And can the hesitant moves in gold last much longer?
Precious metals haven’t moved all that much on Wednesday, but is it time to get complacent? The wait continues… PMs declined yesterday, but the move was nothing to call home about. Still, it was more or less in tune with what we saw in March – provided that one takes into account the lower volatility in the short run.
In the silver market, we saw that the small intraday breakout above the declining resistance line was invalidated, just as we had indicated in yesterday’s analysis. Silver takes longer to start its move, but apart from that, the situation continues to be similar to what we saw in the first half of March. Our previous comments on the above chart, therefore, remain up-to-date.
On Thursday, the white metal reversed and declined profoundly on relatively big volume – just like it had done on March 9th. In the following two trading days, it had moved lower, but just slightly so. That’s exactly what happened also this month – on May 1st and May 4th. And then…
In March, silver then plunged, and it took the white metals just three more days to slide below $12 from about $17.
As the starting point for silver for now is approximately $15, could it slide to about $10 in just 3 trading days?
Obviously, silver didn’t slide profoundly yesterday (conversely, it moved higher), so the day-to-day similarity is no longer perfect. Does the lack of perfection invalidate the similarity altogether? No, at least not yet.
A useful question to ask is if this similarity – aside from the previous several days – was perfect from the beginning? It wasn’t.
The mid-April bottom appears to be analogous to the late-February bottom, and the blue dashed lines (might not be clear at first sight, but once one knows where to look, they become visible) that connected these bottoms along with initial and final tops, were almost identical.
Almost, means that they were not perfect, and the difference was in the length of the consolidation. The final short-term top took place a day later than the blue dashed line suggested. Initially, it even seemed that silver was breaking higher – above the declining resistance line.
Did this daily delay or the initial move in the other direction change the analogy? No. It delayed its consequences. Silver reversed and declined, anyway. And it did so in a profound manner, just like it did on March 9th. Throwing the analogy out of the window in late April would have been a mistake, a moderately costly one. Now, if the analogy does remain intact, then throwing it out of the window would now be very costly, as the follow-up move is likely to be much bigger.
In our opinion, the bearish implications remain intact, especially since it’s just one of the markets that showed similarity to this period. Precious metals investors, look out.
The full version of today’s analysis includes details of our currently open position as well as supports and targets of the upcoming sizable moves in gold, silver and – in particular – the miners. It includes not only the final targets, but also the interim ones that could trigger a rebound as early as this week.