Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Powerful Signal from Gold GDX

Commodities / Gold and Silver Stocks 2019 May 24, 2019 - 06:04 AM GMT

By: P_Radomski_CFA

Commodities

Gold and silver declined a bit yesterday, but mining stocks reversed and closed the session higher. It seems that the miners showed strength, especially that they formed a bullish reversal candlestick. But did they? The reversal candlesticks should be confirmed by strong volume and what we saw in the GDX ETF yesterday was the lowest daily volume of the year. In fact, the GDX volume was lower than any volume that we saw in 2018. And 2017. And 2016. And even 2015. The last time when we saw as low a volume was on May 21, 2014 (yes, exactly 5 years earlier). So, how should we read this price action?

It is not the reversal or relative strength that is the powerful signal from the GDX. It’s the extremely low volume reading. What makes it so important right now, is that since March 2013 there were only four similar cases and they were all followed by exactly the same thing.

Quick declines.


Diving into the GDX Lessons

There are quite a few lines on the above chart, and they all have a purpose. Let’s start with the blue lines. These are the lines that represent sessions that are most similar to yesterday’s session. Namely, these are the sessions, during which GDX moved higher on volume that was as low (or lower) as yesterday’s (May 21, 2019) volume of 13.4M.

The red lines represent sessions that are also similar but not clearly so. These are the days, when the GDX moved either higher or when it was flat on volume that was as low as yesterday, or even lower.

Finally, the thin, black lines represent the days, when the GDX moved in either direction and the volume was equal or lower to Monday’s (May 20, 2019) volume of 17.6M. In other words, it’s a relatively broad category of low-volume days.

We marked all three kinds of similarity to increase the quality of the analysis. Of course, there are some analysts that don’t even wait for a given formation to be completed (especially inverse head-and-shoulders formations are popular among the gold promoters disguised as gold analysts) or don’t pay attention to where they get data from and arrive at incorrect conclusions regarding the major charts (gold to silver ratio clearly broke above its long-term resistance, it’s not at it), but we care too much about you and your financial success to feature something without researching it really thoroughly first. So, please bear with us, as we explain our methodology.

The more similar a given development is to what happened recently, the more likely it is that the follow-up action will also be repeated.

However, at the same time…

The more similar situations from the past confirm the same outlook and the less situations indicate a different outcome, the more likely it is that the follow-up action will also be similar.

There is usually a trade-off between the level of similarity and the number of similarities, so the question becomes, which ones should one take into account. Our reply is that one should use all of them, because they might confirm, or invalidate each-other, thus making a given forecast either more or less valuable. After all, the more signals point to the same outcome, the more likely it becomes.

The blue lines are the most similar cases, so let’s start with them. There were only 4 similar cases when volume was as low during a daily upswing as they were yesterday, and they were all in a relatively similar part of the year. The most recent case took place exactly 5 years ago. The previous cases took place on June 17 2013, May 6 2013, and in mid-March 2013 (on 14th, 15th, 18th, and 19th).

The follow-up action was very similar – a quick decline followed either immediately (June 17, 2013 and May 21, 2014) or shortly (May 6, 2013 and mid-March 2013). What is even more profound is that the next bottom formed in all these cases in about 2 weeks (8-10 trading days) after the low-volume session. This means that we are likely to see the next bottom at the end of May or very early in June.

Let’s consider the broader point of view. The red lines are present close to the blue lines, so they approximately confirm their indications. There are only three separate cases when we saw them, though, so they don’t provide much additional value. Why did we separate the blue and red lines if that’s the case? Because the blue lines are much more precise and by looking at all ultra-low-volume sessions we might have not detected this uncanny similarity. It’s always good to dig deeper into the data. At worst, you won’t find anything. At best, you’ll get a more precise forecast, a confirmation or invalidation of the more general indication. We have the former.

The broadest point of view – the black lines – confirm the bearish indication in general, but are not precise with regard to the follow-up action. The low volume sessions were seen right before some of the most powerful declines (multiple similar sessions in August 2014, in May, June and July 2015, and in mid-2018), but we also saw them before smaller rallies (mid-2013, June 2014, March 2018), and smaller declines (November 2017). Overall, low-volume sessions indicate bigger moves on the horizon which are usually to the downside. The precision in the prediction comes from the volume being not just low, but ultra-low. The extremely low value is what makes this situation stand out among other low-volume sessions. And the implications are much more bearish than if the volume was “just low”.

Let’s get back to the issue of confirmations. The more confirmations and the more they vary, the greater the chance that a given prediction will be realized.

Applying the GDX Lessons

The GDX ETF is after a breakdown and the entire back and forth trading that we saw this month is a post-breakdown consolidation. In other words, that’s how the GDX is preparing for the next move.

But it’s actually more than that.

The recent consolidation took form of a triangle. This is important because of two reasons. First, triangles are usually continuation patterns. Second, the vertex of the triangle is likely to mark a reversal moment. And when is the vertex? At the turn of the month, which serves as a perfect confirmation of the ultra-low analogy that we described earlier.

On April 18th, we indicated that gold stocks are likely to decline to their January lows. And they did. That was not a major bottom – just an interim one. But it was enough to create the right shoulder of the potential head-and-shoulders formation (December – January price action being the left shoulder). This means that once GDX breaks below the early May lows, it’s likely to decline all the way down to the 2018 low of about $17.25. Naturally, this may change as new information becomes available, but that’s what seems likely at this time. Please note that if one wants to take advantage of this trade, it might be a good idea to place the exit price above the final target, just in case its off by several cents.

Today's article is a small sample of what our subscribers enjoy regularly. In its full version that is reserved for our subscribers, it also covers short-term gold analysis, silver with its near-term target, and the implications miners’ strength we just saw on Friday. To keep informed of both the market changes and our trading position changes exactly when they happen, we invite you to subscribe to our Gold & Silver Trading Alerts today.

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