Yup, Everything Is Still Bearish
Sunshine Profits | Sep 24, 2021 02:04AM ET
The Fed has decided, and the Fed has spoken. And the markets reacted in tune with their previous trends. In other words, the bearish outlook for the PMs remains very much intact.
Here’s the key chart for us, in light of the profitable short position in the miners that we have. While our short position is in the junior miners, it is the GDX ETF that is more important, as its actions are observed by more market participants.
The GDX ETF confirmed the breakdown to new 2021 lows, and it did so after trying to rally. This makes the most recent price action even more similar to what we saw in mid-August after the previous breakdown.
The situation was already extremely bearish previously, but it’s getting ridiculously bearish now.
The GDXJ ETF also continued to move back and for the below the previous September lows. Despite the intraday attempt to move higher, it ended the session mere $0.16 higher.
So, nothing really changed – the outlook for the miners remains clearly bearish.
Gold ended yesterday’s session relatively unchanged, so practically everything that I described in yesterday’s video commentary remains up-to-date. If you haven’t had the chance to watch it so far, I encourage you to do so today, tomorrow, or over the weekend.
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Despite yesterday’s $0.30 rally, silver didn’t invalidate its previous breakdown to new yearly lows, so the outlook remains clearly bearish also from this point of view.
The USD Index moved higher yesterday, and the precious metals sector didn’t decline, which might be viewed as a sign of strength of the latter, but I don’t see it in this way. Why? Because yesterday’s session was an exception from the rule due to the importance of the news that accompanied it – Fed’s decisions and comments. These days tend to be rich in sudden price swings in all directions as investors and traders try to guess what the news is going to be and then they are unsure how to react to the news when it finally hits the market. Consequently, yesterday’s lack of declines in the PMs is not a sign of their strength – it was likely a more-or-less random kind of reaction. If we see more of that, the implications might change, but that’s not the case right now.
Finally, while the S&P 500 moved above the mid-August lows in intraday terms, please note that yesterday was the third consecutive close below the mid-August bottom in closing price terms. This means that from this point of view, the breakdown was confirmed. The S&P 500 futures are higher in today’s pre-market trading, but they are just a few index points above the mid-August lows (closing prices), so it’s too early to say that the breakdown was invalidated – we would need to see a close above those lows (4,400.27) to say that
Summing up, the outlook for the next few months for the precious metals sector remains very bearish.
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