Available to premium subscribers only.

• Read more

Junior miners are rallying “slowly but surely”, which means that once again practically everything that I wrote on Monday and yesterday either happened in tune with that or it remains up-to-date; and thus, today’s technical part will be rather brief.

Let’s start with what I ended yesterday’s analysis with – the USD Index.

I previously wrote the following:

The higher of the recent highs is at 103.96 right now, so if the analogy to 2014 is to remain intact, the USD Index could now top at close to 104.5 or even 105.

That’s exactly what happened recently. On Thursday, the USD Index moved to 104.96, and in Friday’s trading it rallied above 105 (to 105.065) and it invalidated the breakout above this level - which is in perfect tune with what I wrote above. Consequently, it seems that we could now see a move to about 103-103.5, after which USD’s rally could continue.

The opposite is likely to take place in the precious metals sector. Gold, silver, and mining stocks are likely to rally in the near term, and then – after topping at higher levels – their decline would continue.

The USD Index futures moved to about 103.7 in today’s [May 17] pre-market trading (so far), so you might be wondering if the bottom is in or about to be, and therefore, will gold stop rallying.

Please note that it’s possible that the USD Index bottoms shortly in the 103-103.5 range but then continues to trade sideways for a few days, while gold continues to rally. In fact, that’s what happened in late 2014. Consequently, what we’ve seen so far today doesn’t imply that gold’s, silver’s, or miners’ rallies are over.

After moving to 103.245, the USD Index futures moved back up, which is in perfect tune with what happened in late 2014, when the USD Index was correcting a breakout above the previous two important highs. Therefore, it’s quite likely that after a few-day-long pause, the USD Index will rally once again. This means that the precious metals market still has room to rally in the next several days.

In yesterday’s trading, gold futures were up by less than $5 (0.27%), so it’s nothing special, but it’s a “notable nothing” as gold didn’t return to its previous decline mode.

In other words, my previous comments on gold remain up-to-date:

In short, gold reversed yesterday’s decline after almost touching its previous 2022 lows, and at the same time, it practically erased the entire war-tension-based rally – just like it was supposed to.

Gold ended the day only $5.80 higher, but the important thing is that it reversed at all. Gold’s RSI also bounced off the 30 level, which can be viewed as a buy signal on its own.

While gold was up by 0.27% yesterday, GDX was up by 0.19%, and GDXJ was up by 0.85%. It seems that we’re using the right proxy for making money on the rebound as it’s moving up most visibly. No wonder – it’s been the most oversold.

Of course, there will be some back-and-forth movement on an intraday basis, but it doesn’t change anything. Junior miners are likely to rally this week, nonetheless. And perhaps not longer than that, as the next triangle-vertex-based reversal is just around the corner – on Friday/Monday.

Meanwhile, the S&P 500 Index has clearly invalidated its head-and-shoulders pattern in terms of the daily closing prices, which is a buy signal on its own.

This means that the odds of a short-term rally in the following days have greatly increased. This makes the current long position in junior mining stocks even more justified and it is likely that profits on it will increase shortly.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim targets for gold and mining stocks that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

• Read more

Practically everything that I wrote yesterday either happened in tune with that or it remains up-to-date, so today’s technical part will be rather brief.

In short, gold reversed yesterday’s decline after almost touching its previous 2022 lows, and at the same time, it practically erased the entire war-tension-based rally – just like it was supposed to.

Gold ended the day only $5.80 higher, but the important thing is that it reversed at all. Gold’s RSI also bounced off the 30 level, which can be viewed as a buy signal on its own.

Junior miners were up by almost 1% yesterday, about 3 times more than gold. They continue to show strength, and our long positions (that became profitable almost immediately) are getting more profitable also in today’s early trading as the GDXJ is up in London trading.

In yesterday’s analysis, I wrote that the S&P 500 invalidated its head and shoulders pattern on an intraday basis, and even though it declined very modestly yesterday, it’s up in a clear manner in today’s pre-market trading.

This means that the odds of a short-term rally in the following days have greatly increased. This makes the current long position in junior mining stocks even more justified.

Also, as far as the USD Index is concerned, I previously wrote the following:

The higher of the recent highs is at 103.96 right now, so if the analogy to 2014 is to remain intact, the USD Index could now top at close to 104.5 or even 105.

That’s exactly what happened recently. On Thursday, the USD Index moved to 104.96, and in Friday’s trading it rallied above 105 (to 105.065) and it invalidated the breakout above this level - which is in perfect tune with what I wrote above. Consequently, it seems that we could now see a move to about 103-103.5, after which USD’s rally could continue.

The opposite is likely to take place in the precious metals sector. Gold, silver, and mining stocks are likely to rally in the near term, and then – after topping at higher levels – their decline would continue.

The USD Index futures moved to about 103.7 in today’s pre-market trading (so far), so you might be wondering if the bottom is in or about to be, and therefore, will gold stop rallying.

Please note that it’s possible that the USD Index bottoms shortly in the 103-103.5 range but then continues to trade sideways for a few days, while gold continues to rally. In fact, that’s what happened in late 2014. Consequently, what we saw so far today doesn’t imply that gold’s, silver’s, or miners’ rallies are over.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim targets for gold and mining stocks that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

• Read more

Are you wondering if it’s worth choosing a long position in the gold market now? Well, consider taking a look at the junior miners first to find out.

On Thursday, I wrote that I was going to go long on junior mining stocks, and in the following hours, the GDXJ moved even a bit lower, providing you with a great opportunity to exit short positions and enter long ones in a comfortable manner. Hopefully, you did that, because the GDXJ rallied by almost 4% on Friday and ended the week above $37. The popular leveraged ETF, JNUG, was up by over 7% in a single day.

If you’re long on miners and you reaped those profits - congratulations! If not, let me re-emphasize what I wrote in Friday’s extensive flagship Alert: it seems to me that the short-term rally has only begun, and that quick profits are likely just around the corner.

Looking at gold’s pre-market decline, one might get second thoughts about the above, but please note that we are long on mining stocks, not gold, and there is a good reason why I chose mining stocks as a proxy and not gold or silver. The reason is that miners tend to show strength relative to gold before the bottom and then immediately thereafter.

Consequently, even if gold didn’t bottom last week and we’re seeing a bottom more or less right now, it doesn’t necessarily mean that miners will test their lows too.

Let’s check what’s gold been doing so far this week.

Gold is down to new lows in today’s pre-market trading, and it’s well below my initial target area for it. However, another important support level is just around the corner.

I don’t mean just the psychologically important (being round) $1,800 level. That too, but it’s crucial to note that gold just moved to levels from which the entire war-tension-based rally started. If it wasn’t for those tensions, gold would likely have plunged profoundly in February and perhaps it would be already after or getting close to its final low. However, since the war has indeed started, gold peaked (when the tensions and uncertainty peaked), and it’s been moving lower since that time – despite what most analysts told you.

Here's what I wrote on February 28, 2022, in the Gold & Silver Trading Alert entitled “Since There is a War, Gold Will Rise, Right? Wrong.”:

Let’s keep in mind that for gold to decline, the war doesn’t have to end, it doesn’t have to be won by either side. The only thing that matters with regard to it, is how big the uncertainty and concern is. And the peak uncertainty/concern might be today, as everything is new, and the situation is dramatically changing the geopolitical environment in Europe.

For comparison, remember Covid-19 cases, deaths in early 2020? That was just a tiny fraction of what we saw later. However, it was new and unknown. People were particularly scared then, and the markets moved particularly significantly then – not based on additional millions of cases and thousands of deaths next year.

Investing and trading are difficult. If it was easy, most people would be making money – and they’re not. Right now, it’s most difficult to ignore the urge to “run for cover” if you physically don’t have to. The markets move on rumor and sell the fact. This repeats over and over again in many (all?) markets, and we have direct analogies to similar situations in gold itself. And junior miners are likely to decline the most, also based on the massive declines that are likely to take place (in fact, it already started) in the stock markets.

That wasn’t the peak uncertainty, but the latter peaked about a week later, and the war is still taking place months later, so it seems that one could say that the above proved to be correct.

Since junior miners just moved to new 2022 lows, it was also profitable not to chase the “emotional stampede”, but rather focus on the analogies to the previous situations from the past. Based on how the situation has developed in the markets so far, it seems that the clearest analogy is to how the gold market performed in 2001, based on the U.S.-Afghanistan war. I provided the chart in my Feb. 28, 2022, analysis, but here it is again:

The decline had been big and sharp, but please note when it ended. Gold formed an initial, and then final, short-term bottom, very close to the price levels at which the rally started before the outbreak of the war.

Fast-forward to the current situation – these are the levels that gold is approaching in today’s pre-market trading.

The January 2022 low is $1,781.30 and the February 2022 low (which is also the yearly low) is $1,778.80.

Today’s pre-market low is $1,787.44 (at least so far). That’s less than $10 away from the above-mentioned strong support levels.

All this means is that gold and silver prices might have just bottomed or that they could bottom shortly.

Let’s not forget what miners tend to do before and right after bottoms – they tend to show strength relative to gold. Let’s check what the GDXJ ETF is doing in today’s London trading.

It corrected somewhat, but unlike gold, the GDXJ didn’t move to new lows today. In other words, junior miners are showing strength, just as they are supposed to around the bottoms.

There are three more things on the above chart that I would like to discuss.

1. The first is that a daily pause right after the turnaround is common for the GDXJ, and I marked several other occasions where we saw something similar. This includes what we saw after the sharp early-2020 correction.
2. The second thing is that it’s clear that the GDXJ just (on Friday) invalidated the small breakdown below its previous (2021 and 2022) lows. This is a huge bullish development (for the short term only!). Invalidations of breakdowns immediately become bullish signals, without the need to wait for confirmation, and that’s what we just saw.
3. The third indication is the triangle-vertex-based reversal, which will take place in about a week. It points to some kind of reversal taking place on May 22. That’s Sunday, so based on the above, we might expect a turnaround on Friday or next Monday.

This serves as an indication that we might want to prepare ourselves to close the current long position and go back on the short side of the trade before the end of the week – perhaps on Friday. Geopolitically, a lot can happen over the weekend, so I’d prefer to be positioned along with the medium-term trend beforehand.

The invalidation described as the “second thing” is also something that we saw from the U.S. perspective, so it’s definitely important.

The thing that I’d like to add is that the RSI just moved back above 30 after being below it, which is a classic buy signal. That’s what marked the end of the 2020 decline, and something very similar to what marked the end of the initial March decline (RSI just touched 30 at that time, but it was enough).

Please note that the triangle-vertex-based reversal point is practically the same from the U.S. point of view, so it adds credibility to the scenario in which junior miners top close to the end of this week.

This fits the target area that I provided on Friday on the above 4-hour-candlestick GDXJ chart.

The target would also fit the sharpness of the recent decline. After all, corrections tend to be similarly volatile as the price moves that are being corrected. Of course, let’s keep in mind that the current long position is for trading capital only, not for long-term investments, as I don’t think that the medium-term downtrend in gold, silver, and mining stocks is completely over yet.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim targets for gold and mining stocks that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

• Read more

The USDX and the precious metals market are like reverse images. Thus, it's possible to guess what gold and silver will do as the dollar gallops up.

Miners and silver declined in a truly epic manner, and yes, the same is likely to take place in the following months, as markets wake up to the reality, which is that the USD Index and real interest rates are going up.

Speaking of the USD Index, after invalidating the breakout below the multi-year head-and-shoulders pattern, the USDX was poised to soar, just like I’ve been expecting it to do for more than a year, and that’s exactly what it did.

The RSI is currently above 70, but since the USDX is in a medium-term rally and is already after a visible correction, it can rally further. Please note that we saw the same thing in 2008 and 2014. I marked the corrections with blue rectangles.

Still, the USD Index is now practically right at its next strong resistance – at about 104.

I previously wrote the following about this target:

It doesn’t mean that the USD Index’s rally is likely to end there. It’s not – but the USDX could take a breather when it reaches 104. Then, after many investors think that the top has been reached as the USDX corrects, the big rally is likely to continue.

The important detail here is that the consolidation close to the 104 level doesn’t have to be really significant (perhaps 1-2 index points of back-and-forth movement?) and it definitely doesn’t have to take long. The interest rates are going higher, and investors appear to have just woken up to this reality – it will take some time before everyone digests what’s going on. Before the late-reality-adopters join in, the USD Index could be trading much, much higher.

Back in 2014, when the USD Index approached its previous highs (close to 89), it consolidated so quickly that it’s almost not visible on the above chart – it took just a bit more than a week (from Dec. 8, 2014 – 89.56 to Dec. 16, 2014 – 87.83).

I previously wrote the following:

We could see something similar this time – and as the USD Index corrects for about a week, the same thing could take place in other markets as well: stocks and PMs. If junior miners were after a very sharp slide at that time, they would be likely to correct sharply as well.

I would like to add one important detail. Back in 2014, the USD Index didn’t correct after reaching its previous high. It corrected after moving above it. The higher of the highs was the March 2009 high, at 89.11.

The higher of the recent highs is at 103.96 right now, so if the analogy to 2014 is to remain intact, the USD Index could now top at close to 104.5 or even 105.

That’s exactly what happened recently. Yesterday, the USD Index moved to 104.96, which is in perfect tune with what I wrote above. Consequently, it seems that we could now see a move to about 103-103.5, after which USD’s rally could continue.

The opposite is likely to take place in the precious metals sector. Gold, silver, and mining stocks are likely to rally in the near term, and then – after topping at higher levels – their decline would continue.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of the full analyses that our subscribers enjoy on a regular basis. They include multiple premium details such as the interim targets for gold and mining stocks that could be reached in the next few weeks. We invite you to subscribe now and read today’s issue right away.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

• Read more