As I’m typing this, Sunday evening trading has been open just a few hours, and just about the only red on the screen is gold, which is getting its shiny little butt kicked again. If it crosses beneath the area I’ve tinted, I think you’re going to see weakness accelerate, as people just pile into equities all the more.
Those of you who watch my little Tastytrade show might remember that yesterday I turned sour on precious metals miners. I bought a position in DUST and also shorted a couple of specific miners (AG, NEM)
Philosophically, I’m a big fan of precious metals thriving in the years ahead as a declaration of the ultimate failure of central bankers. From a charting perspective, though, miners have been oh-my-Lord-overbought for weeks now, and it seemed it was time for a breather. (What really sold me was the collapsing volume in DUST, suggesting people had just stopped bothering anymore). In any event, it looks like this sector is in for some backing-and-filling. Gold’s first important test of support is coming up, tinted in green:
Just a quick comment cleaner to note that silver, while having had a terrific 30% rise in just over a month’s time, is due for a breather. I think precious metals have a terrific future ahead, but I certainly wouldn’t be buying any at these levels. A selloff down to about $18 seems completely plausible and would do a nice job filling that gap.
It’s an odd feeling for me to be bullish on something and to keep reading about how The Top Is In, but the “thing” just keeps going up. I’m referring, of course, to precious metals, about which I’ve been blatantly bullish (particularly on my Tastytrade segment).
The shoe is truly on the other foot for someone like me to own a bunch of stuff at a low price, believe in its long-term uptrend, and respond to all the cries of a “top!!” with “OK, whatever.” It must be what it’s felt like to be a stock bull since 2009.
Gold zipped higher on an otherwise quiet holiday weekend…..
Spot Gold has hurdled– and is sustaining above– its prior significant rally peak at $1307.40, which has the right look of completing a meaningful April-June rounded-bottom pattern, which, if accurate, indicates that GOLD has entered a new upleg from its May 30 pullback low at $1199.84, which projects next to $1440-$1470.
Only a break below the post-Brexit spike low at $1244.74 will wreck the developing bullish set-up. As for 10-Year YIELD, the Brexit reaction represents the third time in 2016 that YIELD approached or pierced 1.50%, which for the third time appears to be containing a falling YIELD structure.
I have to be honest – I did not think Brexit had a chance. Apparently Wall Street didn’t either because trading on Friday was a disaster for equity markets around the world, with banks taking a particularly hard beating. There was a very clear flight to safety with defensive sectors like Utilities and precious metals outperforming. Speaking of precious metals, gold, silver, and the miners had a terrific day as you will see below.
The tide is turning folks. Equity markets, depending on how one measures valuation, are at or near all-time highs. Earnings have been declining for months and yet stocks continued to march higher (at least until yesterday). Precious metals have been bottoming for over a year as both fundamentals and technicals continue to tilt in the bull’s favor. In my post from Wednesday I commented, “I feel like there is going to be a huge move soon, possibly in [both equities and precious metals], but I have no idea which direction it will be.” Well, I think Brexit has given us the answer.
Today’s post will be chart-heavy with annotations and a few comments smattered about. My takeaway from Friday is nothing more than a confirmation of what I’ve been saying for over a year: equity markets are topping and precious metals are bottoming – it’s time to position yourself accordingly. (more…)