I was expecting gold to throw us a curve-ball and I think we saw it last week. Tuesday’s spike in metals and miners forced shorts out of their positions, and buyers rushed in suspecting a breakout. The shakeout has set the stage for the next move.
If our curve-ball theory holds, gold should decline 4-8 weeks into an extended 6-Month cycle low. A weekly close above $1,300 would nullify our hypothesis and confirm a major breakout in gold.
The Fed announces on Wednesday. Markets are anticipating a 99.6% chance for a rate hike. The price action Thursday and Friday is key.
-US DOLLAR- The Dollar closed above the 10-day EMA. If prices made a significant low, we should see prices rally for at least 1-2 months and beyond the trendline. If price moves explosively through the trendline, we could see an attempt at new highs.
-GOLD WEEKLY- A bearish candle formed at the long term trendline. Prices failed to close above the April closing high ($1,289.10). The probabilities favor a 4-8 week decline into an extended 6-Month cycle low. However, a weekly close above $1,300 would establish a bull market breakout.
-GOLD DAILY- Prices closed below the 10-day EMA, and a top is likely. A daily close below $1,265 will confirm. Gold should break the trendline and provide a failed daily cycle before reaching a 6-Month low.
-SILVER WEEKLY- Prices formed a bearish engulfing candle after striking the 200-Week MA ($17.75). A retest of support between $15.67 and $16.00 is likely. Breaking sharply through that level could lead to increased selling pressure.
-SILVER DAILY- It appears prices peaked and will work their way lower to the $16.00 support zone.
-GDX- Tuesday’s explosive move higher was apparently a false breakout. Prices closed the gap on Friday. We should see a move back to the $21.00 support level, and if broken, a drop to $18.50 is reasonable. I will alter my perspective if GDX breaks convincingly above the upper trendline.
