Commodities Analysis & Opinion

GDXJ Takes Bearish Action in Spite of Standstill in Gold Prices

 

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The precious metals market appears to have topped. The fact that junior miners underperform gold serves as bearish confirmation that more downward waves may follow.

Almost everything I wrote and said yesterday also is still relevant today.

In Tuesday’s analysis, I wrote the following about the US dollar index:

Despite the intraday attempt to move lower, the support held.

USD Daily Chart

Consequently, what I wrote below the USD index chart yesterday remains up-to-date:

Despite the USD index closing a bit lower than on Tuesday, the VanEck Junior Gold Miners ETF (NYSE:GDXJ) closed the day over 1% lower.

GDXJ Daily ChartGDXJ Daily Chart

As I said and wrote earlier, the precious metals market appears to have topped.

Interestingly, it appears that the classic Elliott-wave pattern has just been completed and that a new massive wave down is about to take occur.

GDXJ 60-Min Chart

The classic EWT pattern is three waves down (I marked those with an orange rectangle) and then a correction consisting of two smaller waves.

That’s exactly what we have seen in recent months. The September–now pattern appears to be the above-mentioned correction. It didn’t only consist of two smaller waves higher – they were actually almost identical in terms of size and sharpness. This created a classic ABC correction (flag) pattern.

Now, since this pattern is complete, another huge 3-stage move lower can – and is likely – to unfold. This is very bearish for junior mining stocks (as well as for gold, silver, and probably other commodities and stocks), and the fact that juniors are already showing weakness relative to gold (the latter was almost flat yesterday, while miners declined) serves as a bearish confirmation. As always, I can’t guarantee anything, but in my view, the profits that can be reaped on this upcoming slide can be enormous.

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