Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Commodities - What Do You Need To Know? - 20th Nov 18
Precious Metals Moving In Unison For A Massive Price Advance - 20th Nov 18
Handicapping the Precious Metals Through Year-End - 20th Nov 18
Betting Markets Confirm Theresa May Safe From Tory Leadership Challenge this Week - 20th Nov 18
Rail Chaos Transpennine Express Cancels Services to Manchester Airport Whilst on the Train! - 20th Nov 18
The Giants Are Coming...Giants of The Internet! - 20th Nov 18
Gold & Silver Corrective Rally is Almost Over - 19th Nov 18
Stock Market Going Sideways - Which Direction is Next? - 19th Nov 18
Technical Analysis Points to DOW 30k Next Target - 19th Nov 18
Stock Market Consolidating in a Downtrend  - 19th Nov 18
Next Tory Leader, Prime Minister Forecast and Betting Market Odds - 18th Nov 18
The Fed's Misleading Money Supply Measures - 17th Nov 18
Stock Market Outlook: Why the Economy is Bullish for Stocks Going into 2019 - 17th Nov 18
NO DEAL HARD BrExit Tory Chaos, Theresa May Leadership Challenge - 17th Nov 18
Gold vs Several Key Investments - 17th Nov 18
GDX Gold Mining Stocks Q3 18 Fundamentals - 17th Nov 18
Is Gold Under or Overpriced? - 17th Nov 18
Active Managers are Bearish on Stocks. A Bullish Contrarian Sign - 16th Nov 18
Will The Fed Sacrifice Retirement Portfolio Values For The "Common Good"? - 16th Nov 18
BrExit War - Tory Party About to Replace Theresa May for NO DEAL BrExit - 16th Nov 18
Aspire Global Makes Significant Financial Strides - 16th Nov 18
Gold Oil and Commodities …Back to the Future ? - 16th Nov 18
Will Oil Price Crash Lead to “Contagion” for the U.S. Stock Market? - 15th Nov 18
How NOT to Be Among the MANY Stock Investors Fooled by This Market Myth - 15th Nov 18
Tory BrExit Chaos Cripples UK Economy, Wrecks Housing Market Confidence - 15th Nov 18
Stocks Could End 2018 With A Dramatic Rally - 15th Nov 18
What Could Be the Last Nail in This Stock Bull Markets Coffin - 15th Nov 18
Defensive Stock Sectors Outperforming, Just Like During the Dot-com Bubble - 15th Nov 18
Buying Your First Home? Here’s How to Save Money - 15th Nov 18
US Economy Ten Points or Ten Miles to ‘Bridge Out’? - 14th Nov 18
US Stocks: Whither from Here? - 14th Nov 18
Know exactly when to Enter&Exit trades using this... - 14th Nov 18
Understanding the Benefits of Keeping a Trading Journal - 14th Nov 18
S&P 500 Below 2,800 Again, New Downtrend or Just Correction? - 13th Nov 18
Warning: Precious Metals’ Gold and Silver Prices are about to Collapse! - 13th Nov 18
Why the End of the Longest Crude Oil Bull Market Since 2008? - 13th Nov 18
Stock Market Counter-trend Rally Reaches .618 Retracement - 13th Nov 18
How to Create the Best Website Content and Generate Organic Traffic - 13th Nov 18
Why the Stock Market Will Pullback, Rally, and Roll Into a Bear Market - 13th Nov 18
Stock Markets Around the World are Crashing. What Not to Worry About? - 12th Nov 18
Cyclical Commodities Continue to Weaken, Gold Moves in Relation - 12th Nov 18
Olympus Tough TG-5 Camera Stuck or Dead Pixels, Rubbish Video Auto Focus - 12th Nov 18
5 Things That Precede Gold Price Major Bottoms - 12th Nov 18
Big US Stocks Q3 Fundamentals - 12th Nov 18
How "Free Money" Helped Create Sizzling Housing Market & REIT Gains - 12th Nov 18
One Direction More Likely for Bitcoin Price - 12th Nov 18
The Place of HSE Software in Today's Business - 12th Nov 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

THE Week. THE Record. THE Extreme Sign for Gold

Commodities / Gold and Silver 2018 Jan 29, 2018 - 03:29 PM GMT

By: P_Radomski_CFA

Commodities

To say that gold’s weekly volume was big is like to say that snails are not the fastest animal. You can't say that it’s a lie, but it doesn't really convey the entire truth, either. Gold’s weekly volume was highest EVER. Yes, ever. There was not a single week – not ever during the 2011 top or when gold declined in 2008 – when gold moved on volume that was higher than what we saw last week.

Is this significant? You bet! The chart below provides details (charts courtesy of http://stockcharts.com).


Breaking of the record is important, but it’s just an exclamation mark behind the implications that apply based on the analogy to other huge-volume weeks.

We marked situations with extreme weekly volume using vertical red dashed lines. There were 2 in 2008, one in 2009, one in 2011 (THE top), one in 2013, and one in 2016. All of them were followed by declines and 5 out of 6 confirmed a major top. The remaining case was during the 2013 decline.

Based on the above analogy, since we are definitely not in the middle of a short-term decline right now, it seems very likely that we are at a major top. The above-mentioned exclamation mark means that the top is indeed meaningful.

What could be meaningful about yet another $1,350-or-so top? There were quite a few of them in the past few years.  It might be meaningful because that’s the top that starts the final slide in gold. That’s exactly what many other factors are pointing to, so such scenario seems quite realistic.

Having discussed the key gold chart for the key precious metals, let’s check what’s happening in the currency market. We explained the situation in detail and we provided updates during the previous week, so if you haven’t had the chance to read the last few alerts, it might be a good idea to do so today. Since we now have the weekly closing prices, it’s time for a weekly update.

The USD Crisis

The USD Index closed slightly below the highest of the key support lines (2009 high of 89.11) and above 3 remaining support levels (the 2010 high of 88.71, 50% Fibonacci retracement based on the 2011 – 2017 rally and the 61.8% Fibonacci retracement based on the 2014 – 2017 rally).

The additional detail here is that in today’s pre-market trading, the USD Index has already moved to 89.27, which is more above the 2009 high than Friday’s close was below it. In other words, the tiny breakdown was already invalidated.

What does this tell us? It tells us that the USD Index is highly likely right after a critical bottom. Even if it was just one of the very important levels that would be reached, the situation would already be bullish in light of the very oversold situation in the RSI indicator. But it’s not just one extreme support that was reached, but 4 of them.

Based on the daily RSI indicator, the USD Index was most oversold in more than a year and it reversed exactly at the turning point. The oversold status is not yet a sign that the bottom is in, but it makes other signals – such as the ones described above – much more important.

The strength of the bullish factors and the amount of them is almost breathtaking.

As we discussed earlier, it was the USD weakness that was most likely the factor behind silver’s lack of decline. If the USD Index has just formed a major bottom – and based on the technical reasons that’s more than likely – then we can expect significant weakness in the price of the white metal in the following weeks and months.

Yes, we realize that the fundamental picture for silver is favorable, we are aware of the arguments for the silver shortage and the case for the silver manipulation, but all of this doesn’t have to prevent silver from declining in the medium term. It certainly didn’t in 2008, so even if we combine the bullish fundamentals for silver, it’s technical picture and the situation in the USD Index, we still get the bearish outlook for the medium term.

Let’s take a look at an additional long-term gold chart.

Gold vs. Stocks

The special thing about the gold to S&P ratio is that it smoothens the price swings and makes it clear what’s really going on. In the case of the price of gold itself, the short-term price swings are more important, and they look just like early parts of bigger moves. In the case of the ratio, however, the small moves are even smaller, and the bigger ones are even bigger. It’s easier to differentiate between them in this way.

The flag example is the 2012 breakdown and the early 2013 decline. In the case of gold, it still looked like a consolidation after a rally, but the ratio showed that the rally was over. The latter turned out to be the reality.

The ratio is now after a major breakdown and after a corrective upswing that verified it. It now resumed its decline as confirmed by the sell signal from the Stochastic indicator.
The significance of the above is much greater than it may appear at the first sight. The reasons are the analogies to the similar cases. The breakdown below a major support line is very important because the only analogous case was the 2012 breakdown. The one that started the huge slide in the precious metals prices. Why is the confirmation so significant? Because we already had fake breakdowns previously that were shortly invalidated. Not this time. This time the implications are fully bearish and confirmed.

Speaking of the confirmation and sell signal from the Stochastic indicator – it’s significant, because of the similarity to the action in late 2016. Back then the ratio broke below the triangle pattern and rallied back up. It then topped and continued to slide – and this slide was confirmed by the sell signal from the Stochastic indicator. We’re seeing the same kind of confirmation this time. Just as the price of gold followed the ratio lower, the same appears likely this time.

The gold to S&P 500 ratio is now breaking to new lows and this is taking place after the verification of the breakdown below 2015, 2016 and 2017 lows. It’s tough to imagine a more bearish situation for the ratio – and thus for gold – than the above.

Before summarizing, we would like to remind you about the critical signal we described on Friday:

The most important thing is that gold didn’t even manage to rally above $1,370 despite USD’s volatile decline during yesterday’s session. In the previous alerts we thoroughly described the likely strength of reaction in light of the possible decline in the USD and while gold moved in precise tune with it, yesterday, it didn’t even manage to do just that. Gold’s lack of strength was astonishing and that (along with the levels that the USD reached) was the factor that made us strongly increase the size of our short positions once again (they had been limited previously).

Summing up, the USD’s epic turnaround along with gold’s extraordinary weakness relative to the USD’s intraday decline along with multiple bearish confirmations paint a very bearish picture for the precious metals market for the following weeks. The situation was very bearish for PMs based on the above, but the record-breaking weekly volume in gold took the bearishness to a new – even more extreme – level. Before calling us perma-bears, please note that we’re expecting to see gold well above its 2011 high in a few years, likely more than doubling its price. We just don’t think that the key buying opportunity is already behind us and we want to prepare you for taking advantage of it.

If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our gold newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up now.

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com
Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules