An In-Depth Look At The Precious Metals Complex

Before we look at the charts I would like to thank Sir Plunger for putting on the short oil trade this week while I was recovering from surgery. You won’t find a more thorough and in-depth look at oil than what Sir Plunger offered. And wouldn’t you know it his timing as usual was impeccable. Oil dropped almost 4% earlier this week.

Now lets turn our attention to the sector which many members have a love hate relationship with.

There is a potential new pattern forming on some of the precious metals stock indexes which is only coming to light today. Before today’s price action there was only a guess of what may be forming with no confirmation. After today’s big gap breakout another piece of the puzzle is falling into place. Nothing is ever guaranteed when it comes to the markets, so all we can do is get the odds in our favor and try to recognize a potential pattern as soon as possible. Once you think you may have something figured out you then put together a game plan and work it until it either plays out or fails.

Lets start with the 60 minute chart for the GDX which shows the now completed bearish rising wedge. We got the H&S top which formed at the top of the rising wedge as the 4th reversal point making the rising wedge a consolidation pattern to the downside. It’s still possible we could see a backtest to the 24 area before the impulse leg down begins in earnest, but there are no guarantees. Note the inverse H&S bottom that formed in March which reversed the decline from the August 2016 high, a H&S at the bottom and a H&S at the top, both of which are reversal patterns.

This next chart is a one year look we were watching during the big impulse leg up out of the January 2016 low to the August 2016 high. Here you can see another H&S top which reversed the 2016 rally. After forming several smaller consolidation patterns the GDX bottomed out in December of 2016. That 2 month rally produced the first blue bearish rising wedge with the 200 day ma offering resistance. If you recall we went short on the backtest to the underside of the rising wedge until the Fed announcement, which spiked GDX higher at the beginning of our current and smaller blue rising wedge. Today we shorted the PM stock indexes again, as the price action is in a similar spot to the bigger blue bearish rising wedge.