WEEKEND NEWSLETTER 4/21/2018

 

The dollar rallied on Friday and gold finished lower. We will find out next week if this is just a pullback or the beginning of a more profound correction in gold. The evidence isn’t overpowering, but I see subtle clues supporting a basic pullback.

Over the last year, we’ve been conditioned to expect little from miners and silver. They’d begin to advance nicely only to collapse from whence they came. Consequently, it’s become natural to exit at the first sign of trouble. Will this rally different? Maybe. Silver and miners are showing signs of relative strength, and this could be the change in leadership I’ve sought.

Next week is important. There are bullish implications if metals and miners hold support and avert a broader correction. Doing so would promote phase two of the bull market. During phase two, the bull market is recognized, investment demand increases and momentum traders engage.

Note: There was moderate buying on weakness in GLD on Friday.

 

-US DOLLAR- The 13-week consolidation in the dollar should be nearing completion. Prices rallied sharply to end the week and tested the upper triangle boundary. The next level of resistance is the longer-term bearish trendline (red) around 90.60. Ideally, the dollar will top next week and start the next downleg. Progressive closes above 91.00 would be unexpected and signal a more profound correction in gold.

-GOLD- Prices broke lower after from the indecision candles and the next few trading days will determine the short-term outlook. Progressive closes below the short-term trendline, and 50-day EMA at $1334 would suggest additional weakness. However, gold would have to close below $1322 to confirm a breakdown and invalidate the rounded bottom. Advancing closes above $1334 could fuel a late April breakout.

-SILVER- Gold has outperformed silver and miners for over a year. I’ve been anticipating a change in leadership to drive the second phase of this bull market. The second phase is the acceptance period when a bull market is finally acknowledged.

I’ll expect more upside as long as silver maintains closes above $17.00. The next level of resistance arrives around $17.70. Consecutive closes below $17.00 would likely provoke a backtest of the $16.80 breakout zone.

-HUI:GOLD RATIO- The gold-mining ratio remained positive despite Friday’s weakness.

-HUI- The HUI found support at the 10-day EMA and stopped the formation of a swing high. Additional upside is favored as long as prices don’t close below the 10-day EMA (182).

-XAU- The XAU junior mining index declined to close Wednesday’s gap (84.50) and established a bullish hammer reversal. Maintaining closes above 84.50 will encourage more upside.

-GDX- Miners formed a swing high but managed to close above the 10-period and 200-day MA. To advance the bullish posture miners must prevent prices from closing below $22.40 next week. Progressive closes above $23.15 will favor a rally to the resistance box.

-GDXJ- Juniors formed a swing high and closed back below the $33.69 level. However, prices are attempting to hold the 10-day EMA. I’ll consider this a simple pullback and anticipate more upside as long as prices don’t close below $32.82.

-JNUG- I’ll continue to hold JNUG and consider buying more if prices hold support between here and $14.40 next week.

-USLV- I’m overweight USLV. I may consider taking partial profits if spot silver begins to breakdown below $17.00. Rallying above the red trendline would recommend a significant breakout in silver prices.

-SPY- Stocks ended soft, and we could see more downside next week. Volume decreased as prices rallied but increased when prices declined; evidence of a dying rebound.

-WTIC- Oil could extend the rally into next week. I’ll look for signs of a top between the 24th and 26th.

Have a pleasant weekend.