Does the mining sector forecast the actual direction of precious metals; specifically, gold?
When looking over the past year, the short answer is yes.
We’ll look at the daily chart of the Junior Mining Sector GDXJ, below and show that each peak and reversal in gold, was preceded by a reversal in the mining sector (not advice, not a recommendation).
Junior Mining Sector GDXJ, Daily
Each ‘black arrow’ shown on the chart of GDXJ, is a peak or bottom and significant reversal in gold (GLD).
Over the past year, GDXJ reached its peak or bottom several days or several weeks before the actual metal.
The right-most arrow is blue … because we don’t know what’s going to happen next.
Pulling to a longer time frame (still using the daily), we see the GDXJ on a closing basis, is oscillating about an axis line that’s been in effect for three years.
Junior Mining Sector GDXJ, Daily Close
Until proven otherwise, we’re still in a test of the ‘Up-Thrust’.
Price action could somehow power its way higher (with higher gold prices) and move into some kind of bull move.
Or, as the chart implies, we’re at a potential inflection point with probabilities equally weighted but suggesting a slight hint to the downside.
Futures Market
Gold futures, GCM23, as of this post (10:25 p.m., EST), are drifting higher and curretly trading up about +0.05%.
Funny things tend to happen overnight in the futures markets. We’ll see if the upward bias holds to the next open or if downside pressure becomes apparent.
From a news standpoint, we have the employment report(s) before the open at 8:30 a.m.; the Fed speaks at 1:00 p.m.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Gold’s reversal or potential for reversal, has already been covered here, here and here.
We’re going to focus on the Junior Miners GDXJ but start first, with an updated chart of gold (GLD).
Gold GLD, Weekly Close
This is how it looked back on April 15th.
As of the close yesterday, we have this:
It’s arguable GLD, is now below the resistance line (completing the Spring-to-Up-Thrust) but that’s not the most important part from a trading standpoint.
When looking at the Junior Mining Index GDXJ, there’s an ominous pattern.
Junior Miners GDXJ, Weekly Close
Each extreme peak over the last three-years has been labeled; the Derecho of 2020, the so-called Ukraine ‘invasion’, and now, the banking crisis.
Note: The SVB bank failure was on March 10th. There was a ‘knee-jerk’ reaction by the public into gold and related components … that peak appears to have stalled at the location shown.
What’s going on is obvious; it’s a bear market.
Each major peak, lower than the last.
Now, the interesting part.
The Junior Miners are in Wycoff Up-Thrust condition.
In this case, price action’s solidly below the resistance line.
Looking at the daily (not shown), there may have been a ‘test’ of resistance this past week for a move higher; if so, it failed and GDXJ closed slightly lower.
Summary & Positioning
So, here we are: The market (SPY) has rallied over the past week, giving the illusion that all is well.
However, it too is now in up-thrust (reversal) position.
For my business accounts, it looks like being short the miners at this juncture is lower risk than being short biotech (not advice, not a recommendation).
Typical short vehicles that could be used (not a recommendation) are DUST and JDST.
As always, anything can happen. If the markets ‘implode’, they might be closed for any number of days or weeks.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
With Friday’s downside reversal we’re now between Euphoria and Anxiety for gold.
This past week was inundated with stories of panic at the bullion dealers.
YouTube ‘content creators’ were going berserk with hyper-inflationist rants; other ‘influencers’ telling us the dollar’s about to collapse; they say the Fed’s the only reason the dollar’s not at zero right now.
Then, rumors warning of gold to $5,000/oz. and higher.
The result as you would expect, is a highly emotional, manipulated public.
Different This Time?
At this point, whether or not the dollar will collapse is probably irrelevant.
Long time visitors to this site already know, battle lines (like here and here) are being drawn and it’s not in precious metals (not advice, not a recommendation).
As always, anything can happen and gold could go higher but with Friday’s reversal, probabilities have now shifted to the downside.
With that, we now have an ominous chart of gold below.
It shows the set-up to a repeating market characteristic:
Wyckoff ‘Spring to Up-Thrust’.
Gold (GLD) Weekly Close
Gold’s momentum wanes just as it’s pushing up through resistance.
Obviously, what happens next is the important part.
Strategy
Looking at the economic calendar for the coming week, there’s a Fed speaker every single day. If we’re really at a significant reversal, next week’s likely to put the panic into unsustainable overdrive and mark the top.
For the bulls, we’re looking for the GLD, highs to be maintained. If it can’t hold, there’s reversal trouble ahead.
A Reversal?
If this is the ‘big one’ and gold reverses, a likely (medium-term) target is in the area of $1,300/oz., – $1,350/oz. (not advice, not a recommendation).
If that happens, gold’s still expensive but it’s the mining sector GDX, GDXJ, that would potentially be devastated.
Both the Seniors and Juniors are already printing an MACD bearish divergence (not yet confirmed) when looking at the weekly charts.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
In our example above, the commentor said their family survived in part, because they had “100kg of salt”.
That amount equates to about 220 lbs.
Converting 1oz gold for (roughly) 18-oz. salt, at today’s gold prices, is about $392,000 ‘worth’ of salt.
When they came out other side, the salt may have been gone, but they had the gold. 🙂
Now, moving on to the chart.
Gold (GLD), Weekly
Gold is at a critical juncture.
We’re either in a potential ‘throw-over’ on the wedge formation (with reversal) or about to pressure higher into all-time highs (not advice, not a recommendation).
We see a rising (terminating) wedge, along with a decline in volume (thrust).
We’re at The Danger Point®
Gold’s price action does not need much of a push to go either way.
Then, The Dollar
Recall, from the dollar update (link here), there’s a possibility for it to decline from current levels; potentially setting up a Wyckoff spring condition.
A dollar decline would naturally provide a likely correlation for gold rising into new all-time highs.
If either one happens, there’s probably going to be panic.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Unbeknownst to many, we’re witnessing a once-in-a-century opportunity and public service.
Those from the era of The Great Depression, are all gone now.
So, the same playbook can be run without anyone (alive) knowing we’ve been here before.
The public service presented to us, the massive on-going exposure of the financial charlatans and grifters.
You can be ‘certified’ and still be a certified (market) dolt.
Neil McCoy-Ward, points this out in his recent update linked here. Go to time stamp 8:40;
“Clueless” … “Completely Asleep”
Anyone who’s worked in the corporate world (in any sector), especially now, knows it’s near impossible to think or act independently.
So, it is with gold.
Gold & The Grifter Bandwagon
Where was everybody back in 2001, when gold was bottoming in the area of $270/oz., after a multi-decades long bear market (from 1980)?
The fact we have nothing but breathless panic from grifters and hangers-on, about rampant inflation should at least give one pause, we could be at a temporary or major reversal (not advice, not a recommendation).
At least with the analysis below, there’s a decision point that will let us know if we’re due for another leg higher, or if there’s a Sovereign debt crisis about to break that would kick-off massive selling of all assets including gold.
Gold GLD, Weekly
As the title says, we’ve got something akin to a ‘Maginot Line’ for gold. What looks like insurmountable resistance that could still be breached … but for now, is holding.
With each (manufactured) crisis, gold’s momentum in the form of price and volume, is declining.
From a Wyckoff analysis standpoint, the bulls (for now) are running out of steam.
The ‘terminating wedge’ in gold’s price action has already been discussed, link here.
Looking at the action in another light, we see a Wyckoff Up-Thrust in the works. Price action has penetrated a previous high and is currently struggling.
If gold (GLD) is able to significantly penetrate the resistance and hold, then we’re likely on to the hysterical predictions of the masses.
If not, and we get a reversal, it’s going to be big surprise for many. They’ll be stunned, unable to move and eventually provide more fuel for the downside as they sell in panic.
Downside Drivers
What could possibly be a downside driver for gold?
One has already been mentioned, a Sovereign debt crisis. It’s a likely event considering the record-pace rise for interest rates and subsequent bank failures.
Another is an ‘executive’ decision that gold ownership is outlawed. It’s happened in the past and those who got through that event are no longer with us.
Moving on, we’ve already been told there will be a ‘cyber-attack’.
What’s going to happen to gold, when there’s no electricity, fuel or food shipments?
As survivalist author Ron Foster says, in this interview, (time stamp 27:20), during a grid-down situation, he’s not giving up his food. He says, during such an event, precious metals are “meaningless”.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Nemont Mining (NEM), Gold, and the Oil & Gas Sector are at a critical juncture.
The rest of the major indices, Dow, S&P, QQQs, real estate (IYR), and so on, are in a similar position.
For this update, we’ll focus on Newmont (NEM), as it’s the largest cap in the Senior Mining Sector GDX, and a general representative of the commodities markets.
Financial collapse is a process, not an event.
Newmont topped-out in April, of last year. Exxon, the proxy for the Oil & Gas sector, may have reached its highs this past November.
Where’s The Inflation?
As Michael Cowan has just reported, banks are absconding with depositor’s money under the guise of ‘bail-in’.
If the fiat cash is so worthless, why are banks seizing it?
As Robert Prechter Jr., said years ago, ‘all fiat cash ultimately goes to zero’; the end game (most likely) for the dollar. However, it could be months, years, or even a decade before that happens.
For right now, today, this minute, the data is showing us, the banks want the money; ‘Show me the money‘.
With that, let’s look at the non-existent ‘inflation’ in the mining sector.
Newmont Mining NEM, Weekly
The first chart identifies the heavy volume and then test of wide price bars. This behavior is common in the markets; they tend to come back and test wide high-volume areas.
Next, we see there’s a terminating wedge developing as volume declines; the inference, is lack of significant commitment at these price levels.
We’ll get close-in on the wedge; last week printed a lower weekly low and closed lower for the week.
There’s no breakdown of the wedge … yet.
At this juncture, it’s up to the bulls to show they’re still in control.
Inflation vs. Scarcity
We have without a doubt, the effects of the event from the past three years gaining momentum. Whether or not those effects reach a peak this year, is unknown.
A lot of the mainstream and YouTuber’s alike talk about the upward move in gold as the result of ‘inflation’.
Here’s a little bit of insight you’ll not find anywhere else; how about gold rising because the above mentioned ‘effects‘ are causing production volumes to decline?
Maybe it’s because of scarcity (along with nearly everything else) that’s causing the increase in price.
Just to drive that idea home, the latest total gold production numbers, listed here.
Gold production for 2020 dropped -8.2%, from the year prior. Year 2021 was down -1%, from 2020.
From 2010 to 1019, gold production increased or was flat year over year … that is, until 2020.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Since the lows last November, to the close this past Friday, gold (GLD) has moved higher by a decent but modest 15.4%.
Naturally, the opportunists are out telling us ‘We’ve been warned’, ‘this is it’, ‘it’s going to the moon’ … yet again.
With that backdrop, we’re going to look at the precious metals facts, not the hype.
‘Precious metals’ because there are only four that have ‘currency code’ classifications, i.e., are classified as an asset with ‘currency like’ monetary characteristics.
Way back over a century ago, Wyckoff discovered the key to understanding the next likely move of the markets was the study the market itself (not fundamentals).
Wyckoff essentially ‘locked himself in a room with just a stock ticker and phone line’.
That’s not saying ‘money printing’ has no effect. There are a lot of moving parts. Intentional destruction of the food supply is just one of those parts.
Old School Analysis
Hypothetically, if you dropped an ‘old-timer’ into the markets at this juncture (without him knowing the ‘hype’), and showed him all four charts of gold, silver, palladium, platinum, and asked ‘what’s happening?’
What’s his response?
After a brief look at the charts, he would likely say:
‘Gold’s move higher is not being confirmed by the other precious metals’.
Note that all four metals peaked together during the inflation spike of 1980.
Ergo: At this juncture, something’s wrong.
Either the other metals are going to ‘catch up’ to meet gold or gold is going to come down to meet the others.
That is of course, unless this time is different … somehow.
With that, we’ll look at the chart of gold to see what it’s saying about itself.
Gold GLD, Weekly
We’re starting with the unmarked chart.
Note: Elder’s Force Index scale is expanded to show the nuances of GLD, price action.
Next, we see we’re at a test of the trendline in place for 16-months before the downside breakout of July, last year.
Moving in closer, we have a wedge formation prior to the up-move last week.
Is this a breakout to the upside or a throw-over?
At this point, it’s unknown.
We can see that Force Index is below where price action entered the wedge during the week of November 11th.
Less force up into resistance (trendline), paints a slightly more bearish than bullish picture.
The ‘Why’ Comes Out
As if on cue and in classic Wyckoff style, we have a ‘why‘ for the move off the lows of last November.
Classic Wyckoff, because he said the ‘why’ of a move comes out after the fact.
There you have it; China buying gold last November and December.
During this move from the recent lows, it was certainly a trading opportunity for the bulls … but from a strategic standpoint, what happens next?
The Non-Confirmation
Non-confirmations can last a long time.
For example, the Oil & Gas sector XOP, declined for eight months, from April 2019 to January 2020, before the price of oil (USO) finally broke lower.
With the ZeroHedge article just released a few hours ago, we can expect at least a blip higher at the next GLD, open.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
So, let’s take a look at a the largest cap in the mining sector, Newmont and see what the price action is telling us.
Newmont Mining NEM, Weekly
First, we have the un-marked chart and right off the bat, it does not look good; down -45.4%, from all-time highs.
It looks even worse, when the resistance zone is added.
So far, price action has already stalled and not been able to hold within the resistance zone.
It’s important to note, this resistance area is over two years wide. it’s not likely that anything’s going to happen to the upside without numerous attempts.
No ‘Clicks’, In A Gold Bear Market
If buying gold was the answer to getting through the financial, economic and societal collapse, then one would think the price would be moving relentlessly higher.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
The market itself is telling us it’s not going to be ‘well behaved’, possibly for years to come.
According to Goldman, link here, we’ve just had the largest short squeeze on record.
Friday, must have pushed it over the edge from the previously reported, ‘third largest‘.
The ‘Pontificators’
Everybody think’s they’ve got it figured out; We’re going to have stagflation, no wait, hyperinflation, no wait, inflation/deflation simultaneously, no wait, dollar collapse, no wait, gold to the moon, no wait, and on it goes.
What we really have, which is obvious to those ‘awake‘, is something that’s never happened before.
That ‘something‘ is here every day, multiple times a day.
Flash Crash, 2010
Every so often just as a reminder, this event is posted as an example; until that day, it never happened before either.
“Paper comes in, a big seller!!!”
‘Paper’ is essentially anyone (banks, hedge-funds, institutions, and/or retail) outside the pit. Those in the pit are called ‘locals’.
Positioned At The Extreme
The largest short squeeze in history has actually performed a public service; the markets are at extremes.
With that, the short position in Junior Miners GDXJ, has already been discussed, link here.
We’re going to move on and talk about the elephant; more specifically, biotech SPBIO.
Biotech SPBIO
The table shows last week’s action when compared to the week prior. All major sectors had solid gains but it’s the right-most column that’s of interest.
The right-side column shows how far price action closed above the prior week’s high.
Once again, biotech shows overall weakness. It gets more interesting when looking at the weekly chart.
Biotech SPBIO, Weekly
It’s been three successive weeks of apparent up-thrust reversals that were negated each time.
Looking at the weekly below, what we have, is a huge bear flag that just so happens to be, Fibonacci 8-Weeks wide.
It’s possible, this congestion area is the mid-point of the overall move from the highs set during the week of February, 2021.
Compressing the chart and putting in a measured move target gives us the following.
If we have an actual Head & Shoulders top, that target is shown as well.
Either way, the downside potential is enormous; thus, requiring intense focus from a Wyckoff standpoint, i.e., during a bear market, identify the weakest sector for short opportunities (not advice, not a recommendation).
All of which brings us to positioning.
Positioning
On Friday, a discretionary exit was made from the entire LABD-22-09 position as (LABD) price action continued to decline with no end in sight.
Loss on the LABD-22-09, series was a drubbing of -12.2%
Then again, last week was the largest squeeze in history; taking that into account, the loss wasn’t -30% or -50%.
As the trading day progressed, LABD price action continued lower until low-and-behold, it reversed.
Once again, a position was entered (not advice, not a recommendation) but this time was different. Frist off, initial position size is smaller; about 60% smaller.
Secondly, the stop is an actual order that’s in the market (shown below).
Sounds obvious but we’re dealing with unprecedented times and market disruptions. Recall during the Flash-Crash of 2010, Kimberly Clark, or Colgate (if memory serves) went ‘no-bid’ and printed i.e., sold for 0.01.
That low print remained on the charts for years until it was ultimately removed.
If it can happen on the downside (i.e. when long), it can happen on the upside as well (when short).
Positions: (courtesy only, not advice).
LABD-22-10***:
Entry @ 18.1398***: Stop @ 16.83***
JDST-22-05***
Entry @ 9.1666***: Stop @ 8.79***
Note: Positions may be increased, decreased, entered, or exited at any time.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
The Danger Point® 