Several markets could be at significant turning points. The stock market (SPY) is pulling back, and I see the potential for a bull trap top and an intermediate-term decline. If established, that could trigger an accelerated breakdown similar to February if key levels begin to fail.
Supporting this breakdown potential is the head and shoulder topping formation in oil. A decline in WTIC below $64.00 would validate the H&S pattern and assign a $55.00 target for October.
A sharp drop in the stock market and oil would presumably be devastating to miners and silver. They act more like financial assets during a collapse while gold often catches a safe-haven bid.
Now – I’m not trying to scare anybody, but I think this is a scenario we need to be prepared for if certain levels are broken.
On the bullish side of things, the Dollar is yet to confirm a cycle low, and gold is holding the $1167 low. If miners rally early next week, I can make a case for a double bottom in GDXJ and undercut low in GDX. If established, I’ll exit my net-short position and prepare for a snapback rally to (at least) the 50-day EMA’s.
September and October could see increased volatility. Traders need to remain nimble for the foreseeable future. I’ll actively manage my positions and continue to post daily notes/updates.
At some point, big money will see value in this sector. I’m not sure when or at what level but eventually prices will be too low to ignore.
DOLLAR WEEKLY
The Dollar needs a weekly close below 95.00 to establish an intermediate-term correction. Precious metals and miners will remain under pressure until that occurs.
DOLLAR DAILY
A daily close above 95.68 would validate a daily cycle low at 94.34. Until that occurs, a C-wave decline to the 93.00 level remains possible.
GOLD WEEKLY
It’s been 3-weeks since gold hit $1167. Prices need to close above the 10-week EMA ($1222.31) to support an intermediate-term cycle low. Until that occurs, I think we need to be prepared for more downside. Commercials are net-long for the first time since December 2001.
