EC …And That’s What A Reversal In Gold Looks Like

What about the answer to the question from the opening paragraph of today’s analysis?

In short, both outcomes are possible, and it seems best to be positioned in a way that should not be affected by the above dilemma. The trades focusing on several days are at the greatest risk right now. Either zooming out (focusing on the big move, which is our preferred take here) or zooming in (focusing on intraday moves, which some may prefer) lowers the exposure to the uncertainty regarding the next several days. We have a sizable position already, but after seeing more bearish confirmations, we will most likely increase it even further.

Summary

Summing up, the strong resistance levels in gold and mining stocks that we featured previously, were reached and they stopped the rally in terms of the daily closing prices, so the medium-term outlook didn’t change. Based on today’s pre-market weakness, the recent breakout in the mining stocks is likely to be invalidated shortly.

The very important detail about the most recent price moves is that they took place in light of a very positive news from the Fed. The thing is that the dovish comments from the Fed (“the case for raising rates has weakened somewhat”) should have caused a much more spectacular rally. Despite the intraday rallies that we saw yesterday and on Wednesday, gold is now just $2 higher, while it could have easily (based on the news alone) rallied $30 - $80 by now.

One of the most bullish situations in any market is when everything that could go wrong for it… Already did. The best confirmation of such bullishness is when the market doesn’t decline despite the facts that should make it decline. We seem to have just witnessed the exact opposite of the above. Gold doesn’t really want to move higher from here, and its technical situation is perfect for a start of a profound decline to the final lows of the prolonged slide that started in 2011.

The upside remains limited, while the downside remains enormous. The turning points are being reached this week, so we may either see a very brief upswing in the metals before the huge decline starts, or the latter may start right away.

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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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