Who wants more confirmations? Who wants more gains? Who…? Ok, all hands are up. Let’s go.
First, miners are underperforming gold even while they move sideways. It’s quite clear on the below intraday chart.
During the most recent hours of trading, the precious metals sector moved sideways, but gold and mining stocks (GDXJ) moved in a different manner. Gold moved horizontally, but GDXJ traded lower (increasing profits on the short position that we had entered on Nov 22 (with GDXJ above $48).
Miners' underperformance indicated what we already see in today’s pre-market trading, and it is the confirmation that we got that I mentioned in the opening line of this analysis.
Gold is down today. Not significantly so, but still. In all likelihood gold is not down significantly YET.
The yellow precious metal tried to rally back above the rising resistance line, and it failed on both occasions. This solidifies the bearish case for the following weeks (and quite likely months).
Remember, it’s the Fed-day tomorrow, so we might not see big price moves before that – only after the post-decision dust settles and trends can resume.
Meanwhile, the USD Index continues to move higher. Little by little, but it adds up and at this pace we’ll soon have the USDX at new highs.
And now, it’s time for the key events from yesterday’s session – the breakdowns in [new trade’s details are available to subscribers] and FCX.
The massive head-and-shoulders pattern was just completed.
One could say that the neckline should be drawn based on intraday lows or closing prices, but it doesn’t matter, as FCX broke below both versions. The pattern is broad, clear, and quite symmetric – all of them make it particularly reliable. Of course, there are no guarantees in any market, but this pattern looks solid. Once the breakdown is confirmed, the door to $30 or lower levels will be wide open.
Why $30 or lower? Because declines based on this pattern tend to be as big as the size of the head, and the head is particularly large in this case.
One extra side note is that I want to once again say something about Rick Ackerman’s recent performance – he caught a nice trade in bitcoin (after this trade, he expected bitcoin to move higher, which it did). As I got interested in Rick’s trading system, I asked him to send me proofs that it is indeed working before I get to study it, and I thought that I’d share what he just sent me:
“My latest bitcoin tout was on your scheduler a day ahead of today’s 5347-point rally. I not only predicted this huge move in advance, my 106,677 target caught the top within a tenth of a percentage point. And here’s the cherry and whipped cream on top: I had explicitly suggested shorting there, as follows: “…don’t hesitate to attempt shorting at p2=106,677 with a reverse-pattern trigger that cuts theoretical entry risk down to size.” The trade would have triggered just off the so-far all-time high, at 106,314. I don’t discuss this in detail because the method is proprietary.”
Finally, my yesterday’s note (from yesterday’s Gold Trading Alert) regarding this week’s likely volatility remains up-to-date:
This is the FOMC week, and the interest rate decision is due on Wednesday and the same goes for the press conference. Before that, the markets may move erratically. The Fed is widely expected to cut rates, so when that happens, we may see an immediate move up that’s followed by the “buy-the-rumor-sell-the-fact” decline. Overall, it doesn’t change the indications from the above charts, and it doesn’t change the outlook, but I wanted you to be prepared for this week’s volatility.
The precise profit-take level for the trade in the GDXJ as well as the details of the new trade (with even greater potential in the near term) are things that I’ll reserve for my subscribers.
Thank you for reading today’s analysis. If you liked it, and would like to stay notified about new ones being posted completely free, I encourage you to sign up to my free gold newsletter today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief