Was That A False Move Out Of The Gold Pennant?

Sure enough, a pennant formed on the gold chart. The low was about 1200 on day 5. Then yesterday the price broke out. But by the end of the day price put in an ugly black candlestick reversal and fell back to the pennant. False move? That would be par for the course in these markets. As the move yesterday hit it’s apex I wrote in comments, “went to 1/3 cash, don’t think the synthetic market has the ammo right now to complete a C wave (to 1310)”.

Gold miners (GDX) have now retraced half of the entire decline from the July 2014 peak to the January 2016 low. This was done in only five weeks. About 20 on the GDX was the memory range from last year and is going to be resistance now.  It is relatively easy to spot support on the chart, and that is roughly 17. Duration can be gauged by tracking the 200 and 50 DMA, which will turn up and move towards the 17 marker.

When you think of it psychologically the serious precious metals survivors (who held on) during the long second half of last year are thankful to have emerged from the abyss and the accompanying mental depression. But immediately going back into the abyss would be sheer torture for most. Even giving up a chunk of the recovery would be psychologically painful. So there is a huge temptation, indeed a need, to take some amount off the table.

If you are like me there is also a psychological stress not to miss out on a further real or imaged rocket launch. There are some rumors that the G-20 meeting this weekend might deliver something significant for gold. I don’t get the memos, but will have to see it to believe it. But the good news is that the junior sector in particular is priced inefficiently and I know exactly what I will use to redeploy reserves in a change-of-strategy contingency.

As I have noted there are some warnings, so it is important to adjust your positions to a level less unnerving: namely a nice reserve to pick up good prices in the correction, and also enough to be satisfied if some how the market C waved higher. An individual determination of what that is should be made.