In short, everything that I wrote yesterday and on Monday remains up-to-date.
Gold is rallying regardless of what’s happening in other markets, and while there are signs of a top, gold appears to simply not care about them at the moment.
We see, however, much stronger sell signs from silver and from the mining stocks than we did previously, so it seems that either the top is in or about to be in. The latter seems more likely, especially that given gold’s strong sentiment and momentum it can reach my profit-take levels any day now.
There’s also one thing that connects most (all?) recent “anomalies”, but I’ll move to that in just a few moments. For now, let’s start with gold, and the quote from my Monday’s analysis.
There are several techniques that point to gold’s upside potential at about $2,340 - $2,380.
The one that I started the above gold’s-upside-target analysis with is the analogy to the previous times when the RSI moved above 70, then gold consolidated, and then it moved up once again despite that recent overbought status. After all, this is what we see now, so the question was what happened in previous analogous cases.
I marked the previous cases (based on the RSI readings) with orange rectangles, and I then copied the post-consolidation declines to the current situation – they are all marked with dashed, blue lines.
There were two areas that gold is likely to end up in given this kind of analogy. The lower one is more or less at the current price levels, and the higher one is at about $2,340 - $2,380.
The upper area is confirmed by several additional techniques:
- The upper border of the rising trend channel based on the 2022 and 2023 lows and the mid-2023 high (marked with black, dashed lines).
- The upper border of the rising trend channel based on the late-2023 and 2024 lows and the late-2023 high (marked with purple, dashed lines).
- If we treat the recent supposed-to-be-double-top price movement as a flag pattern, then the move that follows it is likely to be analogous to the move that preceded it. I marked that with red, dashed line.
- The 1.618 Fibonacci extension based on the 2022 low and the early-2023 high.
- The 1.618 Fibonacci extension based on the late-2023 low and the late-2023 high.
At the moment of writing these words, gold futures are trading at about $2,270, so we might be looking at an upside potential of another $100.
The above is a quote from Monday’s analysis, and today, gold futures are trading at about $2,312.
Let’s zoom in for more precise estimation of targets.
Based on the recent momentum and a more detailed view, it seems that we can narrow the target area to $2,355 - $2,380.
On gold’s short-term chart we see just how powerful the momentum is.
Gold price has been rallying by about $26 per day in April. Given the current price, gold could reach the lower border of the target level as early as tomorrow.
I previously wrote that gold might rally as long as there’s no breakout in the USD/YEN currency exchange rate and this remains to be the case. In particular, I wrote that this currency pair can continue to trade sideways for days and that would give room to gold’s rally. And that’s exactly what’s been taking place.
The USD/YEN is on a verge of a breakout, but it hasn’t broken yet, and gold price is taking advantage of it.
It seems that this can persist for several more days, and then gold could top while the dollar soars. This creates a good trading opportunity, and there’s a way to limit the risk, too.
In other news, the medium-term weak assets such as junior mining stocks, silver, and FCX shares, have been quite strong recently. Suspicious, isn’t it?
It could be the case that we now have a great buying opportunity in… everything but given how overbought stocks were and how similar the current case is to 2000, and 1929, another reason is likely true.
It’s the case that the weak stocks – the laggards catch up big time when the market is topping. That’s what the investment public is excited about, and those investors tend to enter the market… At its tops.
So, the fact that the weak stocks and assets are catching up and outperforming is indicating that the investment public is buying, which in turn indicates that we’re close to a major top.
Let’s check.
Silver soared on strong volume, and it did so in a major way. It even broke above its declining, long-term resistance line.
That would be bullish for many markets, but not for silver. The white metal is known for fake breakouts and for outperformance of gold right at the tops or just before them.
Since the breakout is above a resistance line of THIS magnitude, the top that is likely to follow will also most likely be profound.
Please note that the 2021 top also formed when silver was after a breakout (above the declining blue line) and it was when silver soared on strong volume, when everyone and their brother got interested in buying it. I wrote that silver was indeed likely to soar, but not at that time.
Again, at this time, silver’s breakout is very likely to be a fake-out.
How high can silver go before it really tops here?
Tough to say. Since the point is about the outperformance, it could even be the case that silver soars to $30, but I’d say $29 is more likely at the final resistance for the white metal. It doesn’t have to rally, though – silver might stop at $27.5 – its 2022 high. The upside target in gold is much more predictable than the one for silver, which is why I’m writing about being long gold.
FCX – copper and gold producer – moved to its all-time highs after rising above its 2007 high. ALL previous cases when FCX moved above its 2007 high were invalidated either immediately or shortly. This worked numerous times, without fail – in 100% cases.
It is very likely the case that we’re going to see a top in FCX shortly or that it’s already in.
Quite likely stocks will move slightly higher before they top, though. The reason is that they haven’t moved to their upside target just yet.
Based on the Fibonacci extension, the S&P 500 Index might need to move to 5,300 before the top is truly in.
There’s also one particularly interesting technique pointing to the likelihood that the top is about to form.
The corrections that we’ve seen during this upswing have become smaller in each case, and this made me recall a technical rule that Anna Radomska discovered and shared with me a few years ago.
Namely, when corrections are getting smaller and then we finally see one that breaks the pattern and is bigger than the previous one, it means that we’ll see one final move in the original direction – to new price extreme – and that would be the final top.
This technique doesn’t point to a specific price target, it’s about the general shape of the move. But we already have the specific price target based on the Fibonacci ratio, so the above simply confirms it.
And if this is the case, then all the “strong performances” of the previous laggards make much more sense.
So, no. The markets are most likely not getting away from us. They are not starting powerful bull markets here. They are likely just confirmations of a huge top in the stock market being formed.
And it could be the case that when stocks top, gold tops as well. This could all happen this or next week.
Stay tuned.
As always, I’ll keep you – my subscribers – updated, and I’ll provide some of the details in my free analyses as well. The full version of today’s analysis includes details on limiting the risk in the current environment, as well as providing the most likely profit scenario for the next few trades. I strongly encourage you to read those details today, especially that you can do so at just $19 – that’s how little it takes to subscribe for the first week. Join us today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief