Mining ETFs: Headed For Their Next Slide?

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Gold seems to have topped in the lower part of my target area and the levels reached by its price as well as the levels reached by the stochastic indicator seem to indicate that the top is indeed in.

Gold reversed after failing to break above the declining short-term resistance line, relatively close to its triangle-vertex-based reversalwhich is a bearish combination. The stochastic (lower part of the chart) didn’t move to the 80 level, but it was very close to it and it was the proximity of this level that was enough for the tops to form in quite a few previous cases – including the November 2020 top. Based on yesterday’s closing price, we didn’t see a sell signal in this indicator yet, but once we see just a little more weakness, we’ll get this confirmation. Based on what we saw in mining stocks yesterday, it seems that we’ll see it shortly.

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Right now, traders are likely taking the wait-and-see approach with regard to the USD Index. The latter just moved to its previous yearly highs. It’s already after verification of the breakout above the February highs, so it seems that it’s ready to break higher any day – or hour – now. When that happens, I expect the rally to take the USDX to at least 94, perhaps to 94.5 or 95. The September 2020 high is 94.8, so this level is the most likely upside target for the short term. I don’t think that the rally in the USD Index would end once it reaches the proximity of 95, but that’s when we might see another breather (perhaps after a breakout above this level and perhaps before the breakout, it’s too early to tell at this time).

All in all, it seems that the next move lower in the precious metals market is already underway and that we’re going to see new 2021 lows in gold and mining stocks in the next several weeks or days.

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