If you feel like the market is running away, and that the bullishness is overwhelming, please keep in mind that this is exactly the feeling that accompanies local tops. This is the trying time, where so many investors panic and get on the wrong side of the trade. Let’s take a look at the GDXJ chart for details.
The GDXJ just did the following:
- Moved slightly above its August high without confirming this move.
- Rallied after below-expected CPI numbers in a way that’s very similar to what we saw in July (and rallied pretty much as much as it did back then, indicating that the rally is likely over.
- Rallied after a flag formation, in a way that is almost identical to the rally that preceded the flag (marked with orange, dashed lines). The moves that follow this formation are likely to be as big as the ones that preceded it. In other words, it’s likely that “this is it”.
On top of the above, the RSI just touched the 70 level which is the classic sell signal. That’s what started the huge 2022 slide – the RSI was at that level when it topped in April 2022.
So, all in all, today’s upswing might seem to be a bullish game-changer, but it’s all part of a bigger – bearish – pattern. The April – October 2023 slide was followed by a zig-zag correction. That’s it. The next huge wave down is likely to start any day or hour now.
As always, we’ll keep you - our subscribers - informed.
Przemyslaw K. Radomski, CFA