Loading ...Market Summary – Another Critical Week Ahead
Yesterday felt like pressing pause in the middle of an action movie. I just wanted it to carry on unfolding. As I pulled up chart after chart it was clear as day that this is another one of those inflexion points. What follows is (hopefully), a plain-language, simple to understand, summary of where we are right now across the markets and indicators that I’ve been tracking for many years here at our beloved ‘tent’. You can find all the supporting charts in my posts from the last week, both here, and on my Twitter feed.
Gold – Several days ago, I suggested that a weekly close above $1800 (spot price) would likely signal golds intention of a ‘spike’ move to $2000 or more. The alternative scenario was a return to major support somewhere close to $1600. Why ? Because we are now ‘stretching the elastic’ in terms of the technical indicators and distance from supporting moving average. To me, that suggests that history will repeat allowing us to achieve our measured move targets (as outlined in all my posts), or we sink back to major support before the move to new all-time highs. Make no mistake though, we are in a PM bull market. Cycle theory for gold has proven to be 100% reliable since the 1970’s and the US coming off the ‘gold standard’. It predicted a major cyclical low around 2016, and then again in 2032. That means (depending on how right-translated we are), I am expecting the main 16 year cycle high to be somewhere in the late 2020’s.
Back to the here and now though – we are sitting above that $1800 level, but below what I believe to be the last hurdle to those all-time highs. If you look back at 2011, there are 2 monthly closes in August/September around $1820-$1825. Both of those months saw price spikes above $1900. We’re currently in a price channel, which goes back several weeks, and we’ve been climbing a series of ‘steps’, breaking through overhead resistance levels. I showed that $1810 is one such resistance level. That’s PRECISELY where spot price closed yesterday. In yesterdays chart, I showed that the technical indicators are lined up for a bullish, upside resolution. If I’m right, we’ll burst through and advance towards channel resistance up around $1850/$1860. Just because we’re in this channel, it doesn’t mean we’re not able to break upwards out of it. If ever there was a case for breaking up from an up-trending channel, this is it, with the pull of new highs acting like a magnet. This is likely to get worldwide attention from the financial media, stirring some general public awareness for the first time (they will not act yet though – many believing it won’t last and this is actually as high as it will go).
Flame out – Just as social media goes nuts over this, we need to expect that large drop back towards $1600 to reset sentiment for the next stage. This ‘flame-out’ is needed to reset all of the over-stretched indicators and allow the moving average and price to ‘re-connect’. I rated this ‘spike’ scenario at 70% a week or two ago, then dropped it to 60% fearing the correction ‘odds’ were increasing a little. I would now rate it at 80%, with the sudden reversal to $1600 at 20% probability.
The correction, when it comes, will probably last several months, but don’t forget, this is a PM bull market, and much higher highs lie ahead – this will have the added fuel of wider institutional and public participation.
Silver & The GSR – One thing that myself, Patrick and others have been saying for a long time is that when the Gold/Silver Ratio drops from it’s multi-century highs you should re-balance your portfolio towards silver and silver miners because you are guaranteed to see higher percentage gains there, compared to gold. That is exactly what has happened/is happening. The gains in SIL/SILJ are out-pacing GDX/GDXJ. Just look at Americas Gold & Silver and Hecla yesterday alone – up approximately 10% and 8% respectively. The GSR has broken down through long-term support, with much, much further to fall, just to get to more historic norms, but, as per previous PM bull markets, it will fall below that to form the cyclical low. That point will be another milestone (not the end) of this PM bull. I’ll be posting updated charts at regular intervals. I now expect to see silver above $21 in coming weeks, and probably somewhere in the mid $20’s.
GDX/GDXJ/HUI/SIL/SILJ – All moving up fast, with silver miners out-performing. See my posts for targets, e.g. $54 for GDX Some miners are now making historic moves. I’m not exaggerating when I say that, Hecla for example – if it closes the month above the $4 level it will have completed an upside breakout from a pattern which has contained it for over 50 years !!! If that isn’t telling us something very significant is happening, I don’t know what is.
US Dollar – Up/down ? I have no bias here. Gold can (and has been) rising with a rising Dollar. More recently DXY has turned down again. You’ve all seen my do(o)med Dollar chart. It is what it is (until it isn’t).
Uranium – Commodities are set for a massive bull run in coming years. Infrastructure projects are being promised on a large scale here in the UK, and I believe governments around the world are likely to do much the same as recent events threaten mass unemployment. Uranium mining shares are down 90% or more from their peaks. The fundamental case is strong and, like the chart for Hecla, we’re seeing multi-decade breakouts across the sector. This sector excites me with it’s explosive upside nature. Like silver, the thinly-traded nature of this sector reacts violently to a tiny shift in investor sentiment. If buying breakouts is your thing (and it probably should be), there is value to be found here – Energy Fuels, Nexgen, Cameco, UR-Energy, Fission Uranium and Mega Uranium are just a few worth taking a look at.
Crypto – Again, I have no preconceptions here. When they take off to the upside, I tend to post charts of a few different crypto-currencies. Many are correlated to the price movements of the big-daddy, Bitcoin though, so I’ve been focussing on that. My Bitcoin chart has remained unchanged for quite sometime. It’s been highlighting this month as decision-time. In fact, it looks highly likely that we will see a decisive move next week. The chart and technical indicators make me think the break will be upwards, targeting $15,000 initially.
So the remainder of this month looks like it will give resolution to some very important questions. The journey from $1050 gold to here has been a steep learning curve (a bit like the ‘golden arc’ I first posted a few years ago, lol). I’ve fine tuned my methods, but those that have gone before us have left a wealth of information to learn from, so I’m grateful for all of their efforts. The posters here and on Twitter are fantastic – this isn’t a competition, it’s all about helping each other to navigate these markets so that we can invest successfully. Ego, really has no place in all of this, and when I hear overly dramatic language and sensationalism its a big red flag. Yes, it can be very exciting, but that’s precisely when you need to stay calm and measured in your approach.
Wishing everyone a great weekend
Thanks good summary. I am glad am here to take advantage of your great work. GBY!
Great summary. Enjoyed the read.
Thank you.
Please allow me an alternative perspective. I like to consider multiple perspectives simultaneously, and the following is one of them. Don’t get me wrong. I am by taste deep deep down a bit of a silver bug and tend to disdain gold, frankly (rather crass, gaudy, gauche).
Nevertheless I have to wonder whether silver might be in the process of a blowoff. Right now it is zooming upwards as our little faction of the investor/speculator class is confident that the authorities will keep inflating its price, much as our comrades elsewhere are increasing in their confidence that various stocks are certain to go upwards forever or nearly so.
Meanwhile, relatively speaking (plenty of exceptions to this glib characterization) gold has been Mr or Ms Slow and Steady over the past couple of years. It too might have a bit of a blow off, but it has, unlike silver, been tending to march upwards in a relatively (note the word ‘relatively’) controlled fashion. It has been trending upwards and not just recently.
Something happens tomorrow, next week, next month, next year. The bubble bursts. Oopsies. Some bomb. New disease. Some major bankruptcies with unforseen 2ndary, tertiary effects. The banks and the treasuries aren’t able to prop things up as well for the investor-speculator classes any more than they can for the current unemployed. More oopsies and exponential oopsies to follow.
How does silver do? Maybe your coins are useful. Maybe your speculative stocks — and I think all of the silver stocks would seem awfully speculative at this point as well as larger hoards of silver — are not so useful however. Gold and many gold stocks might seem to collapse in price for the moment. However I suspect gold might fairly soon resume its slow and steady march upwards and then some of the gold stocks, even many of them.
I do not think there is a good analogy to the current situation. The depression of the 1930s is a poor analogy, but perhaps instructive. Gold in US dollars was of course heavily manipulated with the seizures, but did not lose value and I believe outside the US did well as did good US mining stocks. As far as I can tell, silver prices lurched up and down in USD, as did the beloved GSR.
In other words, I sometimes think one should separate gold and silver in one’s mind more, though I am not going to set up a silver tent site.
But I do not know. I try not to predict as opposed to wondering and suggesting.
Hi Karl. My approach is to just ignore all of that. Forget it. It’s all speculation anyway. Focus on the chart. Trade the chart. That’s the only truth that matters.
Great summary with very plausible scenarios. Much obliged!