No More Subtleness – It’s Show Time!

On May 1st, we knew that the precious metals sector was starting a 2-week rally based on cyclical turning points, apex-based reversals, and True Seasonality for May. The rally is over, the profits cashed in… And growing once again thanks to the new short position. What’s in store for the rest of the month and the next few ones? Something epic.

Let’s start today's analysis with the two most important short-term reasons due to which the outlook for the precious metals sector just became very bearish.

Breakout and Breakdown

(Click on image to enlarge)

Gold and US Dollar - daily price chart - USD

The situation in the USD Index was the only thing that had bullish implications for the PMs and based on what happened yesterday, the implications are now bearish. The USDX moved to new 2018 highs in terms of both: intraday and closing prices. This invalidates the previous theory according to which there will be another short-term downswing after a few days of pause. Based on the breakout, this is no longer likely. Instead, the USD is now likely to move to the next resistance or even higher (in fact, our short positions in EUR/USD are already profitable). The next two target prices are at about 94 and 95. The former is provided by the December 2017 top and the latter is based on the October / November top. The 94 level seems more important as its strengthened by the August and early October tops and the 38.2% Fibonacci retracement level.

There is something else that is only visible on the above chart if one knows how to look. It’s the indication that we shouldn’t put too much weight on the USD Index’s signals in the next few months when it comes to predicting gold prices.

We just saw a powerful weekly reversal in the USD Index and it seemed to be a major bullish factor for metals and miners. It turned out that the PM-specific factors like True Seasonals and apex-based reversals were much more important. Plus, if the current rally is indeed going to be similar to the 2014 one, then predicting any pullbacks will be very risky.

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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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