The Rally in Gold – Did it Just End? Stocks Seem to Say So…
It’s only a few days after my buy Alert for mining stocks, but it already seems that the easy part of the rally is over. Will gold decline shortly?
Let’s start today’s analysis with a very short-term chart (hourly candlesticks) featuring the GDXJ ETF – a proxy for junior mining stocks. These miners have been the most volatile part of the precious metals sector – at least, it’s the more popular part.
As I had indicated earlier, the big-volume decline that we saw on the hourly candlestick was likely to trigger another quick rally. Indeed, we saw another sizable intraday upswing that allowed us to take profits from our quick long positions.
Why did I take profits there instead of waiting for the junior miners to move to even the first of their classic Fibonacci retracement levels?
- My idea behind the previous long position was to catch the “easy” part of the rally, as given the strength of the medium-term downtrend, the biggest risk was to miss profits from the decline.
- The mid-Feb. intraday highs also served as at least somewhat important resistance.
You can see the latter even more clearly on the below chart.
You can additionally see that it was not just the GDXJ ETF that touched the resistance created by the previous intraday highs. We saw the same thing in the GLD ETF (a proxy for gold).
The SLV ETF (proxy for silver) wasn’t even that strong. The white metal topped below its mid-Feb… lows.
What’s next? Well, given the critical action in the stock market that we just saw, it seems quite likely that the next move lower is already underway, or it could start very soon.
The thing is that the S&P 500 moved below its rising support line based on the October and December 2022 lows and also its declining support line – thus invalidating a breakout above it.
There was some back-and-forth movement after those breakdowns, and they were verified as a result. Thanks to this, we know that those moves lower were not accidental or artificial. To be precise, one can never be 100% certain on anything on the market, but the above seems very likely.
Since stocks and the precious metals market declined together and then rallied together, it seems that they can slide together in the following weeks as well.
So, all in all, it seems that the next big move lower is either already underway or about to start.
Thank you for reading the above free analysis. The premium analysis I just posted, on which the above is based, continues and additionally includes a special GDXJ ETF, on which I’m providing a detailed overview of the upside price target. I’m also discussing the strategy for this trade, and I’m featuring detailed price targets not just for the GDXJ but also for the JNUG (2x leveraged proxy for junior miners), silver, SLV, AGQ (2x leveraged proxy for silver), gold, HGU.TO (Canadian 2x leveraged proxy for gold stocks), and HZU.TO (Canadian 2x leveraged proxy for silver).
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Przemyslaw K. Radomski, CFA
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