Gold Bullish But Tentative

Gold and Silver are slow to confirm their cycle highs. This rally could expand if gold closes back above $1,258 and if silver surges above $18.32.

Commercial traders increased their short positions in gold by 26,595 contracts. Short positions in silver grew by 7,692. The smart money players are preparing for lower gold and silver prices. These numbers are useful, but they don’t always time tops/bottoms.

Miners are still weak relative to gold. It’s been 16-trading days since their March 9th lows. According to our analysis, prices should break the March lows on or before the 23-trading day (April 11th). A significant breakdown will occur once gold and silver finally rollover.

-US DOLLAR WEEKLY- The dollar formed a weekly bullish engulfing pattern after testing the 50-week EMA. A multi-week rally is likely starting.

-US DOLLAR DAILY- The Dollar confirmed a cycle low at 98.67. However, prices need to clear the 20/50-day MA crossover to bring this rally to life.

-GOLD- $1,261.40 could be the cycle top, but we can’t be sure until prices close consecutively below the 10-day EMA. If prices close back above $1,258 early next week, then this cycle could extend even higher. In that case, I’d expect a final top to arrive between $1,280 and $1,290.

-SILVER- Still no evidence of a cycle top. Breaking below $18.00 could lead to a sharp selloff, comparable to what we saw in early March. However, an upward breakout from the consolidation box would extend the cycle and prices could reach $19.00.

-GDX- Prices attempted to rally but ended up closing just below the 10-day EMA, a sign of weakness. Closing below the trendline line (currently at $22.00) will confirm the breakdown.

-DUST- Prices traded lower but rallied into the close. Trading back above Thursday’s high ($32.15) should ignite a sustained rally.

-GDXJ- Junior’s also soldoff into Friday’s close. Prices need to close below $34.50 (trendline) to confirm that the next down leg has commenced.

-JDST- Prices formed a bullish hammer reversal candle on Friday. I’d keep my stop just below Tuesday’s $13.81 low. Breaking the trendline would signal an exit. Closing above the $15.80 high should ignite a significant rally.

-SPY- Stocks confirmed an interim low. If the bounce closes above the 239.28 high, we could see a rally to 255 by late April, early May. Failure to breakout above 239 could usher in a swift decline to the trendline.

-WTIC- Prices tested the 50-day EMA but failed to close above it. If prices reverse below the trendline, I’ll reenter my short position. See XLE chart.

-XLE- I will be watching the XLE (energy stocks) for signs of strength/weakness next week. Prices moved lower the last two days as oil advanced. Breaking out above the 50-day EMA and subsequent trendline would be a bullish sign for oil. In that even, I would no longer look to short crude.

Gold and Silver are yet to provide conclusive evidence of topping. Therefore, it’s feasible their cycles extend even higher next week. As a reminder, here are the three steps that thoroughly confirm a daily cycle top.

• STEP 1) Prices must form a swing high.
• STEP 2) Prices must reasonably close below the 10-day EMA.
• STEP 3) Prices need to close for the second time below the 10-day EMA; below the step-2 close and preferably below the step-2 low.

Currently, Gold has only completed step. Silver has none.

I’d like to see gold and silver confirm tops next week, they have been persistently stubborn. Follow-through lower is key. A quality down day or recognition-day next week should launch a sustained down leg.

I will frequently update throughout the week as the price structure unfolds. The color gauges will remain neutral until tops are established in precious metals.