels, and it’s very oversold on a short-term basis. It all happened in the middle of the year, which is when the USDX formed major bottoms on many occasions. This makes a short-term rally here very likely.

While it might not be visible at the first sight (you can click on the chart to enlarge it), the USD Index moved briefly below the long-term, black support line and then it invalidated this breakdown before the end of the previous week. This is a very bullish indication for the next few weeks.

We even saw a confirmation from USD’s short-term chart.

The U.S. currency is finally after a decisive short-term breakout. In fact, it’s already after two short-term breakouts. Looking at the short-term picture only, the USD’s sideways trading could be both: a triple-bottom pattern, or a flag consolidation pattern. The former would be bullish, and the latter would be bearish. Based on the previous long-term chart, the bullish interpretation is stronger.

Back in March, the short-term breakout in the USD Index was the thing that triggered the powerful rally in it, as well as a powerful plunge in the precious metals market. It’s generally a good gold trading tip to monitor the USD Index’s performance.

Consequently, based on this analogy, the implications for the near term are bearish for the PMs. Especially, when we consider the fact that Gold Miners Bullish Percent Index showed the highest possible overbought reading recently.

The excessive bullishness was present at the 2016 top as well and it didn’t cause the situation to be any less bearish in reality. All markets periodically get ahead of themselves regardless of how bullish the long-term outlook really is. Then, they correct. If the upswing was significant, the correction is also quite often significant.

Please note that back in 2016, there was an additional quick upswing before the slide and this additional upswing has caused the Gold Miners Bullish Percent Index to move up once again for a few days. It then declined once again. We saw something similar also this time. In this case, this move up took the index once again to the 100 level, while in 2016 this wasn’t the case. But still, the similarity remains present.

Back in 2016, when we saw this phenomenon, it was already after the top, and right before the big decline. Given the situation in the USD Index, it seems that we’re seeing the same thing also this time.

Please note that back in 2016, after the top, the buying opportunity didn’t present itself until the Gold Miners Bullish Percent Index was below 10. It’s currently above 70, so it seems that miners have a long way to go before they bottom.

Gold stocks declined significantly last week, after which they paused. Their performance is weaker than it was in early March, but this can be explained by smaller size of gold’s rebound.

Back in March, gold moved back to its previous highs (in fact it moved slightly above it) before topping and right now, it’s consolidating lower. Still, we should keep in mind that there’s also the possibility that gold won’t repeat the March performance to the letter and history will rhyme instead.

Consequently, it might be more useful to monitor the market for signs of weakness and to pay extra attention to the time factor.

After all, time is more important than price; when the time is right, the price will reverse.

Back in February, it took 4 days after the top for the miners to form their initial bottom and we saw the same thing also this time.

Back then, it then took 4 (closing prices) or 5 (intraday extremes) trading days for the miners to top. Today will be the 4th trading day after the bottom, so if the history is to repeat itself with regard to time, miners might form the final top today or tomorrow. This would be in tune with where the general stock market is trading right now. It’s so close to its previous high that it could easily break to new highs and then invalidate this breakout today or tomorrow.

If gold does indeed rally to the previous highs or even moves slightly above them, we don’t expect miners to do the same thing. In fact, we think that they would be likely to top close to the 61.8% Fibonacci retracement level (at most) – at about $43.

The downside target for the mining stocks is very far from the current price. However, if the stock market declines significantly once again, miners can indeed fall far, even if gold declines by “only” a couple of hundreds of dollars.

We marked also an interim price target that’s based on a few other techniques, with a red ellipse – at about $31 – $32. One of the techniques is the 50% Fibonacci retracement level based on the March – August rally, and the other two are the February high, and the May and June lows. That’s also where – approximately – we have the 200-day moving average. The latter is not particularly strong in case of the GDX ETF, so we wouldn’t say that it creates any significant support on its own, but it serves as a good confirmation of the other techniques.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details such as the interim target for gold that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Gold Is Starting Its Move

Everything good comes to its end sooner or later, and the higher one rises, the deeper one falls. These could very well apply to the current situation around PMs.

Speaking of indications pointing to the situation being excessive, let’s take a look at the USD Index.

Remember when in early 2018 we wrote that the USD Index was bottoming due to a very powerful combination of support levels? Practically nobody wanted to read that as everyone “knew” that the USD Index is going to fall below 80. We were notified that people were hating on us in some blog comments for disclosing our opinion – that the USD Index was bottoming, and gold was topping. People were very unhappy with us writing that day after day, even though the USD Index refused to soar, and gold was not declining.

Well, it’s the same right now.

The USD Index is at a powerful combination of support levels. One of them is the rising, long-term, black support line that’s based on the 2011 and 2014 bottoms.

The other major, long-term factor is the proximity to the 92 level – that’s when gold topped in 2004, 2005, and where it – approximately – bottomed in 2015, and 2016.

The USDX just moved to these profound support levels, and it’s very oversold on a short-term basis. It all happened in the middle of the year, which is when the USDX formed major bottoms on many occasions. This makes a short-term rally here very likely.

While it might not be visible at the first sight (you can click on the chart to enlarge it), the USD Index moved briefly below the long-term, black support line and then it invalidated this breakdown before the end of the week. This is a very bullish indication for the next few weeks.

We even saw a confirmation from USD’s short-term chart.

The U.S. currency is finally after a decisive short-term breakout. In fact, it’s already after two short-term breakouts. Looking at the short-term picture only, the USD’s sideways trading could be both: a double-bottom pattern, or a flag consolidation pattern. The former would be bullish, and the latter would be bearish. Based on the previous long-term chart, the bullish interpretation is stronger.

Back in March, the short-term breakout in the USD Index was the thing that triggered the powerful rally in it, as well as a powerful plunge in the precious metals market. It’s generally a good gold trading tip to monitor the USD Index’s performance.

Consequently, based on this analogy, the implications for the near term are bearish for the PMs. Especially, when we consider the fact that Gold Miners Bullish Percent Index showed the highest possible overbought reading recently.

The excessive bullishness was present at the 2016 top as well and it didn’t cause the situation to be any less bearish in reality. All markets periodically get ahead of themselves regardless of how bullish the long-term outlook really is. Then, they correct. If the upswing was significant, the correction is also quite often significant.

Please note that back in 2016, there was an additional quick upswing before the slide and this additional upswing has caused the Gold Miners Bullish Percent Index to move up once again for a few days. It then declined once again. We saw something similar also this time. In this case, this move up took the index once again to the 100 level, while in 2016 this wasn’t the case. But still, the similarity remains present.

Back in 2016, when we saw this phenomenon, it was already after the top, and right before the big decline. Given the situation in the USD Index, it seems that we’re seeing the same thing also this time.

On Friday, gold stocks declined significantly, and they moved visibly below their July 27 high, even though gold ended its Friday’s session almost $100 higher. Mining stocks’ underperformance is quite extreme, especially that it’s connected with silver’s very strong short-term performance. This is what we usually see when the precious metals market is topping.

Please note that the miners topped almost right at the vertex of the huge rising wedge pattern. Quoting our previous analysis:

(…) huge rising wedge pattern is about to form a vertex today or tomorrow. The same rule that applies to triangles has implications also here. The vertex is quite likely to mark a reversal date. Given the overbought status of the RSI (given today’s upswing, it’s almost certain to move above 70 once again) as well as miners recent unwillingness to track gold during its continuous rally, it’s highly likely in my view that this will be a top.

The downside target for the mining stocks is very far from the current price. However, if the stock market declines significantly once again, miners can indeed fall far, even if gold declines by “only” a couple of hundreds of dollars.

We marked also an interim price target that’s based on a few other techniques, with a red ellipse – at about $31 – $32. One of the techniques is the 50% Fibonacci retracement level based on the March – August rally, and the other two are the February high, and the May and June lows. That’s also where – approximately – we have the 200-day moving average. The latter is not particularly strong in case of the GDX ETF, so we wouldn’t say that it creates any significant support on its own, but it serves as a good confirmation of the other techniques.

And they’re pointing one way…

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details such as the interim target for gold that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The Trifecta of Key Signals for Gold Miners

Nothing lasts forever, and the brightest flame burns itself out the fastest. That could very well apply to the current situation around PMs.

Speaking of indications pointing to the situation being excessive, let’s take a look at the USD Index.

Remember when in early 2018 we wrote that the USD Index was bottoming due to a very powerful combination of support levels? Practically nobody wanted to read that as everyone “knew” that the USD Index is going to fall below 80. We were notified that people were hating on us in some blog comments for disclosing our opinion – that the USD Index was bottoming, and gold was topping. People were very unhappy with us writing that day after day, even though the USD Index refused to soar, and gold was not declining.

Well, it’s the same right now.

The USD Index is at a powerful combination of support levels. One of them is the rising, long-term, black support line that’s based on the 2011 and 2014 bottoms.

The other major, long-term factor is the proximity to the 92 level – that’s when gold topped in 2004, 2005, and where it – approximately – bottomed in 2015, and 2016.

The USDX just moved to these profound support levels, and it’s very oversold on a short-term basis. It all happened in the middle of the year, which is when the USDX formed major bottoms on many occasions. This makes a short-term rally here very likely.

We even saw a confirmation from USD’s short-term chart.

The U.S. currency finally after a decisive short-term breakout. Back in March, the short-term breakout in the USD Index was the thing that triggered the powerful rally in it, as well as a powerful plunge in the precious metals market.

Consequently, based on this analogy, the implications for the near term are bearish for the PMs. Especially, when we consider the fact that Gold Miners Bullish Percent Index showed the highest possible overbought reading recently.

The excessive bullishness was present at the 2016 top as well and it didn’t cause the situation to be any less bearish in reality. All markets periodically get ahead of themselves regardless of how bullish the long-term outlook really is. Then, they correct. If the upswing was significant, the correction is also quite often significant.

Please note that back in 2016, there was an additional quick upswing before the slide and this additional upswing has caused the Gold Miners Bullish Percent Index to move up once again for a few days. It then declined once again. We saw something similar also this time. In this case, this move up took the index once again to the 100 level, while in 2016 this wasn’t the case. But still, the similarity remains present.

Back in 2016, when we saw this phenomenon, it was already after the top, and right before the big decline. Given the situation in the USD Index, it seems that we’re seeing the same thing also this time.

On Friday, gold moved higher once again, but senior mining stocks refused to move to new highs. They didn’t manage to even erase their Thursday’s decline. The volume that accompanied this daily upswing was relatively low. This means that it’s likely that this is a counter-trend bounce, and not the bigger move higher.

Miners were the first to top, and the short-term breakout in the USD Index indicates that other PM markets are likely to follow.

Please note that the miners topped almost right at the vertex of the huge rising wedge pattern. Quoting last week’s analysis:

(…) huge rising wedge pattern is about to form a vertex today or tomorrow. The same rule that applies to triangles has implications also here. The vertex is quite likely to mark a reversal date. Given the overbought status of the RSI (given today’s upswing, it’s almost certain to move above 70 once again) as well as miners recent unwillingness to track gold during its continuous rally, it’s highly likely in my view that this will be a top.

Combine the USDX situation with Gold Miners’ Bullish Percent and vertex-based reversal, and you get a high likelihood of lower prices in miners next.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details such as the interim target for gold that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The Key USDX Sign for PMs

Yesterday’s session was indeed volatile around the FOMC, just like we warned, and gold even moved to its previous high, likely forming a double-top pattern. Even though gold moved higher on an intraday basis, it didn’t invalidate its previous breakdown, which was a bearish sign. Gold was likely to decline, and it is declining so far in today’s pre-market trading.

The above chart shows just how precisely yesterday’s upswing ended at the previous support line, verifying it (most likely finally) as resistance. The implications are bearish.

The next short-term support is at about $1,850, but we don’t think that the decline will completely stop there. Instead, after a pause or corrective upswing, a move to about $1,700 – or even lower is likely in the cards. Naturally, this is based on the information that we have available at the moment of writing these words, and the outlook could change in the future.

Why? Because of the confirmations from other markets, including silver and – perhaps most importantly at this time – the USD Index.

Just like gold, silver moved back to its previous support line and verified it as resistance. It seems that both markets are waiting for USD’s rally (which is likely to arrive shortly) to plunge.

And what did the USD Index do recently?

While gold didn’t move back above its rising support / resistance line, let alone the previous high, the USD Index did move below its previous low.

This means that after a powerful short-term rally, gold is refusing to react to additional bullish indications. This is a strongly bearish sign. Naturally, gold’s verification of its breakdown is bearish as well.

The USD Index itself is also very important, because while the move to new lows is not encouraging, it’s worth keeping in mind that the early March bottom was actually a series of tiny bottoms, when the initial bottom was broken by just a little right before the USD soared.

Consequently, the loss of USD’s bearish momentum might be the thing that one should focus on at the current juncture, and view the breakdown as bearish only if it is confirmed. At the moment of writing these words, the USD Index is already back above its Monday’s intraday low.

At the same time, the USD Index is attempting to move back above its declining short-term resistance line. It seems that this attempt might finally succeed. Let’s keep in mind that breaking above the analogous line in early March was the start of USD’s powerful upswing.

Zooming out shows that there’s a very good reason for the USD Index to rally here.

The USD Index just moved to the early-2018 lows, which were also the mid-2015 and 2016 lows (approximately). Additionally, the USDX moved to the rising long-term support line based on the 2011 and 2014 bottoms. And it all happened relatively shortly after the USDX moved below two important Fibonacci retracement levels: 61.8% retracement based on the 2018 – 2020 rally, and the 38.2% retracement based on the 2014 – 2020 rally.

All the above-mentioned factors suggest that the USD Index is going to rally in the very near future. Gold has been magnifying USD’s tiny shows of strength, which suggests that any really visible rally in the USDX is likely to trigger a big sell-off in gold.

And a big sell-off in gold is likely to translate into an even bigger plunge in the gold stocks.

During Monday’s session, miners reversed on big volume and it happened almost right at the vertex-based reversal. Gold stocks then continued to decline on volume that was not minor.

So far, the decline was relatively calm, but let’s keep in mind that the same was the case during the first three trading days of both early-2020 declines. The GDX ETF declined rather insignificantly in late February, and the same was the case in the early March.

The important detail is that while gold moved to the precious high during yesterday’s session, gold miners didn’t. Their underperformance relative to gold along with the RSI above 70, and the recent reversal make the outlook very bearish for gold and silver mining stocks.

Summing up, it seems that gold has formed a double-top pattern, just as the USD Index seems to have finally bottomed. Gold and silver have both reacted very strongly to the USDX developments, which has very bearish implications for the following days. The verifications of the very short-term breakdowns in gold and silver serve as bearish confirmations.

The miners have reversed this week on strong volume and practically right at the vertex-based reversal, and it all happened after they had flashed the extremely overbought signal through the Gold Miners Bullish Percent Index.

The implications are very bearish for the next several days – weeks.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple other details such as the details of the current trading position.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Translating the Gold Index Signal into Gold Target

Last week, we wrote that gold miners flashed an “extremely overbought” signal, which they had only flashed once in the past – almost right at the 2016 top. The Gold Miners Bullish Percent Index recently moved to the highest level that it could reach – 100.

The only other case when the index was at 100, was in mid-2016.

We marked this situation with a vertical dashed line. Did miners continue to move higher for a long time, or did they move much higher? No.

Precisely, the index reached 100 on July 1st 2016, and gold mining stocks moved higher for two additional trading days. Then they topped. This was not the final top, but the second top took miners only about 5% above the initial July high.

This year, the index reached the 100 level on July 2nd – almost exactly 4 years later, and once again practically exactly in the middle of the year. Miners seemed to have formed the intraday high on July 9th – four trading days later.

It’s not justified to assume that the delay in the exact top would be 100% identical, but it seems justified to view it as similar. Two-day delay then, and four-day delay now seem quite in tune, and this similarity supports a bearish prediction for gold.

There’s also one additional point that we would like to emphasize and it’s the previous high that the index made on November 9, 2010. That was the intraday top, so there was no additional delay. There was one additional high about a month later, in December, but miners moved only about 1.5% above the initial high then.

One might ask if mining stocks are really overbought right now given the unprecedented quantitative easing, and the answer is yes. Please note that in 2016 the world was also after three rounds of QE, which was also unprecedented, and it didn’t prevent the miners to slide after becoming extremely overbought (with the index at the 100 level). The 100 level in the index reflects the excessive optimism, and markets will move from being extremely overbought to extremely oversold and vice versa regardless of how many QEs there are. People tend to go from the extreme fear to extreme greed and then the other way around, and no fundamental piece of news will change that in general. The economic circumstances change, but fear and greed remain embedded in human (and thus markets’) behavior. Taking advantage of this cyclicality is the basis for most (if not all) gold trading tips and the same goes for other markets.

Today, we would like to dig deeper into the analogy to the 2016 top. There are more similarities than just the most-extreme reading from the Gold Miners Bullish Percent Index.

In order to do that, let’s zoom in.

Back in 2016, the extremely overbought (100) reading from the Gold Miners Bullish Percent Index resulted in a small decline, which was supposedly a verification of the breakout above the previous (2013 and 2014) highs. Then we saw another final move back up and that was the top for the next few years.

What happened recently? The extremely overbought reading resulted in a decline back to the previous 2020 high and then another move higher. This is very similar to what we saw in 2016.

What happened in the GDX ETF with regard to its own technical indications?

Well, shortly after the extremely-overbought reading, the GDX ETF moved lower and broke below the rising medium-term support line. It then moved back up and topped slightly above the previous highs. When the rising support line was more or less at the same price level as the previous high, GDX broke below it and formed a top that was not exceeded for a few years.

And what happened recently in the GDX?

Pretty much the same thing. Shortly after we saw the extreme (100) reading from the Gold Miners Bullish Percent Index, GDX broke below its rising medium-term support line. It then moved back up, and while it didn’t move to new intraday highs, Friday’s closing price was slightly above the previous 2020 high.

The rising medium-term support line just moved to the previous high as well.

The history has been repeating to a very considerable (quite remarkable) extent, and if it continues to do so – which seems likely – we’re likely to see a sizable decline shortly. In fact, Friday’s high might have been the high for the next few months. If not, then such a high is very likely to form this week.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details such as the interim target for gold that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The Curious Story of the Miners’ Breakdown

What we previously wrote about mining stocks’ breakdown and yesterday’s upswing, might seem like something that invalidates it or something that’s just nonsense. In reality, it’s one of the common patterns that we see after breakdowns – the price comes back to the previously broken level or line in order to check whether it’s able to get back above it. If it’s not, the breakdown holds, and it becomes verified. This increases the odds for decline’s continuation. Conversely, if the move higher takes the price above the certain level or line, the breakdown becomes invalidated and the signal for the opposite side (here: bullish) is created.

What if both: verification and invalidation take place at the same time? This can’t happen with regard to the same line, but if a given line or level is considered based on different perspectives or different prices (intraday, daily closes, weekly closes, monthly closes, quarterly closes), the “same” line might actually be slightly different. Which indication should one trust more in this case?

Of course, there are no certainties in any market, but in general, the more long-term-oriented a picture is, the more important the signals coming from it. Consequently, ceteris paribus (all other things being equal), the more long-term-oriented indications are likely more important.

With the above in mind, let’s take a look at what happened in the gold and silver stocks yesterday.

The GDX ETF invalidated its breakdown below the rising intraday support line, which could be viewed as a bullish sign, but…

GDX’s daily chart (which is twice as long-term as daily candlesticks include two 4-hour candlesticks from the previous chart) shows that the line that’s based on more long-term price extremes actually held. This means that the breakdown wasn’t invalidated – it’s being verified.

The above chart also shows that a pause and a small comeback is relatively normal after the major tops and initial declines. Please note what happened after the February top, after the March top, and after the May top. The same thing – a daily pause. This perfectly fits yesterday’s comeback to the previously broken rising support line, which now turned into resistance.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes also analysis of what happened in gold and how it relates to the critical developments in the USD Index.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

 

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The Remarkable Gold Index Sign Vs. the Miners’ Strength

We started yesterday’s Gold & Silver Trading Alert with the Gold Miners Bullish Percent Index, and we’ll start today’s analysis in the same way. We’ll do so, because we received a question about whether gold miners stayed overbought for a long time, while they kept pushing to new highs – just like what markets sometimes do (especially the general stock market) when a given indicator (say, RSI) is already overbought.

In short, no.

The only other case when the index was at 100, was in mid-2016. We marked this situation with a vertical dashed line. Did miners continue to move higher for a long time, or did they move much higher? No.

Precisely, the index reached 100 on July 1st 2016, and gold mining stocks moved higher for two additional trading days. Then they topped. This was not the final top, but the second top took miners only about 5% above the initial July high.

This year, the index reached the 100 level on July 2nd – almost exactly 4 years later, and once again practically exactly in the middle of the year. Yesterday was the third day after this move. It’s not justified to assume that the delay in the exact top would be 100% identical, but it seems justified to view it as similar. Two-day delay then, and three-day delay now seem quite in tune.

There’s also one additional case that we would like to emphasize and it’s the previous high that the index made on November 9, 2010. That was the intraday top, so there was no additional delay. There was one additional high about a month later, in December, but miners moved only about 1.5% above the initial high then.

One might ask if mining stocks are really overbought right now given the unprecedented quantitative easing, and the answer is yes. Please note that in 2016 the world was also after three rounds of QE, which was also unprecedented, and it didn’t prevent the miners to slide after becoming extremely overbought (with the index at the 100 level). The 100 level in the index reflects the excessive optimism, and markets will move from being extremely overbought to extremely oversold and vice versa regardless of how many QEs there are. People tend to go from the extreme fear to extreme greed and then in the other way around, and no fundamental piece of news will change that in general. The economic circumstances change, but fear and greed remain embedded in human (and thus markets’) behavior.

It’s unlikely that gold miners would wait as long before declining profoundly, or that there would be another move higher before the bigger decline. Why? We already wrote about that this week – for instance, because of gold’s long-term turning point and because of USD’s mid-year turning point:

Gold’s very long-term turning point is here and since the most recent move was to the upside, the implications are bearish. They are particularly bearish since gold just invalidated the tiny breakout above its November 2011 high.

Naturally, everyone’s trading falls within their responsibility, but in our opinion, if there ever was a time to either enter a short position in the miners or to increase its size if it wasn’t already sizable, it’s now. We made money on the March decline and on the March rebound (buying miners on March 13th), and it seems that another massive slide is about to start. When everyone is on one side of the boat, it’s a good idea to be on the other side, and the Gold Miners Bullish Percent Index literally indicates that this is the case with mining stocks.

We used the purple lines to mark the previous price moves that followed gold’s long-term turning points, and we copied them to the current situation. We copied both the rallies and declines, which is why it seems that some moves would suggest that gold moves back in time – the point is to show how important the turning point is in general.

The take-away is that the long-term turning point is a big deal, and that gold could fall significantly before it soars due to its extremely positive fundamental outlook. This also means that the downside target of $1,400 or slightly lower (the 2016 – 2018 highs) is well within the range of the possible moves.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details such as the interim target for gold that could be reached in the next few weeks.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The Bearish Combination of Soaring Silver and Lagging Miners

Silver is moving up quite shortly today, which sounds bullish, until one realizes that silver tends to be particularly strong right before the precious metals market tops. And you know what’s the other thing that quite often happens at the tops, in addition to silver’s temporary strength? Miners tend to underperform. What did gold miners do on the last trading day of the previous week?

Miners reversed and ended the day over 1% lower, even though the GLD ETF ended the day slightly higher. Consequently, this piece of the puzzle seems to be in.

Remember when we wrote that the situation right now is similar to what happened in March, but this time it takes longer for everything to develop due to the change in market’s perception of risk? To make a long story short, the March coronavirus panic was because the entire world was dealing with the unknown, which exacerbated the fear. Right now, the situation is worse, and it goes worse almost on a daily basis, but people are not as afraid. The economic implications don’t appear so dire either. And it’s definitely nothing unknown – we more or less know what to expect.

This means that we’re likely to see a repeat of what we saw in March, we’re likely to see it in “slow motion”, at least for some time. Please note that even slow-motion mode of the mid-March plunge would still be very volatile.

The areas that we marked with red rectangles are similar in terms of shape, but the current one is about 4x longer. The previous pattern was characterized by a decline and a correction that took more or less the same time to complete. If we’re about to see something similar also this time, then we can expect the top to be formed this week.

If the March decline took 5 trading days and the price moves are taking 4x as long this time, then perhaps we would see a monthly decline to the final lows instead of a weekly one. This would serve as a perfect “handle” for the massive, long-term “cup and handle” pattern in gold.

Today’s relatively weak performance of the mining stocks seems to confirm the above. The implications for the next 1-6 weeks are bearish.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details, but most importantly, it includes the clear discussion of what will be the sign telling one that gold’s move lower is almost certainly completely over. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Gold’s Major Reversal to Create the “Handle”

Gold just closed the month and quarter and its performance on the final day of both was very encouraging for the bulls. What’s going on and what changed?

Let’s start with the big picture.

Gold just moved to the November 2011 high and in today’s pre-market trading it even moved above it. The volume on which gold moved up last month was relatively small, which doesn’t support the bullish case, but a confirmed breakout above the November 2011 high would be an important technical development, nonetheless.

The key word here is “confirmed”. The November 2011 high was $1,804.40, and at the moment of writing these words, gold futures are trading at $1,805.15 – that’s less than $1 above the above-mentioned high.

The way in which gold moved between 2012 and 2020 created a near-perfect cup from the cup-and-handle formation. Generally, the bigger the base, the stronger the move, and this time the base is huge. Still, the “handle” of the pattern is still missing, and it could take form of a volatile plunge. This would be in tune with how gold reacted to the first wave of coronavirus.

The breakout above the November 2011 high is far from being confirmed, and in our view it’s unlikely to be confirmed. Why?

There are multiple reasons for it, but the most precise and technical ones are gold’s likelihood to reverse its direction based on the triangle-vertex-based reversal and the long-term cyclical turning point.

The resistance line, above which gold tried to break and the rising support line based on the March and June lows cross more or less in the first days of July. The triangle-vertex-based reversals have pointed to many important tops and bottoms in the recent weeks and months.

We previously wrote that the above-mentioned reversal might correspond to a bottom in gold, but as of today, it’s clear that if any reversal is to take place, it’s going to be a top, not a bottom, as gold’s most recent short-term move has been up.

Let’s keep in mind that gold’s long-term turning point is here (the vertical gray line on the chart below), which further emphasizes the likelihood of seeing a major turnaround right now.

The reversals provided by the above-mentioned techniques are actually relatively close to each other given that this is already the first week of July, and that the second week of the month starts in just 2 trading days (the markets are closed in the U.S. this Friday).

The implications here is clear – don’t count on gold’s breakout’s success.

The HUI Index is once again trying to break above the 2016 high. Although it might move higher today, we doubt that it would be able to hold its gains for a long time, in light of gold’s looming reversal. Instead, another invalidation of the reversal is likely.

And silver?

The white metal showed strength as well, rallying almost to the previous 2020 highs. As dramatic as it may sound, please note that silver just a few dollars above its 2015 low and over $30 below its 2011 high. Miners are disappointing too – it is only gold that is stealing the spotlight. And it’s doing so on relatively low volume, making its entire “strength” doubtful.

Silver broke above its declining green resistance line… Once again. This line is based on the 2011 high and the 2019 high. There were three previous attempts of the white metal to break above this line and they all failed. Is this time any different? We doubt that, especially given gold’s reversal indications.

And in particular, given the rising coronavirus cases that initially (!) triggered a precious metals sell-off in March. The sell-off started when people started really considering the economic implications of the pandemic and the lockdown, so this kind of thinking is likely to be back once the pandemic prevention mechanisms are going to be re-introduced on a bigger scale.

Summary

Summing up, gold is stealing the spotlight, trying to break above the $1,800 barrier and the November 2011 high, but it’s unlikely to be able to confirm this move. Gold did end the previous month and quarter at exceptionally high level, but the monthly volume was low and it was the only part of the precious metals market that showed this kind of strength. Silver is just a few dollars above its 2015 low and over $30 below its 2011 high, while miners are trying to get above their 2016 high – well below their 2011 high. Given the above and gold’s looming reversals, I think that a big decline is in the cards for the entire precious metals sector.

Thank you for reading today’s free analysis. It’s a part of our premium Gold & Silver Trading Alerts. If you enjoyed it and would like to get details of our trading position follow-ups, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

New Covid-19 Highs, New Major Price Moves

The second wave of Covid-19 is here and while it makes gold’s potential even better in the long run, it’s likely to mean a sharp decline beforehand.

It might be tempting to focus on something else, to look the other way, or to limit testing, but the difficult fact is that the Covid-19 pandemic is developing after a several-week-long pause. There are new highs in the number of new daily cases both: globally, and in the U.S.

The second wave is not yet present in Europe, but please keep in mind that it could become a severe problem very fast. As the entire world has more and more coronavirus cases, and the economies are being reopened, it will be very hard to avoid the second wave in Europe.

The new daily cases in Israel clearly show how a supposedly contained situation can easily get much worse in a relatively short period.

Why is this important from the gold investment and gold trading point of view? Because the markets appear to have viewed the March price moves as a one-time event triggered by also a one-time event. And the markets are just starting to wake up to the fact that it doesn’t work this way at all.

The number of searches for the “coronavirus cases” phrase in the U.S. is on the rise again, but it’s not yet significantly higher than what we saw in mid-March. People are not yet panicking once again, but the trend is already in place.

The re-opening schedules are being canceled and some small lockdown measures are being introduced but their extent is not yet significant. People are already starting to get that they were way too optimistic regarding the recovery, but we are early in this process. The above search chart from Google Trends indicates that and performance of the general stock market confirms it.

The huge volume on which the S&P 500 reversed on Friday was likely an indication of the change in the market sentiment, which is still remarkably positive compared to what’s going on. It’s as if we were not in the early part of the biggest economic disaster of the last several decades.

It seems that the markets will soon catch up to the (unfortunately – grim) reality and decline much more. In the early part of the move, the precious metals market is likely to decline, just like it had declined in the first half of March. It’s likely to then rally more profoundly, and soar well above the 2011 highs, but it’s unlikely to happen without a slide first.

The situation in the USD Index continues to support the bearish case in the next 1-3 weeks, but at the same time it also explains why gold hasn’t plunge just yet.

From the short-term point of view, the situation in the USD Index was very similar to what we saw in early March. At this time, it’s clear that it’s not 100% similar, but that there’s a significant difference when it comes to timing and volatility. The situation is now developing less dynamically, as the authorities are reluctant to impose new lockdown measures, knowing how big declines in stocks followed, and gold was reacting primarily to the economic changes – people ran for the hills and then craved the safety of the U.S. dollar – at least initially. Right now, the situation is not yet critical in people’s view, which is most likely why the USD Index is moving up in a steady manner instead of moving up sharply.

What is key here is that the situation can change quickly, just as it changed in March. Now the states are looking at each other and nobody wants to be the first to seriously limit the economic activity let alone force people to stay home. But as the cases grow to new highs, and as the number of deaths grow, people will likely get scared once again, and the more severe lockdown measures are likely to be re-introduced. That’s when the USDX would be likely to soar with vengeance, and gold would be likely to slide – at least initially.

Technically, the USD index didn’t manage to break above its mid-June highs and instead it reversed on both: Thursday and Friday. Consequently, many traders are likely viewing the June rally as a zigzag – a correction within a decline. We disagree with this interpretation, because of the favorable long-term chart, the similarity to what happened in February and March, and the way in which the new Covid-19 cases are growing in the U.S..

Summing up, the precious metals market is likely to decline in the short term (and only in the short term! gold is likely to soar in the following months!) along with the big decline in the stock prices and the decisive upswing in the USD Index. This is quite likely to correspond to renewed lockdown orders, which are just starting to emerge. Given how quickly the pandemic is developing, the above actions and price moves are likely just around the corner.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details, but most importantly, it includes the clear discussion of what will be the sign telling one that gold’s move lower is almost certainly completely over. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Gold’s Long-term Turning Point is Here

Historical precedents are in many a technician’s toolbox – and it’s a tool they reach for with success repeatedly. Does the yellow metal offer any interesting parallels?

Gold had declined and it recovered, but the above simply prolongs the 2008-2020 analogy; it doesn’t invalidate it. Today, gold is attempting to break above the previous highs, but it’s not being successful in that.

Gold topped about a dollar below the May high and just like it was the case in May, and in April, gold quickly moved down from these levels. Gold futures are at $1,756 at the moment of writing these words, which means that gold invalidated the small breakout above the declining resistance line that’s based on the April and May highs.

This is a bearish sign pointing to the repeat of the pattern – gold is likely to once again decline from the current levels to at least $1,680 or so. The emphasis here goes on “at least” as given the bearish support from the media (spreading the coronavirus fear) and the short-term breakout in the USD Index.

The resistance line, above which gold tried to break and the rising support line based on the March and June lows cross more or less in the first days of July. The triangle-vertex-based reversals have pointed to many important tops and bottoms in the recent weeks and months, so perhaps the above-mentioned target date will be the date when gold finally bottoms. If gold slides from here this week, the above will become the most likely outcome.

Speaking of target dates, there’s also another very important target date, which is likely to translate into an important reversal.

It’s more or less right now, and the technique that is applied here is gold’s long-term turning point.

Until the 2011 top, these turning points were tops, and after the 2011 top – in each case – these turning points corresponded to major bottoms. We marked them with vertical, solid, gray lines.

The above means that the upcoming turning point had a slightly bigger chance of being a local bottom, but the most important thing is that there is likely to be some kind of extreme regardless of what type of extreme it is (that’s the key difference between turning points and cycles – the latter have tops and bottoms after each other, while turning points could work in either way).

This means that what we saw earlier today might have been much more than just a temporary attempt to move higher. It might have been a major long-term top after which gold is going to slide in a profound manner.

Since the slide in gold is not likely to take long, but rather be relatively quick (similar to what we saw in March, and similar to the final slide that we saw in 2008), it could be the case that both the major top, and the major bottom will be close to the turning point. That’s exactly what happened in 2011, which was also the only time when gold was trading above $1,500 during the turning point.

Back then, gold plunged almost $400 in less than a month. Since this kind of decline followed somewhat similar technical development, it’s not out of the question that a big and sharp move could happen also in the following 1-3 weeks.

The above also suggests that our “crazy downside targets” are not so crazy after all.

Cup and Handle in Progress?

Naturally, the long-term outlook remains extremely bullish, especially given the possibility of seeing a cup-and-handle formation in gold. The 2011 – now price movement could indeed be the “cup”. Generally, the bigger, more symmetrical, and rounder the “cup” is, the more profound and more bullish the implications are.

There is, however, something that’s missing from the pattern… We have the cup, but we’re missing the handle!

The decline in gold which we wrote about previously would serve as the perfect handle for the massive cup that gold formed in the previous nine years. That’s in perfect tune with what we’ve been expecting for gold anyway – we have been expecting one final slide before the move to new highs, and we would like to stress that getting it would not invalidate the long-term bullishness at all. Conversely, it would confirm it through the cup-and-handle pattern.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details, but most importantly, it includes the clear discussion of what will be the sign telling one that gold’s move lower is almost certainly completely over. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Tying the Signals in Miners, Silver and USDX to What Comes Next

The precious metals sector was likely to decline, and it did exactly that. And based on what we just saw, it’s likely to decline even more.

Once again, the situation yesterday and so far today developed quite in tune with what we wrote yesterday, so today’s analysis will take form of a broad update. Let’s take a look at the GLD ETF. In yesterday’s and Monday’s analyses, we described it in the following way:

[Monday] As far as the short-term is concerned, we have a good indication from the GLD ETF that the rally is about to end today. This is the case due to the triangle-vertex-based reversal that we have right now. This trading technique has proven to be useful many times in the previous months, so it seems to be worth to pay attention to its indications also this time.

[Tuesday] The GLD ETF has indeed moved higher yesterday (less than 0.5%, though), and gold futures are moving lower in today’s pre-market trading (so far declining by about 0.3%). This might have indeed been the top, especially that silver invalidated its tiny breakout above the previous 2020 highs and gold showed weakness relative to declining USD Index.

GLD ultimately declined by 0.65%, which means that it erased more than Monday’s gains. The triangle-vertex-based reversal technique seems to have worked once again. This is further confirmed by the fact that gold is once again down in today’s pre-market trading – despite lower USD Index values.

In yesterday’s analysis, we emphasized that the length of the current decline is very similar to the length of the February – March decline that we saw right before the big USDX run-up. We also argued that the situation is relatively similar on the fundamental front. To clarify, there are obvious differences, but the key similarity is that it’s relatively clear that the Covid-19 cases are going up and the economic implications are going to be more severe than it is currently perceived in general, but the numbers don’t yet reflect that. Which is probably why the USDX is still not soaring and stocks are not yet declining. Again – it’s a “yet” in my view.

What we would like to add to the above today is that in March, the USDX bottomed on the third day after breaking below the previous important support (the January low). Today is also the third day when the USD Index moved below the important support in the form of the 61.8% Fibonacci retracement. It could be the case that the big run-up is just around the corner. And since gold is already declining despite the lack of USD’s help, such an USDX rally would likely have a devastating effect on the precious metals sector.

As you can see on the above chart, silver is now visibly below the previous highs, and it’s now crystal-clear that silver’s small attempt to break to new 2020 highs was invalidated. This is something that we often see as a confirmation that the top is already in, and it seems that this is the case also this time.

Please note that the huge slide below $12 in silver futures started from almost the same levels and it took less than a month for the white metal to move there. If the first part of the slide is similar to what we saw previously, we can expect to see a decline below $17 shortly.

Miners’ performance also suggests that another slide is starting. And it’s not only because of HUI’s profound monthly reversal, or the invalidation of its breakout above the 2016 highs.

Monday’s rally on low volume was followed by a bigger decline on visibly bigger volume. GDX has almost erased three days of gains, declining more on a relative basis than GLD did during the same time. This serves as yet another confirmation that the top is already in.

The thing that we would like to add today is the note about similarity between the price patterns that we saw between mid-February and early March and the last few weeks. The areas marked in red are identical. As you can see the shape of the price moves is very similar, and so is the timing of the price extremes. In fact, the latter is almost identical. “Almost”, as it seems the move lower started one day earlier this time.

It’s just like the PMs and miners got fed up waiting for the USD’s rally and stock market’s decline and are moving lower even without them. This is the perfectly bearish situation, because once we do get the above-mentioned signs, the decline is likely to simply accelerate.

Thank you for reading today’s free analysis. There are major trading implications of the new signals that we just got and the full version of our report includes them. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Gold Analysis: The Implications of the Monthly Reversal in HUI

There is a laser-precision technique that tells us whether the precious metals market is going to move higher or lower, and it could take form of a confirmation or invalidation of a major breakout. We just had the make-or-break situation in gold mining stocks, and previously described the HUI Index – flagship proxy for the gold miners – in the following way:

The HUI Index declined significantly, and then it rebounded significantly.

Both are likely linked. Miners first declined more sharply than they did in 2008, so the rebound was also sharper. Based on the stimulus and gold reaching new yearly highs, miners also rallied, and tried to move to new yearly highs. It’s not surprising. 

However, if the general stock market is going to decline significantly one more time, and so will gold – and as you have read above, it is very likely – then miners are likely to slide once again as well. This would be in tune with what happened in 2008.

At this time, it may seem impossible or ridiculous that miners could slide below their 2015 lows, but that’s exactly what could take place in the following weeks. With gold below their recent lows and the general stock market at new lows, we would be surprised not to see miners even below their 2020 lows. And once they break below those, their next strong resistance is at the 2016 low. However, please note that miners didn’t bottom at their previous lows in 2008 – they moved slightly lower before soaring back up.

Please note that the HUI Index just moved to its 2016 high which serves as a very strong resistance. Given the likelihood of a very short-term (1-2 days?) upswing in stocks and perhaps also in gold (to a rather small extent, but still), it could be the case that gold miners attempt to rally above their 2016 high and… Spectacularly fail, invalidating the move. This would be a great way to start the next huge move lower.

And what happened last week?

The HUI Index invalidated the breakout above its 2016 high in terms of the weekly closing prices and also in terms of the monthly closing prices.

This is a perfectly bearish sign, especially since the HUI Index has been forming an extremely clear monthly shooting star candlestick. This is a clear formation with clear implications – gold miners are likely to decline in June.

It’s important to note that on a daily basis, miners have barely moved higher on Friday. They had a good reason to do so – even two reasons. Both: general stock market and – most importantly – gold / GLD moved higher so miners should have rallied as well. They didn’t, which shows that they are much more likely to decline in the short term instead.

Combining two key gold trading tips: silver’s exceptional strength with miners’ exceptional weakness provides us with a great trading opportunity.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details, but most importantly, it includes the clear discussion of what will be the sign telling one that gold’s move lower is almost certainly completely over. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

All Eyes on the HUI Breakout Invalidation!

The key technical development of this week in the precious metals market is HUI’s invalidation of the breakout above the 2016 highs. It will be particularly interesting to see where it closes the week, as an invalidation in weekly closing terms will be a crystal-clear bearish confirmation.

Gold miners reversed before the end of yesterday’s session, but they didn’t manage to take HUI back above the highest weekly close of 2016 – the 278.61 level. The HUI closed at 271.06.

On the daily chart, we see that a short-term breakdown is currently being confirmed.

The GDX ETF moved below the rising support line based on the previous April and May lows and it closed there for two consecutive trading days. If the GDX closes below the rising dashed line once again today, the breakdown will be confirmed.

And based on gold’s 4-hour gold chart, it could be the case that the very short-term upswing that started yesterday, is already over.

Gold approached its short-term declining resistance line, and it’s currently testing it. This line already held less than a week ago, so it favors lower prices at this time.

Of course, by the time you read this analysis, gold might already be after a breakout. In this case, we wouldn’t be surprised to see gold futures at about $1,740 or even $1,760 before the next decline takes place. Again, that is IF the breakout takes place, but the entire point of creating resistance lines for gold is to detect gold’s tops – places that are likely NOT to be broken. Or that are going to be broken, but then an invalidation will follow, leading to further declines.

The GLD ETF bounced from the rising support line yesterday, and it then moved to the above-mentioned resistance line – that’s a relatively normal course of action. Based on HUI’s invalidation of the breakout above the 2016 high, it seems that the top is already in for gold and gold stocks, and the price action yesterday and today in gold doesn’t invalidate it.

And what can one forecast for silver?

The white metal is still showing strength on a very short-term basis, which further confirms the toppy nature of the most recent price moves. Silver tends to outperform at the very end of a given upswing, so we could even see more of that phenomenon – especially if the stock market moves even higher from here.

Silver is known (at least it should be known) for its fakeouts. Silver often breaks above certain resistance levels, only to invalidate these breakouts shortly thereafter. If silver’s “breakout” is not accompanied by an analogous move in gold or miners, the odds are that it’s a fakeout. The odds increase further if this action was preceded by a rally.

Therefore, if silver moves higher from here, and even breaks to new May highs, it might not be a bullish development at all. It could be a fakeout that only takes the white metal to about $18.50 or so – the declining resistance line based on the previous highs – and then starts the next huge downleg. Please keep in mind that silver already launched one huge slide from almost $19 this year, so another big move lower from these levels could definitely take place.

All in all, it seems that we’re going to see one more sizable move lower in the precious metals market before they move much higher, and the odds are that the downswing has already begun or it’s going to start shortly.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details, but most importantly, it includes the clear discussion of what will be the sign telling one that gold’s move lower is almost certainly completely over. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Reading the Tea Leaves of Gold’s Upcoming Move

To be bullish or not to be – that is the question. Or it might have been the question, if someone named Shakespeare wrote a piece titled Investhamlet.

The choice whether to be bullish or bearish or neutral on a given asset should be made each day, each time based on the information that is currently available. Let’s check the new signs that we saw yesterday.

First of all, we just saw a bearish sign from the general stocks market.

The Sign from Stocks

The huge price gap that we saw on Monday seems very encouraging, but please keep in mind that the S&P 500 once again failed to close the bearish price gap that it had opened in the first half of March. So, should one trust Monday’s bullish price gap? It seems too early in our view. The above-mentioned resistance is strengthened by the late-April high, and the S&P 500 futures moved lower yesterday.

And by “moved lower yesterday” we actually mean, they reversed in a way that’s quite profound in case of the S&P 500 futures.

The shooting star candlestick in the stock market futures points to a change in the trend, especially since stocks invalidated the tiny breakout above the late-April high and the 61.8% Fibonacci retracement level.

Also, please note the increase in volume on the previous chart – we saw the same thing at two April highs. Perhaps we’re seeing yet another high, instead of a beginning of a new upswing. We shall know soon enough – stocks are trading between the price gaps and they are likely to break out or break down sooner rather than later.

The implications for silver and mining stocks – which are more connected with the general stock market than gold is – are bearish.

While stocks reversed, the USD Index moved lower once again.

The USDX Bidding Its Time

The USDX moved below its 50-day moving average (marked with blue) and it closed there for the second day. That’s important, because that’s USD’s fourth attempt to break below this moving average and confirm the breakdown. The first two attempts took place in late March and in early April, and the breakdowns were invalidated on the next trading day in both cases. The third attempt took place about 3 weeks ago, and this time the breakdown was invalidated on the third day.

Will this time be different and the breakdown below the 50-day MA gets confirmed? We doubt it. The history repeats itself, after all, and a given pattern remains in place until it is clearly broken. This time, it seems that the USD Index will reverse once again, especially given its long-term breakout. The latter is likely to make the USD Index move much higher in the following months (possibly years), not only weeks. This doesn’t mean that we expect gold to decline in the long run, though. We think that a quicker 1-3-week-long decline is in the cards, but nothing more. It’s likely to be significant, though.

The implications of the most recent developments in the USD Index are bearish for the precious metals market.

As you can see in the lower part of the above chart, gold moved higher yesterday, but it moved up rather insignificantly. Gold futures were up by precisely $11.20, which means that they didn’t erase Monday’s decline.

Meanwhile in Precious Metals

Gold’s unwillingness to react to USD’s bullish lead can be viewed as bearish. The same goes for the sell signal from the Stochastic indicator. These signals that took place after Stochastic was close to the 80 level, were followed by quite visible declines in gold.

Consequently, the implications of yesterday’s session – and this week’s developments in gold – are bearish.

Then there’s silver that’s soaring like there’s no tomorrow and miners that just confirmed their breakout above the previous May highs.

Silver moved higher right after forming the daily reversal and it even moved above the intraday high earlier today. Silver is clearly outperforming gold. In case of the gold to silver ratio that’s based on futures, we saw a move slightly below 100, and in case of the ratio based on the spot prices, the ratio just touched the 100 level a few hours ago, and then it moved back up.

On one hand, the breakout above the 100 level in the gold to silver ratio seems to have been just verified, and it’s bullish.

On the other hand, silver reversed slightly above $18, which doesn’t correspond to a major resistance level. This means that the white metal could still move higher before topping. There are several resistance levels visible on the previous silver chart – between about $18,50 and about $20. Will silver really move as high shortly?

If the USD Index is bottoming and the general stock market is topping, then the above is very doubtful. In fact, silver’s relative strength on its own makes the short-term picture for the precious metals market rather bearish, because silver usually plays major catch-ups with gold in the final part of the rally. It definitely happened already and the extent to which silver outperformed gold, was clear and loud. Consequently, the top might already be in after all, as the 100 level in the gold to silver ratio is more important than any of the above-market individual silver resistance levels.

This leaves us with the bullish implications of yesterday’s move in the mining stocks.

There are two possibilities at this moment. Either the GDX ETF is breaking substantially higher here… Or it’s providing us with fake strength at the very end of the move.

Yes, the link between gold and gold miners is not as straightforward as it seems at first sight. On average, miners do tend to be weak sooner than gold during its rallies. However, there’s also this very final part of the upswing, in which miners fake their strength. Let’s take a closer look at this phenomenon. The chart below features gold and the HUI Index – proxy for gold stocks.

The above-mentioned link works both ways. That’s how the 2015/2016 decline ended. Miners underperformed in the first days of January and this was a fake move. That’s also how the February-March decline started – with gold miners’ outperformance. And that’s how many other moves in gold and gold miners have ended.

The black rectangles show periods when gold miners refused to fully follow gold’s lead, and the red rectangles show when gold miners temporarily multiplied gold’s signals.

So, is miners’ “strength” really “strength” to the full extent of this word’s definition? Given all the other points made today, this still seems doubtful.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. It also includes the fundamental analysis of the Great Lockdown with the emphasis on the dramatic changes on the US jobs market, as well as technical discussion of silver, mining stocks, USD Index, platinum, and palladium. They say that the partially informed investor is just as effective as partially trained surgeon… You might want to read the full version of our analysis before making any investment decisions.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

It’s Not Only Palladium That You Better Listen To

Whenever one hears the words precious metals, gold and silver spring to mind. But this world is much richer, and precious metals don’t end with the yellow or white metal. The less well known cousins, platinum and palladium, can and do send valuable signals too. Before we examine silver, let’s take a look at something interesting in palladium.

The interesting detail is palladium’s weakness. This precious metal was the one that soared most profoundly in the past few years and while it recovered some of its 2020 declines recently, it appears to be back in the bearish mode as its unable to keep gained ground, even despite the move higher in the general stock market.

The previous leader is now definitely lagging. And you know what was leading? The previous laggard – gold stocks. And you know what is leading now? Silver – as it usually does in the final part of the upswing. The HUI Index is marked with brown in the bottom part of the chart. When leaders are lagging, and laggards are leading, one should recognize that the market is topping – and that’s the key take-away from the palladium and platinum analysis right now.

Palladium was the leader and platinum was actually one of the laggards. Palladium was down by 0.43 last week. And what did platinum do?

Platinum rallied by 3.52% last week.

The big rally in platinum to palladium ratio is yet another sign from the relative valuations analysis pointing to a nearby top in the precious metals sector.

Having said that, let’s take a look at silver’s forecast. In case of the white metal, its ratio to gold might be more important at this time than price itself.

The silver futures are trading at $17.73, and gold futures are trading at $1,773, which means that in case of the futures market, the gold to silver ratio has just moved to the 100 level.

Earlier this year, the gold to silver ratio had broken above the very long-term and critical resistance of 100. Is it really that surprising that silver is verifying the breakout by moving back to the previously broken level? It’s not.

The key ratio for the precious metals market has just moved back to the previously broken resistance level and it’s verifying it as support. This is relatively normal that after a breakout, the price or ratio moves to the previously broken level.

Yes, on a short-term basis, and looking at silver chart alone, the breakout above the April highs and a quick move to the early-March highs was a clearly bullish phenomenon. However, this ignores the fact that silver is known for its fakeouts (fake breakouts) and that looking at its relative performance to gold has been more useful (and profitable) than looking at its individual technical developments, especially if they were not confirmed by analogous moves in gold.

Consequently, we view the current action in silver as bearish, not bullish, especially since the gold to silver ratio moved back to the very strong support level (100), which likely means that silver’s strength relative to gold is over, at least for some time.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. It also includes the fundamental analysis of the Great Lockdown with the emphasis on the dramatic changes on the US jobs market, as well as technical discussion of silver, mining stocks, USD Index, platinum, and palladium. They say that the partially informed investor is just as effective as partially trained surgeon… You might want to read the full version of our analysis before making any investment decisions.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Will Stocks Lead the Way Lower for Miners?

The precious metals market did almost nothing yesterday, and consequently we have relatively little to comment on today. There are two subtly bearish signs that we would like to feature, nonetheless.

The first subtly bearish sign is the change in the way the USD Index “topped” this month. In early April, and then in late April, the USDX reversed close to the 101 level and then moved lower in a decisive way, until declining below 99. This time has already proved to be different.

In early May, the USDX reversed and declined a bit, but instead of continuing its decline in the following days as it used to do in April, the US currency moved back up, and touched its previous highs. The shape of the decline is clearly different, so perhaps the outcome will be different as well. Perhaps instead of a move below 99, we’ll finally see a confirmed breakout above 101.

Again, it’s a relatively subtle indication, but still something that we noticed yesterday. Other factors that we discussed in the previous days are more important.

The second small sign is the mining stocks’ weakness. Even though gold, and the GLD ETF moved higher yesterday, the HUI Index – proxy for gold stocks – was practically flat. The GDX ETF – another proxy for the miners – closed lower.

This would normally be an important sign – not a small one – but yesterday’s weakness could be explained by a quite significant daily decline in the main stock indices.

The daily slide in the S&P 500 was likely to affect miners – and it did. Consequently, it’s no wonder that yesterday, miners disappointed relative to gold.

Still, let’s keep in mind that the stocks traded higher previously, and miners lagged, while silver leaped the gold price, so the bearish implications of the relative performance analysis remain intact. It’s just that yesterday’s session was not as meaningful as the previous ones were.

If stocks decline more and break below the 2850 level, they will create a bearish head-and-shoulders top pattern, with the target slightly below 2700. We don’t think that this level would stop the decline for long, but a decline – if it is to follow at all – has to start in some way. A move to 2700 or so based on the head-and-shoulders pattern seems a quite likely way for this move to start.

Let’s keep in mind that back in 2008 (and the current situation is still very similar to 2008 due to the sudden nature of the crisis) the final slide in gold started when the USD Index rallied decisively, breaking above the previous highs.

The USD Index has been trading back and forth for several weeks now without a meaningful breakout whatsoever. Perhaps the confirmed breakout above the 101 level will be what triggers the first part of what we think is going to be the final washout slide in the precious metals market.

All in all, gold’s outlook for the next few years is very bullish, but the outlook for the next several weeks remains bearish.

Thank you for reading today’s free analysis. In the full version of the analysis, we also feature our preferred way of taking advantage of the current situation and the analogies to the previous price moves. If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7-day access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Gold Investors Shouldn’t Be Losing Focus

The recent volatility in most markets was really extreme, which means that it was easy to lose focus on the things that matter the most in case of the gold market. It was relatively easy to keep one’s focus as far as the fundamental outlook for gold is concerned – it’s quite obvious that the economies around the world are in deep trouble and that the various QEs and money-printing mechanisms are likely to be inflationary, which together is likely to result in stagflation – which gold loves.

On the other hand, it was easy to lose focus with regard to one of gold’s key short- and medium-term drivers – the USD Index. If the USD Index soars, then gold is likely to plunge in the short run, regardless of how favorable other fundamentals are.

Consequently, in today’s free article, we’ll discuss the situation in the USD Index, with emphasis on two key similarities.

The USD Index was previously (for the entire 2019 as well as parts of 2018 and 2020) moving up in a rising trend channel (all medium-term highs were higher than the preceding ones) that formed after the index ended a very sharp rally. This means that the price movement within the rising trend channel was actually a running correction, which was the most bullish type of correction out there.

If a market declines a lot after rallying, it means that the bears are strong. If it declines a little, it means that bears are only moderately strong. If the price moves sideways instead of declining, it means that the bears are weak. And the USD Index didn’t even manage to move sideways. The bears are so weak, and the bulls are so strong that the only thing that the USD Index managed to do despite Fed’s very dovish turn and Trump’s calls for lower USD, is to still rally, but at a slower pace.

We previously wrote that the recent temporary breakdown below the rising blue support line was invalidated, and that it was a technical sign that a medium-term bottom was already in.

The USD Index soared, proving that invalidation of a breakdown was indeed an extremely strong bullish sign.

Interestingly, that’s not the only medium-term running correction that we saw. What’s particularly interesting, is that this pattern took place between 2012 and 2014 and it was preceded by the same kind of decline and initial rebound as the current running correction.

The 2010 – 2011 slide was very big and sharp, and it included one meaningful corrective upswing – the same was the case with the 2017 – 2018 decline. Also, they both took about a year. The initial rebound (late 2011 and mid-2018) was sharp in both cases and then the USD Index started to move back and forth with higher short-term highs and higher short-term lows. In other words, it entered a running correction.

The blue support lines are based on short-term lows and since these lows were formed at higher levels, the lines are ascending. We recently saw a small breakdown below this line that was just invalidated. And the same thing happened in early 2014. The small breakdown below the rising support line was invalidated.

Since there were so many similarities between these two cases, the odds are that the follow-up action will also be similar. And back in 2014, we saw the biggest short-term rally of the past 20+ years. Yes, it was bigger even than the 2008 rally. The USD Index soared by about 21 index points from the fakedown low.

The USDX formed the recent fakedown low at about 96. If it repeated its 2014 performance, it would rally to about 117 in less than a year. Before shrugging it off as impossible, please note that this is based on a real analogy – it already happened in the past.

In fact, given this month’s powerful run-up, it seems that nobody will doubt the possibility of the USD Index soaring much higher. Based on how things are developing right now, it seems that the USD Index might even exceed the 117 level, and go to 120, or even higher levels. The 120 level would be an extremely strong resistance, though.

Based on what we wrote previously in today’s analysis, you already know that big rallies in the USD Index are likely to correspond to big declines in gold. The implications are, therefore, extremely bearish for the precious metals market for the following months.

On the short-term note, it seems that the USD Index has finished or almost finished its breather after the powerful run-up. While the base for the move may be similar to what happened between 2010 and 2014, the trigger for this year’s sharp upswing was similar to the one from 2008. In both cases, we saw dramatic, and relatively sudden rallies based on investors seeking safe haven. The recent upswing was even sharper than the initial one that we had seen in the second half of 2008. In 2008, the USDX corrected sharply before moving up once again, and it’s absolutely no wonder that we saw the same thing also recently.

In fact, on March 23rd, just after the USDX closed at 103.83, we wrote that “on the short-term note, it seems that the USD Index was ripe for a correction.

But a correction after a sharp move absolutely does not imply that the move is over. In fact, since it’s so in tune with what happened after initial (!) sharp rallies, it makes the follow-up likely as well. And the follow-up would be another powerful upswing. Just as a powerful upswing in the USD Index triggered gold’s slide in 2008 and in March 2020, it would be likely to do the same also in the upcoming days / weeks.

Please note that the 2008 correction could have been used – along with the initial starting point of the rally – to predict where the following rally would be likely to end. The green lines show that the USDX slightly exceeded the level based on the 2.618 Fibonacci extension based on the size of the correction, and the purple lines show that the USDX has approximately doubled the size of its initial upswing.

Applying both techniques to the current situation, provides us with the 113 – 114 as the next target area for the USD Index. A sharp rally to that level (about 13-14 index points) would be very likely to trigger the final sell-off in gold, silver, and mining stocks.

On a short-term basis, we just saw a daily move lower in gold, while the USD Index declined and reversed before the end of the day. This – by itself – is a sign of gold’s weakness, but it’s a sign of strong weakness, when one takes into account gold’s recent technical development.

Namely, gold recently moved above its declining resistance line – the upper border of the triangle / pennant. A decline in the USD Index was a bullish factor for gold and it should have easily held ground. Namely, it should have rallied further and confirmed the breakout. Gold didn’t manage to do that. Instead, it declined and invalidated the breakdown. This is a profound sign of weakness.

Interestingly, while gold showed weakness, silver showed daily strength by rallying higher despite a move lower in gold. That’s exactly what we quite often see right before big declines in the precious metals market.

The above is the most important short-term technical development in gold, so we don’t discuss it separately from this point of view, but we would like to draw your attention to the following monthly gold chart.

In 2008, after the initial plunge, and a – failed – intramonth attempt to move below the rising support line, gold came back above it and it closed the month there. The same happened in March 2020.

During the next month in 2008, gold rallied and closed visibly above the rising support line. The same was the case in April, 2020.

In the following month – the one analogous to May 2020 – gold initially moved higher, but then it plunged to new lows and finally closed the month below the rising support line. We might see something very similar this month.

Speaking of this month in particular, let’s check how gold usually (seasonally) performs in May.

In short, gold usually tops in the first half of the month, and bottoms in its second half. It then recovers, but moves to new highs only in June. This more or less fits what we expect to see later this month also this year.

All in all, the outlook for the USD Index is bullish, which is likely to trigger a decline in the price of gold. Ultimately, gold is likely to recover and soar in the following years, but the opposite seems more likely for the following weeks.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. It also includes the fundamental analysis of the Great Lockdown with the emphasis on the dramatic changes on the US jobs market, as well as technical discussion of silver, mining stocks, USD Index, platinum, and palladium. They say that the partially informed investor is just as effective as partially trained surgeon… You might want to read the full version of our analysis before making any investment decisions.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Precious Metals, Lockdowns and Reopening

The action in silver is really interesting. Let’s check the prospects for volatile white metal, and the relevant historical analogy it offers. Is the major 2008 – 2020 analogy in terms of price moves remains intact? In short, yes.

Silver Shares Its Two Cents

Silver plunged to our initial target level and reversed shortly after doing so. It was for many months that we’ve been featuring the above silver chart along with the analogy to the 2008 slide. People were laughing at us when we forecasted silver below $10.

Well, the recent low of $11.64 proves that we were not out of our minds after all. Our initial target was reached, and as we had explained earlier today, the entire panic-driven plunge has only begun.

Those who were laughing the loudest will prefer not to notice that silver reversed its course at a very similar price level at which it had reversed initially in 2008. It was $12.40 back then, but silver started the decline from about 50 cent higher level, so these moves are very similar.

This means that the key analogy in silver (in addition to the situation being similar to mid-90s) remains intact.

It also means that silver is very likely to decline AT LEAST to $9. At this point we can’t rule out a scenario in which silver drops even to its all-time lows around $4-$5.

Note: Silver at or slightly below $8 seems most probable at this time.

Crazy, right? Well, silver was trading at about $19 less than a month ago. These are crazy times, and crazy prices might be quite realistic after all. The worst is yet to come.

Let’s quote what the 2008-now analogy is all about in case of silver.

There is no meaningful link in case of time, or shape of the price moves, but if we consider the starting and ending points of the price moves that we saw in both cases, the link becomes obvious and very important. And as we explained in the opening part of today’s analysis, price patterns tend to repeat themselves to a considerable extent. Sometimes directly, and sometimes proportionately.

The rallies that led to the 2008 and 2016 tops started at about $14 and we marked them both with orange ellipses. Then both rallies ended at about $21. Then they both declined to about $16. Then they both rallied by about $3. The 2008 top was a bit higher as it started from a bit higher level. And it was from these tops (the mid-2008 top and the early 2017 top) that silver started its final decline.

In 2008, silver kept on declining until it moved below $9. Right now, silver’s medium-term downtrend is still underway. If it’s not clear that silver remains in a downtrend, please note that the bottoms that are analogous to bottoms that gold recently reached, are the ones from late 2011 – at about $27. Silver topped close to $20.

The white metal hasn’t completed the decline below $9 yet, and at the same time it didn’t move above $19 – $21, which would invalidate the analogy. This means that the decline below $10, perhaps even below $9 is still underway.

Now, some may say that back in 2008, silver rallied only to about $14 and since now it rallied to about $16, so the situation is now completely different and that the link between both years is broken. But that’s simply not true.

The nominal price levels are just one of the ways that one should look at the analogy – far from being the perfect or most important one.

Please note that back in 2008, there were two smaller bottoms in silver, and this time we saw just one. The decline before the bottom was sharper, so is it really that surprising that the rebound was sharper as well? Silver ended the 2008 corrective upswing once it moved visibly above the declining orange line and that’s exactly what happened recently. It also topped once it reached its 10-week moving average (red line). That’s exactly what just happened.

This MA is at $15.48 and at the moment of writing these words, silver is back below it, trading at $15.35.

The situations are not perfectly identical in terms of nominal prices, but they remain remarkably similar given how different fundamental reasons are behind these price moves (in reality, what’s behind both declines is fear that – itself – doesn’t change).

The technique used for predicting silver price is clearer than the one that we applied for gold, so it seems useful to look not only at the USD Index for signs, but also at the white metal itself. Once silver moves to $8 or below it, it will likely serve as a strong buy sign for gold, regardless of the price at which gold will be trading at that time.

Also, please note that silver formed a big shooting star candlestick during the previous week, which is a topping sign. The volume was low, but it was not low just during the formation of this candlestick, but it’s been low during this month’s upswing as well. It’s relatively unclear whether the volume is confirming or invalidating the shooting star. Consequently, we view it as a bearish confirmation, and we wouldn’t open a position based just on it. However, since it’s just one of the factors pointing to much lower silver prices in the next few weeks, we view the very bearish outlook as justified.

On the short-term note, we see that silver is more or less repeating its early-March performance. The price moves are not identical in terms of the Fibonacci retracement levels, but comparing the size and shape of the initial rallies (blue dashed lines) we get almost identical results. After rallying sharply initially, silver started to do… pretty much nothing. That was the same in early March. It was after a few additional days, when silver’s corrective upswing had really ended, and the big slide started.

If the similarity to the early-March continues, we can expect the decline to start on Wednesday or very close to it. Please note that silver’s first few days of the decline were noticeable, but not huge. However, once silver broke below its previous lows, it took only three sessions for the white metal to slide below $12. Let’s keep in mind that previously silver started from higher price levels.

The implications are bearish for the following few weeks and rather neutral for the next few days.

Thank you for reading today’s free analysis. Its full version includes details of our currently open position as well as targets of the upcoming sizable moves in gold, silver and the miners. We encourage you to sign up for our free gold newsletter – as soon as you do, you’ll get 7 days of free access to our premium daily Gold & Silver Trading Alerts and you can read the full version of the above analysis right away. Sign up for our free gold newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Junior Miners Dangerously Close to the Cliff

And today, every precious metals investor better pay attention to their message. Take a look at the below chart featuring the miners.

We will compare the junior miners to what GLD ETF and SPY did. The latter are ETFs representing gold and the S&P 500.

We zoomed in to the 2-hour chart to show you something specific that happened in the last few days and to provide the likely explanation for it.

Namely, the miners started to show odd strength relative to both: GLD and SPY, and we marked it with a green rectangle.

The relative strength started in the final part of the previous week, when the GDXJ approached the $36 level. Instead of falling further, just like GLD did – or at least like the SPY did on Tuesday – the GDXJ stayed above it.

The gold trading tip for today would be always question such situations before taking them at face value. Why would that be the case? What factor could have been strong enough to trigger such strength? Or maybe – in the absence of such a factor – was the mining stock sector really strong enough to withstand the powerful bearish forces in the form of declining GLD and SPY?

There is a good reason for the miners’ “strength”. It’s the $36 price level itself. Or, more precisely, the strong support that it provides.

This is the price level from which junior miners rallied in early March.

This is the price level at which juniors reversed on an intraday basis on March 9th.

This is the price level that stopped the decline on March 10th.

And this is the price level that – once broken on March 11th – triggered waterfall selling that quickly took the GDXJ below $20.

This is also the levels that stopped the late-March rally, and the level that initially served as resistance on April 9th.

It also served as support after the initial – April 15th – decline.

Given that this price level worked as both: support and resistance so many times, is it really surprising that without a major breakdown back below the previous 2020 highs in the GLD ETF, this level is holding strong?

It’s absolutely normal. Let’s not overestimate this support’s importance, though. This level doesn’t invalidate the bearish gold price forecast, it only changes its shape a bit. Instead of declining just like GLD, the GDXJ is taking a breather above $36, but once GLD moves decisively lower, the GDXJ would be likely to break below this level, and slide profoundly – catching up with the pace of the slide.

Please note what happened on April 9th and April 13th. The miners first declined (about $2) based on the resistance, but once they finally broke above the $36 level, they soared until topping almost $6 higher. What’s happening now? The GDXJ moved higher first (about $2) and as soon as it gets the bearish lead from gold, it’s likely to catch up, by breaking below the $36 level, and sliding much further.

The very same chart features a specific self-similarity suggesting that the junior miners are likely to get this kind of bearish kick shortly. Not only is the current situation in the GDXJ itself very similar to what happened in mid-March, right before the slide, and right before the breakdown below $36 – it’s also the case with the GLD ETF.

The GLD is moving back and forth around its blue moving average, while the RSI indicator (note: everything on the chart is based on the 2-hour candlesticks, not the daily candlesticks) is moving around the 50 level.

The similarity in each ETF on a stand-alone basis might just raise an eyebrow, but the fact that both similarities aligned at the same time – along with a breakdown in the general stock market and rallying USD Index – should make one’s both eyes wide open.

The next big move for the precious metals market is likely to be down, and it’s likely to be really significant.

Thank you for reading today’s free analysis. Its full version includes details of our currently open position as well as targets of the upcoming sizable moves in gold, silver and the miners. We encourage you to sign up for our free gold newsletter – as soon as you do, you’ll get 7 days of free access to our premium daily Gold & Silver Trading Alerts and you can read the full version of the above analysis right away. Sign up for our free gold newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care


All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.