Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19
US Tech Stock Sector Setting Up for A Momentum Breakout Move - 12th Feb 19
Key Support Levels for Gold Miners & Gold Juniors - 12th Feb 19
Socialist “Green New Deal” Points the Way to Hyperinflation - 12th Feb 19
Trump’s Quest to Undermine Multilateral Development Banks - 12th Feb 19
Sheffield B17 US Bomber Crash 75th Anniversary Fly-past on 22nd February 2019 Full Details - 12th Feb 19
The 2 Rules For Successful Trading - 12th Feb 19 -
Financial Sector Calls Gold ‘Shiny Poo.’ Are They Worried? - 11th Feb 19
Stocks Bouncing, but Will They Resume the Uptrend? - 11th Feb 19
EURO Crisis Set to Intensify: US Dollar Breakout Higher
Stock Market Correction Starting? - 10th Feb 19
Gold Stocks Gather Steam - 10th Feb 19
Are Gold Bulls Naively Optimistic? - 9th Feb 19
Gold, Silver Precious Metals Update - 9th Feb 19
The Wealthy Should Prepare to Be Soaked - 8th Feb 19
US Business Confidence Is Starting to Crack - 8th Feb 19
Top Myths and Facts about ULIP Plans - 8th Feb 19
A Major Stocks Bear Market in 2020? - 8th Feb 19
Gold Market Extremes Test Your Mettle - 8th Feb 19
The Venezuela Myth Keeping Us From Transforming Our Economy - 8th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Upcoming Turnaround in Gold

Commodities / Gold and Silver 2018 Mar 14, 2018 - 05:34 PM GMT

By: P_Radomski_CFA

Commodities

More than two weeks ago, we described the very specific and very important pattern in the gold market, one of short- and medium-term importance. We wrote that the triangle apex pattern based on the intraday highs, pointed to a major reversal in the first half of March. The first half of March ends this week, so the key question is if the pattern was invalidated or are we about to see a major reversal in the price of gold.

In our view, the latter outcome is highly likely as it is confirmed also by other – independent – analogies. Let’s start with going back to the chart that we presented on February 26th (charts courtesy of http://stockcharts.com).


In the past two weeks gold didn’t soar – conversely, it was trading sideways and its currently lower than it was when we wrote the above. So, one might be wondering if the implications of the triangle’s apex are actually bullish, since the move in the last two weeks was down. They are not, because this gold forecast technique is based on medium-term lines, so we should also take medium-term rallies and declines into account while determining the implications of the turnaround.

The preceding medium-term move was up – gold moved higher in late December 2017 and for most of January 2018, topping a bit above $1,360. The back-and-forth movement since that time is rather a lengthy medium-term topping formation than a combination of price moves that should be analyzed independently – at least from the medium-term point of view.

Of course, if gold breaks above the $1,360 with a vengeance and confirms a big breakout above it, then the current back-and-forth trading will turn out to be a consolidation within a rally – but that’s not what seems likely at all. After all, gold wasn’t able to break above its 2017 and 2016 highs even though the USD Index declined a few index points below the analogous extremes.

The medium-term nature of the pattern has an additional important consequence. It is that we shouldn’t put too much weight on its precision in terms of days. A good rule of thumb is to zoom in or out on a given chart until the pattern that you want to analyze is clearly visible, and then check – without zooming in – if the price is just a bit away from what it should be doing based on the pattern, or not. In the case of our triangle apex reversal, the moment of reversal is “more or less here”, so if we see a reversal this week, it will be definitely in tune with the pattern – it will not invalidate it.

During yesterday’s trading, gold moved higher without moving back above the 50-day moving average. If we are to see a major reversal and a powerful decline thereafter, then we should see / have seen at least some upswing beforehand. After all, what’s to reverse if there was absolutely no rally? Consequently, it seems that yesterday’s rather small upswing is perfectly understandable in the current market situation. Besides, we wrote in the previous analyses that slightly higher prices could be seen. This seems to be it. We don’t expect significantly higher gold prices before the reversal, though.

Earlier today, we wrote that the bearish case is supported by also other analogies. One of them is to the previous breakdown below the 50-day moving average.

Back in early December 2017, the breakdown below the 50-day MA was followed by a brief pause and the decline continued only after that time.

This is something that we’re seeing also this time – the pause and a small rally is a verification of the breakdown below the MA, which is a bearish gold trading sign.

Silver’s Striking Similarity Continues

The second analogy can be observed in the silver market. In the past few weeks, the white metal has been performing almost identically as it did after the September 2017 top. The initial decline, the volatile comeback and another move lower, but not below the initial low. Then a sharp daily upswing above the 50-day moving average and almost to the previous high. Then another big move down that erases more than the daily rally. Finally, a few days of quiet upswing. That’s where we are right now and that’s exactly what preceded the $1.5 decline in late 2017.

The above paints a clearly bearish forecast for silver.
 
Gold Stocks’ Breakdown Below 2017 Low

In yesterday’s Gold & Silver Trading Alert, we wrote that based on the analogy present in silver, the one in gold and due to gold’s triangle apex reversal, it seemed that the chance of another upswing was very low. Even if it was seen – we argued – gold miners would be likely to underperform, so a move to a new March 2018 high didn’t seem to be in the cards.

Yesterday’s session more or less confirmed the above. Gold and silver moved a bit higher just as one might have expected them to before a reversal, and silver moved in tune with its self-similar pattern. Gold stocks, however, ended the session slightly lower, underperforming and closing once again below the 2017 low.

It seems that the breakdown below the last year’s low is now more than verified and thus much lower prices are likely to follow.

Sign from Europe

The interesting pattern about the euro is that it quite often ends rallies with triple tops with an extra upswing that sometimes is too temporary to be called another top. We marked those cases with red rectangles and we marked those “extra upswings” with red arrows. The temporary nature of the latter can be seen particularly clearly in September 2017.

On Friday, we wrote that the problem with this analogy and the reason why it didn’t add clarity to the outlook was the January 25th intraday high. Should we count it as one of the major local tops?

Yes, because ultimately a high was indeed reached. No, because in terms of the closing prices, nothing really happened on that day.

Based on the most recent very short-term move higher in the EUR/USD, we know that the second interpretation was most likely the correct one. Namely, the intraday high didn’t really count and that the top we saw earlier this month was the third one. This, in turn, makes yesterday’s rally the “extra upswing” that is seen right before declines. The implications are bearish for the EUR/USD, bullish for the USD Index and bearish for the precious metals market.

Summary

Summing up, a major top in gold, silver and mining stocks is probably in, and based on the way silver and gold stocks performed on Friday and the analogies in gold and – especially - silver, it seems that the big decline is just around the corner. We already saw the key short-term signs: silver’s outperformance and miners’ underperformance last Tuesday, and the fact that they were repeated on Friday makes the bearish outlook even more bearish, especially that our last week’s upside targets for gold and silver were already reached.

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

© 2005-2019 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