March 24, 2020, 9:16 AM
Available to premium subscribers only. In today's Gold & Silver Trading Alert we are adjusting the profit-take levels for our profitable long positions in the mining stocks. We entered it in the final 25 minutes of the March 13 session, with GDX at about $17. That (March 13) was also when we completely closed our short positions in the precious metals sector - the ones that we had opened on February 21st - one day before the final 2020 top.
March 23, 2020, 1:12 PM
Available to premium subscribers only.
March 23, 2020, 10:41 AM
Traders consult higher timeframes so as to get a big picture view that filters out some short-term noise. So, what story does the monthly gold chart tell?
Gold reversed in February, creating a crystal-clear shooting star candlestick. The monthly volume was big, meaning that this candlestick formation is valid. The shooting star is a bearish sign for the following weeks and/or months, especially that in 5 out of 5 previous times that we saw it, such moves lower followed.
The most interesting thing is that two of those five cases formed in 2008, which is yet another link between 2008 and 2020. One of the biggest and sharpest declines in the precious metals sector started with the formation that we just saw. The implications are very bearish - it seems that gold has already formed its final reversal for this medium-term rally.
Please note that March is far from being over, but it seems relatively clear that the top in gold is already in. So far, gold is repeating its February reversal, which has bearish implications for the following weeks and months.
And speaking of major gold moves, please note how perfectly the long-term triangle-vertex-based reversals in gold worked.
Gold was very likely to reverse, and it did exactly that, just like we had written earlier.
Reversals should be confirmed by big volume, and the volume, on which gold reversed was truly epic, and that's a perfectly bearish confirmation. It was the biggest weekly gold volume EVER.
Well, until two weeks ago, when the record was broken. Gold once again reversed on record-breaking volume. This makes the previous signal even stronger.
We already wrote a lot today about gold and we will write even more, also about silver and miners. We will cover multiple signs that point to lower precious metals prices in the following weeks and months (not days, though). But, the record-breaking-volume reversals are alone enough to make the outlook bearish. That's how significant this reversal-volume combination is.
In addition to the above, the above chart shows the next medium-term target for gold - at about $1,400 level. This target is based on the mid-2013 high in weekly closing prices, the 38.2% Fibonacci retracement based on the 2015 - 2019 upswing, and the rising medium-term support line. Of course, that's just the initial target, gold is likely to decline more after pausing close to $1,400.
The above chart also featured a triangle-vertex-based reversal in early April - about a month from now. It could be the case that gold declines to $1,400 at that time.
Still, based on today's pre-market move to $1,451 along with Fed's actions, it seems that we might get a local rebound also early this week. The above price level corresponds to the late-2019 lows, which served as support.
Indeed, we got a local rebound early last week and the abovementioned price of $1,451 was the bottom from which this rebound started. Still, it seems that this rebound is not yet over, as the USD Index has not corrected just yet.
Before moving further, we would like to show you how well the triangle-vertex-based reversal gold trading technique worked recently. We're going to apply it later today
Gold reversed at the beginning of the year (top), then it reversed at the next reversal point (local bottom) and now it seems to have finally topped at the final triangle-vertex-based reversal point.
The final top in intraday terms was incredibly precisely indicated by the triangle vertex reversal point.
The recent top just several dollars above the previous 2020 high is quite in tune with the way the previous major tops formed.
On a short-term basis, we see that gold broke above the third declining resistance line and verified this breakdown by temporarily moving back down and then up again. The "three line break" is one of the technical tools that help to pinpoint the breakouts, and it currently predicts higher gold prices in the near term.
Thank you for reading today's free analysis. Its full version includes a thorough analysis of precious metals' reversals, targets and timings, all supported by the USDX and stock market analysis. The latter is of particular importance to our currently open and very profitable long gold miners position. We currently offer 10% discount for the first subscription period (even for the yearly subscriptions). Given how volatile the markets are, how profitable our trades just were and currently are, and how much is likely around the corner, the time to subscribe was never better - subscribe at a discount today.
March 20, 2020, 7:42 AM
Yesterday, we told our subscribers that probably all markets (or most thereof) are about to correct. And it seems that's exactly what is happening. Crude oil is moving higher. The USD Index declined from 103.82 to about 102.72 (at the moment of writing these words). Stocks are moving higher (at least so far in today's pre-market trading - and we just took profits on our long positions in stocks) after yet another reversal yesterday. Today is the first day - since March 3rd - when the S&P 500 futures moved to new intraday high.
The post-reversal rallies are already happening.
This changed and new market landscape impacted the precious metals market in the way that we had outlined in the previous days.
Gold rallied up to about $1,500, while silver rallied to about $12.70. We don't have the trading data for the mining stocks yet, but it seems that they will soar today, given the above, especially as the main stock indices continue to climb.
This brings us to the main topic of today's free Gold-and-Silver-Trading-Alert-based analysis - the mining stocks, and their upside target. Practically everything else (including the target details) written in the previous days remains up-to-date, so we won't go into details once again today.
The charts below may seem small and insignificant, but the opposite is the truth. They might be small in size, but they are critical in importance, especially given our current trading position (we're long mining stocks).
The Miners and SPY View
The above charts are 4-hour charts (each candlestick represents half of the daily US session). This zooming-in compared to the regular daily charts is very useful given the very short-term nature of the most recent price swings. It allows for instance for drawing of more accurate trend lines. By the way, Nadia Simmons discovered (and I verified that it applies to the precious metals market as well) that using trendlines on charts that are more short-term than the 4-hour charts is often misleading - that's why we're using 4-hour charts, and not for instance 5-minute charts.
We updated the support and resistance lines based on the most recent lows. This required an update, because miners declined initially yesterday before moving higher. This, in turn, decreased the pace at which the trend channels rise.
Moreover, we added different trend channels that are based on the daily closing prices (thick lines).
Finally, we adjusted the Fibonacci extension tool to make its predictions more realistic (it's extremely likely that miners won't move to new yearly highs shortly), and we added 1-to-1 lines (red, dashed) that show how and when miners are likely to move if they repeat their previous 2-day upswing.
All this creates a relatively broad target area between $27 and $31 in case of the GDX ETF. In case of the GDXJ ETF, the target area is between $35 and $41.5.
There is, however, a part of the GDX target area, where the density of resistance / target levels is particularly big. We marked this area with a red ellipse. It's between $27 and $30. That's most likely where the GDX ETF is likely to form its next top. In case of the GDXJ ETF, there's a good chance that either $36 or $41.5 (approximately) will stop the rally.
Our strategy here is to take profits off the table at the lower border of the target areas (slightly below them to increase the chance of the exit orders getting filled), and examine - based on what the stock market is doing - whether miners are already topping or not. If the S&P 500 is very close to 2700 at that time, we will likely re-open speculative short positions. If the S&P is still relatively far from it (say, at 2600 or so), we will likely wait until it moves higher, taking miners higher with it, and re-open the short positions once S&P 500 is close to 2700, regardless of where the miners are going to trade at that time. The odds are that they would be trading within our target areas - ideally close to their upper borders.
If the above takes place as we outlined, it will be yet another extreme move that we will be making huge money on. We entered the short positions in the precious metals sector on Feb 21st, we took complete profits from this trade and we went long mining stocks in the final 25 minutes of last Friday's trading, very close to the intraday lows (about $17 in the GDX). After securing huge gains from the current long trade, it seems that we will have the opportunity to make more similarly epic trades in the following days and/or weeks.
The shape of yesterday's session (especially the final candlestick) might seem scary, and there is a good reason for it. It's a massive reversal on big volume. These patterns are very bearish for the short term.
As always, the context is king and if there's one gold trading tip that one should keep in mind at all times, it's exactly this. Looking at the above chart alone, very few traders would want to be on the long side of the market. But why would we limit ourselves to this chart alone, when we have all sorts of market inter-dependencies and we can use them to see what really happened yesterday.
Bearish reversals (like the shooting star above) represent situations in which the bulls tried hard to rally but were overwhelmed by seller's force. The above indicates that the seller's strength is substantial and thus likely lead to even further declines.
Nothing like that happened yesterday. It looks like it, but that's not what happened.
What happened was that gold declined (most importantly, GLD declined - they have the same opening and closing times as GDX does), and SPY (the ETF for the S&P 500 Index with the same opening and closing times as GDX) moved up by only 0.21%. And yet, the GDX ETF managed to close the session over 8% higher. Yesterday's session was a show of miners' strength, not weakness.
Moreover, please note that it took only a little strength in the S&P 500 and gold, for the GDX to rally almost to its Tuesday's high. Miners are magnifying the bullish indications and are not fully reacting to bearish ones. This is a show of strength and it's very bullish for the short term.
The nearest strong resistance (assuming that stocks break above the declining resistance line, which seems very likely in our view) is provided by the 38.2% Fibonacci retracement that is based on the entire decline. This level also corresponds to the recent local high. That's where I think (detailed S&P 500 trades are featured in our Stock Trading Alerts) the S&P 500 is likely to move (and likely to top). This level is at about 2700.
If this is where the S&P is going to top, then it's about halfway done correcting.
Let's see how this compares to what's happening in the USD Index.
The Unfolding USDX Correction
If the USD Index is about to decline to approximately 100 - as we outlined yesterday - then it's also halfway done correcting at the moment of writing these words.
This suggests that today's gains in gold and silver are also likely to increase. Since both precious metals bottomed earlier, it's unclear whether doubling the rally so far would provide accurate targets. It would probably be more reliable in case of gold, as the yellow metal is more connected to the USD Index than silver is. The latter plunged so heavily recently that the weight of this event is more important than USD's influence. In other words, our previous analysis regarding silver's upside target is even more relevant now.
Gold and Silver in Focus
As a reminder, we think that silver will rally to about $13.50 - $14 - as a verification of the breakdown below its 2015 low.
If gold doubles its most recent upswing, it will move to about $1,575, which approximately corresponds to the 50% retracement based on the entire recent decline.
This is approximately in tune with the upper border of the rising trend channel, which might (and likely will) turn into a flag pattern. Based on it, gold could rally to about $1,565 or so, before topping.
Consequently, our predicted target area for gold is $1,565 - $1,575.
Before summarizing, we would like to reply to a question that we received about the pricing of NUGT and DUST (but it might have easily been about any other opposite pair of ETNs like JNUG and JDST). The question was how can they - the opposing ETNs - move in the same direction during the day.
In short, there can be some temporary mispricings in normal times, and they can get bigger in volatile times, such as the current times. These are likely to be averaged out within a day or a few days. Also, please note that it might have something to do with the way these instruments are priced. They are designed to multiply daily gains. And if something moves down by 20% and then up by 20%, it will be trading at 0.8 x 1.2 = 0.96 (or 96%) of the original value. But if these moves were multiplied 3x, and something went down by 60% and then up by 60%, you'd get 0.4 * 1.6 = 0.64 (or 64%) of the original value. If the same thing happens several days in a row, rather counter-intuitive moves could happen. The investors in private investment funds (and in other cases, where capital is professionally managed) might greatly benefit from these instruments, but it's definitely not appropriate for everyone (and the same applies to all leveraged instruments).
Summing up, it seems that we saw a reversal in all or most markets and that the corrective upswing in many markets (including the precious metals one) is already underway. This move could be sharp and short-lived, so we might take (enormous) profits from the current long position in the miners shortly and enter (likely big) short positions - most likely also in the mining stocks. We expect this to take place within the next several hours to next several days, and we will keep our subscribers informed regarding any changes in the above, and with regard to entering and exiting the trades.
This rally might make one feel bullish - after all, the prices of miners are likely to soar soon. Please be sure to keep in mind that what we saw was the first big wave down of a much bigger move lower, also in the stock market. The coronavirus stock-market decline has likely just begun and once it continues - and as the rally in the USD Index resumes - the precious metals market is likely to be hit. Silver and miners are likely to be hit particularly hard.
The real panic on the US stock market will begin when people start dying from Covid-19 in the US in thousands per day. We hate to be right on this prediction, but we expect the number of the total confirmed cases in the US to be greater than the analogous number in China. At the moment of writing these words, the number of total confirmed cases in the US is 14,250, which is sixth in the world, just behind Germany (15,320 cases).
It's 2008 on steroids.
Most importantly - stay safe. We're making a lot of money on these price moves (and we'll likely make much more in the following weeks and months), but you have to be healthy to really enjoy the results.
Thank you for reading today's free analysis. Its full version includes detailed upside targets for our long positions in mining stocks that we entered in the last 25 minutes of Friday's session and that are already very profitable (and these profits are likely to become enormous shortly). We currently offer 10% discount for the first subscription period (even for the yearly subscriptions). Given how volatile the markets are, how profitable our trades just were and currently are, and how much is likely around the corner, the time to subscribe was never better - subscribe at a discount today.
March 19, 2020, 9:47 AM
Gold and the greenback. During some periods they move hand in hand, but most of the time, their relative moves go in opposite directions. So, what can we as precious metals investors and traders, glean from the USD Index performance?
It's been rallying relentlessly in the last couple of days. It's not surprising, because you knew based on our previous analyses, that the long-term outlook for the USDX was very bullish. But can this vertical climb really continue without any corrections?
That's not likely.
The USDX in Perspective
The most similar situation to what we see right now (at least from the USDX perspective) is what happened in 2014. We've been writing about this similarity for months and we marked the analogous multi-year cases with green rectangles. This analogy was particularly useful during the recent breakdown below the rising blue support line. It looked scary from the bulls' point of view, but the same thing happened in 2014, so it was a relatively normal course of action that actually heralded a huge rally.
This rally is now underway. Yet, just because it is underway, it doesn't mean that it will continue without any corrections. Conversely, based on the very same analogy, it seems that a correction is due... Right now.
We marked the first part of the huge 2014 rally in the USD Index with purple dashed line, and we copied it to the current situation. We also did the same thing with the 2011 rally as it was similarly sharp. Interestingly, in both cases, the USDX rallied by almost the same amount (percentagewise). If the size of the initial rally is similar also this time, we can expect the USD Index to top... Above the 102 level and relatively close to 103. And where did the USD Index move earlier today?
It just moved to about 103. If the history is to repeat itself, as it so often does, then the USD Index is likely to correct. Back in 2014, the USD Index declined back to the previously broken highs, so this time, the situation could be similar. The most recently broken high is just below the 100 level, so that's where we would expect the USDX to bottom before soaring once again.
Thank you for reading today's free analysis. Its full version includes detailed upside targets for our long positions in mining stocks that we entered in the last 25 minutes of Friday's session and that are already very profitable. We currently offer 10% discount for the first subscription period (even for the yearly subscriptions). Given how volatile the markets are, how profitable our trades just were and currently are, and how much is likely around the corner, the time to subscribe was never better - subscribe at a discount today.
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