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PRECIOUS METALS HAPPY DAYS ARE HERE AGAIN
FROM THE WIZARD OF RAMBUS
The precious metals complex is an isolated area in the markets that investors either love or hate this often misunderstood sector. Most mainstream investors hardly know it even exits except for a headline that pops up once in awhile. Then there are the goldbugs that are constantly looking for the end of the world and Gold is going to be their salvation.
The truth is somewhere in the middle. There can be long periods of time when the stock markets outperforms gold which can be very frustrating if one only invests in the PM complex. Then there are other times when the precious metals complex can outperform the stock markets for long periods of time. Knowing when to invest in the stock markets or the PM complex is very important to understand if you don’t want to spend half of your trading career on the wrong side of the markets.
https://rambus1.com/2023/04/09/weekend-report-precious-metals-complex-happy-days-are-here-again/
Last summer when the PM stocks hit new lows in the month of July I wrote that those levels could be a bottom, however they would be tested in the fall. That test could fail to lower lows and if it did that would likely be the bottom of the bear market in PM’s. Note I called it a bear market NOT a correction which to my amazement gold bugs still clung to using the word correction. In retrospect it does appear that the bottom was established in late September for the metal stocks. It has taken some time but this has been a nice rally off the bottom.
I’ll refer to this move as the first leg of the bull market.
But here is what is troubling to me. In a word…. GAPS. as in unfilled gaps. The indexes and most individual PM stocks have wide open unfilled gaps way down towards the lows that were put in last fall. This is very troubling to me and gives me pause to embracing further upside from here.
If there were just a few gaps I could write it off since all gaps don’t have to be filled. But the existence of these gaps is pervasive. I therefore have to conclude that the PM stocks will likely undergo a deep correction to this uptrend. I don’t know what will power this correction, but let me suggest it could come in the form of a crash like decline over the next few months in the general stock market and the PM stocks decline in sympathy.
Keep in mind that the market has a memory like an elephant and the existence of gaps is a traumatic event visited on either bulls or bears. In this case it was the bears. These bears need psychological repair. The market could iron out these gaps before the seasonal bullish period arrives by late summer. I know it seems hard to imagine right now with bullish psychology at its peak with gold printing $2,000. But the market plays by its own rules.
Food for thought.
I hear you Sir Plunger
But there is alos a Big DOWN gap luking at 36 on the GDX for example
It has been open for a long time now…a year !
We just closed One Gap on that chart
Sooo…which Gap gets closed first the One Year Gap or the more recent up gap ?
I would only say that Mr Bull has plenty of time to fill that gap above.GDXJ has a wide gap at 45 as well. He has the entire bull market ahead to do it. However those nasty gaps way way down there GDX 22.7 GDXJ 28.7 are a magnet. They will want to be filled.As a reminder when we look back at the 2001-2011 bull market Mr. Market fill all of his gaps. So we are not just pontificating here. Plus when the GDX hit 41.9 in March 2022 it seemed inconceivable the GDX was destined to fill its gap down at 22 left over from March madness in 2020, yet it was done within 6 months and in a painful fashion.
So which one first? Who knows, I would venture it depends on when the general stock market decides to give it up. And the fuse is getting pretty short for that.
and then we have this to contemplate…. Opps.
https://www.tradingview.com/x/j9QogFBw/
Yes I agree Plunger. Nice to see you using Ackermans method btw. So just a note on your chart. What happened is a big negative in the way I chart as price never quite reached the “D” target at 100% but fell short. It may stall at the 75% line where it sits now and come back up for an encore but there is doubt. If the chart was really bullish it would have breached above the 100% line on the first run. I tend to think gold is ready to fall back just as I suspect Bitcoin is going to take a rest and decline. They will both be going down together in that case as we approach May. (sell in May and go away maybe?) LOL Guess we will see.