It looks like if you went long mining stocks in tune with my Friday’s free analysis, you’re very happy with today’s rally in them.
In fact, the GDX ETF formed the bottom on Thursday, which was the day when I wrote about closing short positions and going long miners to my subscribers. Either way, if you followed my bullish comments and you’re making money on today’s rally – congratulations!
As the situation is developing in line with what I wrote on Friday, there are only a few things that I’d like to update you on. I might increase the profit-take levels for this trade (and you’ll soon read why), but for now remain up-to-date.
Quoting from my Friday’s analysis:
(…) the general stock market, which finally declined after invalidating its move above 6,000. This might have a profound impact on many other markets. But… Even if stocks formed THE top here, they could easily rally in the very near term.
Here’s why:
(…) the invalidation of the move above 6,000 and the triangle-vertex-based reversal triggered declines. And this might be the tipping point for the declines in the precious metals market and commodities. However, even if THE top was formed, we might still get a rebound as tops in stocks tend to be rather flat with more than one smaller top creating them.
And since the S&P 500 just moved to its previous high, we have a good reason to expect the rebound to take place right now.
This appears to be taking place today – we saw a small (but still) move higher in stocks. I wouldn’t be surprised by a move toward 5,950 – the lower of the rising resistance lines.
The USD Index is holding up very well despite reaching its previous highs and the 50% Fibonacci retracement based on the 2023 slide.
This suggests that if the USD Index declines more visibly, gold, silver, and mining stocks might rally in a more meaningful way. This, in turn, might imply that my original profit-take level for the current long position was placed too conservatively and that perhaps I should move it higher.
Let’s see how the markets close today – so far, they’ve been open for just two hours today and a lot can still happen before the closing bell. I’ll provide an intraday Gold Trading Alert if a higher profit-take level becomes justified, as given this kind of volatility, the current target can be reached shortly.
On Thursday, I commented on the above gold chart in the following way:
Gold corrected half of its June – October rally, and this is one of the price levels from which gold could correct. I previously thought that the 61.8% Fibonacci retracement (at / below $2,500) would be likely to trigger the rebound, but… We have what we have in the USD Index, and it’s unlikely that gold would continue to fall here while the USD Index declines.
How high can gold rally? I don’t see it rallying back above the rising resistance line (currently slightly above $2,700), and the previous low of ~$2,620 seems to be a more likely upside target.
Since gold already moved to $2,618 today, but the USD Index hasn’t declined yet, it seems that gold will rally more – perhaps even to the above-mentioned $2,700 level.
The target area between $2,640 and $2,670 seems to be now the more likely upside target for the yellow precious metal. I know that this target area is rather broad - looking at the dynamics between gold and USDX might give us more clues regarding detecting the next local top, and I’ll keep my eyes open for them.
As far as silver is concerned, I wrote the following on Thursday:
Silver didn’t move to my likely target levels yet, but it did move to the $30 level which served as resistance multiple times. In fact, it moved back below this level and then moved above it once again. It looks kind of like breakout’s verification.
To clarify, I don’t think that the $30 level will hold as support in the following weeks/months, but it might trigger a corrective upswing now. Silver could rally to $32.5 or so during this correction – that’s where it already topped once.
The main reason for it is the situation in the USD Index and the fact that gold reached one of its support levels as well.
At the moment of writing these words, silver is about halfway there – at about $31.34.
The GDX soared by about 5% and NUGT gained 9.60% so far today. If gold’s rally is not over yet, then the rally in the GDX / NUGT is unlikely over as well.
On Friday, I wrote the following:
The one thing that I’d like to add here is a note about the current position of the RSI indicator based on the GDX ETF.
Namely, it moved below 30, which – in all recent cases – marked at least short-term buying opportunities. As the history tends to rhyme, we’re likely to experience a rebound also in the near-term future.
That’s exactly what we see here.
The full version of today’s analysis (my Gold Trading Alert) includes the discussion regarding updating the upside profit-take level for the long position in the GDX. Also, please note that my subscribers get intraday Alerts whenever necessary. And it looks like this will be necessary soon. I encourage you to get those premium details and subscribe to Gold Trading Alerts today. They are also available as a part of the prestigious Diamond Package (that’s our best package – if you can afford it – definitely go for it). Alternatively, if you’re not ready to subscribe yet, I encourage you to sign up for my free gold newsletter today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief