Is gold finally due to swoon or can it continue to rally?

The naysayers point to overbought conditions on the weekly charts, COT reports showing a mammoth short position held by the commercial traders, and the upcoming stock market “crash season”.

The bulls point to a peaking US business cycle, inflationary and growth-destructive tariffs, a tight job market, an increasingly dovish Fed, strong central bank buying, de-dollarization, out of control government spending and debt, and Chinese investors buying more gold instead of investing in their weak stock market.

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In the big picture, both fundamentally and technically, the bulls clearly have not just the edge, but a mighty wind at their backs. 

What about the short-term picture? 

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Even in the short-term, I give the edge to the bulls! 

There’s a rectangular drift in play, and per Edwards & Magee (writers of the technical analysis “bible”), rectangles have roughly a 67% chance of consolidating the existing trend, which is up.

Even if the price were to reverse on a disappointing Fed announcement, there’s great intermediate time frame support at $1360-$1275.

Institutional money managers are only going to become more enthusiastic about gold, silver, and the miners as the business cycle matures and the Fed becomes more dovish.  Any pullback in the gold price now will be bought by their very strong hands.

What about the stock market?  If there’s a crash in September or October, would gold stocks suffer?

Well, the CDNX index (where the “ultra-junior” miners trade) fell with the Dow during last year’s crash season swoon, but gold and most senior miners blasted higher!

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From a performance perspective, gold stocks look poised to “destroy” the US stock market. 

A massive inverse H&S bottom breakout is in play.   

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In 2011 the dollar began breaking out from a huge base pattern against the yen. Gold began to break down from a huge double top pattern against the Nasdaq. This told me a general risk-on theme was emerging and I suggested investors sell some gold and put the proceeds into the stock market. 

Now, the opposite situation is beginning to take shape and investors should consider allocating some capital from the equity markets to gold, silver, and the miners now…

And with bigger size when there’s a breakout over 9 on the weekly gold versus Nasdaq chart.

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I don’t see any reason for gold-stock investors to be nervous.

Investors get solid performance and low drawdowns trading NUGT/DUST and SQQQ/TQQQ. 

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The GDXJ ETF is called a “junior miners” ETF, but in my professional opinion, it’s really more of an intermediate producer ETF now.

The current price action is truly exhilarating!  An inverse H&S bottom and a marvelous bull pennant pattern both target the $45 price area.  The $35-$36 zone is outstanding support.  

Aggressive gamblers can “step up to the JNUG plate” and buy the JNUG ETF.  It’s a triple-leveraged version of GDXJ.

Whether JNUG, GDXJ, or individual component stocks of the ETFs are used, buyers of size can place a stop-loss order under the pennant low to mitigate “Fed Day” announcement risk.  Modest-size buyers don’t need stop-loss orders.  Just buy and prepare to watch GDXJ and its component stocks fly!