It’s Not Necessarily All About Gold Price…

Boring day for precious metals, but brace yourself for some major stocks action!

Bullion.Directory precious metals analysis 19 June, 2023
By Przemysław K. Radomski
Founder of GoldPriceForecast.com

I’ll be honest – there’s not much going on today, at least for the precious metals market. Things are pretty interesting for stocks, though…

After Thursday’s supposedly bullish short-term reversal, there was a bearish short-term reversal on Friday, and gold futures are down in today’s pre-market trading, but not significantly so.

In other words, the post-breakdown back-and-forth movement continues. And it continues to have the same bearish implications as it used to. The markets are preparing for their next big move, and it’s extremely likely that this move is going to be to the downside.

Gold practically ignored last week’s sizable decline in the USD Index, which tells us that there’s probably nothing or very little that could make it rally from here (I’m talking about “regular” events, of course). On the other hand, given this kind of relative performance, it seems that once gold gets at least some trigger (can come from any semi-important piece of news or the USD Index’s upswing), it would be ready to slide.

For now, it’s still in the preparation mode, which makes it likely that once the decline is going to finally start, it’s going to be really significant.

What we saw in the S&P 500 on Friday is more interesting.

Namely, we saw a reversal that took place on a huge volume.

One might say that it’s not a big deal, or it’s something bullish because we saw something like that in late May, and it was right before the upswing.

However, this time, we saw the volume spike also in the Nasdaq, which we didn’t see in late May, so this time really IS different.

Could it be that stocks finally reached their peak?

Honestly, even I’m tired of writing that this is likely, but… It DOES appear to be likely.

The RSI is still at extremely oversold levels, and the index itself just reached its rising resistance line, which you can see on the chart below.

It does look like it’s high time for a turnaround. This has been the case a couple of times now, but never did we see a combination of huge volume, a resistance level being reached, a daily reversal, and an extremely overbought RSI.

Also, do you remember (I wrote about it on many occasions) what tends to happen at the end of an upswing in the stock market? The stocks that were weakest previously tend to outperform.

The reason is that the investment public buys whatever’s cheap without considering that it might be cheap for a reason. Sometimes the moves are bigger, and sometimes they are smaller, like the one that we just saw in the GDXJ.

The GDXJ moved higher on an intraday basis on Friday, but ended the session very close to its rising red support line. Was the breakdown invalidated? I wouldn’t say so, especially given today’s pre-market decline in gold.

Did juniors had some reason to move higher on Friday, even though gold didn’t? Yes, it could have been because stocks were topping.

Was Friday’s move higher a sign of strength in the precious metals sector? No, because of the above reason and because it was just one day. Considering where the GDXJ is relative to its June lows and highs and then comparing it to where the gold price is compared to its own June lows and highs tells us that miners remain weak relative to gold. And that’s bearish.

All in all, the outlook for the precious metals sector remains bearish, and it seems that the patience (which has been very difficult) will be well rewarded for those positioned to take advantage of the next big move to the downside (and those prepared to take advantage of the upcoming rebound).

This article was originally published here

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