What a Breakdown in Gold Stocks! What a Verification!
You know what happens on the markets after a breakdown? A test. A verification. The GDXJ had just tested this move as it had moved to new yearly lows. What was the result?
The breakdown was a real thing, not just a blip on the radar screen.
How do I know?
Because we saw a small move back above the lowest closing prices of the previous year, after which the GDXJ ETF turned around, declined, and closed the day even lower!
What a perfect verification of the breakdown!
Another way for markets to verify their moves – besides moving briefly back to the previous support/resistance and then continuing their previous move – is their ability to stay below / above certain levels for more than one day.
Yesterday, we saw the second daily close below the 2022 close. Ideally, I want to see three consecutive daily closes before saying that a given move was confirmed, but two are important, too.
Given this verification, the short-term nature of all the bearish indications that I’ve been writing about previously got amplified.
Another intriguing aspect of yesterday's decline is that it occurred in the midst of a general stock market rally.
The S&P 500 moved higher by over 1% yesterday, so junior miners – being particularly closely related to the stock market – had a good reason to move higher and invalidated the breakdown below the 2022 close.
They didn’t. This is yet another indication pointing to junior miners’ bearish outlook.
And since mining stocks tend to lead gold… This is all bearish for gold as well.
Consequently, my yesterday’s (premium) comments on the GDXJ ETF and the near-term target area for it remain up-to-date.
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.
Przemyslaw K. Radomski, CFA