Another and perhaps final re-test of the neck level of the head-and-shoulders pattern in the GDXJ is already behind us.
It looks like today’s session will be the third consecutive day when GDXJ will close below the neck level of the pattern, thus marking it as fully verified. Shortly after I wrote about this pattern as something that was likely to form.
This makes subsequent declines even more likely.
Please note how the technical indication from the GDXJ precedes the technical indication from the GLD ETF, which is still sitting on its rising support line.
There’s one more thing that the above chart tells us – namely, it shows that GLD, SLV, and GDXJ are all declining despite a small – but still – decline in the UUP ETF, which serves as the proxy for the USD Index.
This is a subtle clue telling us that the precious metals sector is ready to slide as soon as the USD Index rallies in a more decisive way (yes, even despite silver’s exceptional fundamental situation). Right now, it’s still trading close to 100 without a confirmed breakout above it – being at 99.69 at the moment of writing these words.
Another clue comes from bitcoin.
The cryptocurrency corrected 38.2% of its previous short-term decline, and it moved slightly above its previous high. It also reversed on an intraday basis.
All this is important because, the last time we saw the 38.2% retracement being reached, was at the January top in bitcoin, which was also one of the local tops in the stock market. Moreover, the most recent short-term top in bitcoin (the early-March one) heralded short-term declines in the precious metals sector.
The implications for stocks and PMs seem bearish, but the fact that the latter rallied after bitcoin’s January top might seem bullish. In my view – incorrectly so. Back then, it was the slide in the USD Index – the one that took it to its yearly low – that triggered the final part of the upswing. Currently, we have something opposite – it seems that the USD Index is on the verge of a bigger move higher, as I discussed in my previous analyses.
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Much more follows in the full version of this analysis – in today’s Gold Trading Alert. Check out the current promo – you’ll like it.
Thank you.
Przemyslaw K. Radomski, CFA
Founder
Golden Meadow®