Precious Metals & Miners Making Waves and New Trends

The precious metals sector has been dormant since both gold and silver topped in 2011. But the long term bull market remains intact. As long as we do not have the price of gold close below the lower yellow box on the monthly chart then technical speaking precious metals should continue much higher.

Large consolidation periods (yellow boxes) provide investors with great insight for investments looking forward 6-18 months upon a breakout in either direction (up or down). The issue with investing during these times is the passage of time. One can hold a position for months and sometimes years having their investments fluctuate adding extra stress to their life when they really do not need to.

Once a breakout takes place a powerful rally or decline will start putting an investors’ money to work within days of committing to that particular investment compared to money invested waiting months for the breakout and new capital gains to occur.

Gold Price Chart - Monthly

Gold Price Chart - Daily

The chart of gold continues to form a large bull flag pattern with a potential 3 or 5 wave correction. If price reverses this week and breaks above the upper resistance trend line then it will be a 3 (ABC)  wave correction which is very bullish. But there is potential for a full 5 wave correction which is still bullish, but it just means we have another month or two before metals bottom.

Gold Miner Stocks – GDX ETF Chart – Daily

Gold miners do not have the sexiest looking chart. It was formed a strong looking bull flag but has continues to correct and is not nearing a key support level. This level could act as a triple bottom (bullish) or if price breaks below then it would be breaking then neckline of a massive head and shoulders pattern which points to 50% decline. I remain bullish with the longer term gold trend until proven wrong.

Silver Price Chart – Daily

Silver remains in a long term bull market much like the monthly chart of gold shown earlier in this report. Silver continues to work its way through a large bull flag pattern with a positive outlook at this time.

Silver Miner Stocks – SIL ETF – Daily Chart

Reviewing the precious metals sector it seems that silver miners have the sexiest looking chart. All price patterns are showing strength and are in proportion to one other. If this chart plays out to what technical analysis is pointing to then we could see the precious metals sector put in a bottom and rally within the next week or two. And if this is the case then silver miner stocks should provide the most opportunity going forward.

Precious Metals Trading Conclusion:

In short, what you need to focus on is the yellow consolidation box on the monthly gold chart. A breaking in either direction will trigger a massive move that should last 6-18 months. Until then long term investors can simply sit back and watch the sector while they put their money to work in other active sectors.

From a short term traders point of view, that f mine. I am looking for a signs of a bottom on the daily chart to get my money working earlier to play the bounce/rally that takes place and actively managing the position until a breakout occurs. The charts overall are not that clear as to when a breakout will take place. Metals could start to rally next week or in a few months and all we can do is wait for a reversal to the upside before we get active.

Knowing the big picture trends and patterns at play along with major support and resistance levels (breakout levels) is crucial for success and piece of mind.

Article contributed by Chris Vermeulen from www.TheGoldAndOilGuy.com


 

Weekly Metals, Oil, Dollar and Index Price Analysis

The US stock market was closed today for Martin Luther King, Jr. Day, and the inauguration. There does not seem to be much price action to take place on the Canadian or futures market today.

Pre-Market Analysis Points:

• Dollar index is giving mixed signals this week. Short term chart looks bullish for another couple of days but overall it is trading within a large bear flag and near resistance.
• Crude oil is trading lower by -0.50% but remains in a strong uptrend and bull flag. $97-$98 looks like the next upward thrust target.
  
• Natural gas is trading higher 0.87% touching our upside target of $3.60 this morning. It could keep climbing to $3.70 which is the next target but it looks as though its ready for a pause.
• Gold and Silver are trading flat. Last week they held up at resistance but have yet to breakout. They could do it this week but until we the trend shifts with volume to support the move and miners to also show strength I will remain on the sideline.
• Bonds are trading flat and giving off mixed signals much. The 60 minute chart is bullish with a bull flag, while the daily chart is bearish.
• SP500 index remains in a bull market grinding its way higher each week without a decent pausepullback to get long. Technically we could see a 3-4% pullback any day and the market would remain in an uptrend.

Contributed by Chris Vermeulen of ETF Trading Gold Newsletter