Miners declined as expected, but today’s action is so far in gold and stocks. Both will impact miners.
From the daily point of view, we just saw another move toward the 61.8% Fibonacci retracement based on the recent decline. This level was not touched, let alone broken. And today’s intraday high wasn’t above the Friday’s intraday high. Consequently, what I wrote about the above chart yesterday, remains up-to-date:
Gold price corrected to the 61.8% Fibonacci retracement level, which is a typical level to which prices move during corrections – there’s nothing special about it. Or actually, the fact that this level tends to work as reliable resistance over and over again is quite special. Other than that, nothing really happened or changed from the technical point of view.
Therefore, what’s happening on the markets today – gold’s decline back below the 50% retracement – is normal. Gold did what was normal for a market to do during corrections, and now it’s moving lower again.
Also, given the fact that 61.8% of the previous move is often the maximum size of the correction, it could be the case that the top in gold is already in.
Gold moved back above the 50% Fibonacci retracement level, so it might seem odd that the decline isn’t happening yet, and instead we saw a rally. But it becomes much more understandable as we zoom in.
On the above 4-hour candlestick chart, gold moved below its rising support line and instead of invalidating this breakdown (as it did earlier this month, which was then followed by a sharp rally), it’s been verifying that breakdown.
In fact, the attempt to move back above this line that we just saw (or at least that I saw before writing those words) was invalidated. This means that the breakdown is being verified, and the odds are that it will be verified. This could be a game-changer regarding the very short-term outlook and a technical trigger for the following declines. This is what could lead to miners reaching our profit-take levels.
Another such trigger could come from the stock market which is behaving in a very specific way right now.
After a sharp post-Nvidia-earnings rally, the S&P 500 Index futures appear to have topped creating a head-and-shoulders pattern.
These patterns – when completed – tend to be followed by a verification, during which the price moves back to the previously broken neck level and verifies it as resistance. This is what we might be seeing right now.
This COULD be the early sign of a major top in stocks. I’m emphasizing the world ‘could’ because it’s a very tough call to time the exact top in case of a market that’s in a parabolic upswing.
If this is it, and stocks are about to slide in the near term, miners – especially junior miners – would be likely to follow. And if both: gold and stocks decline, miners will truly slide, boosting our profits. If stocks don’t slide, miners are likely to decline in a regular manner.
The buying opportunity (as well as profit-taking opportunity for short positions) is near, and my premium Gold Trading Alerts include details necessary for those trades. My subscribers will also be informed through intraday Alerts to help them navigate those (and other trades).
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief