Blog

Gold, silver, miners, USD & SGR, current situation

I hedged the sector periodically on the way up, to no positive effect and a net negative effect. That’s show biz. Then a big positive effect was had by hedging when the sector cracked and a correction finally started.

We are now left with 4 choices, as I see them:

1. A sharp, deep correction now, which would be quite bullish (for a solid rally, at least) if extreme downside objectives were reached.
2. A long, extended correction (like the 2002-2003 correction shown for HUI below) that made deep drops and sharp rebounds for about a year. The ups and downs would be highly tradable.
3. The current short-term correction is all there is and it’s up up and away from here.
4. The current short-term correction leg is over and a test of the highs that is destined to fail is in play with Q4 party season.

I think #4 is very viable based on this morning’s setup per the indications below. Let’s see if it holds true. #1 has been preferred for a committed bullish view sooner (and is why I re-hedged). #2 is viable, but it would need #1 to play out first. I think that #3 is least likely.

First, here is HUI’s 2002-2003 example of a year-long correction, that was tradable both to the downside and upside (30% +/- swings in either direction). But you had to be fairly nimble with it. If the PM complex drops to more extreme lows short-term and rallies, this will be the favored outcome. After the extended and volatile sideways correction, Huey resumed its bull market.

Here is the GDX daily chart situation in pre-market. As you can see, it wants to open positive again after yesterday’s bounce. But the implied open is below the 50 day moving average. If GDX successfully takes out that MA and and short-term EMA 20 (orange dotted) we could be looking at a gap fill around 78 or a test of the highs.

But this would not qualify as a 30% (+/-) swing per HUI’s analog above. A 30% drop for GDX from its recent high would bring it to our more extreme downside target area, around 60. So a test of the highs or gap fill here would be tradable… by DAY traders. A no-brainer buy for a big trade or bull market resumption would be a drop to at least the 62% Fib retrace level around 63, or lower. The SMA 200 is way down at clear “no-brainer” support around 55.

Silver re-took the (black) neckline per a video update that looked at this short-term chart. Man stared at said chart and imagined a larger bearish H&S and a possible bullish Inverted H&S, after the previous bearish H&S played out to its implied downside target of around 46.

Today, if pre-market holds true and if silver takes out the orange neckline, Team ‘Bounce/Test Highs’ gains a strong upper hand with a target around 53. It doesn’t mean “correction over”, but it would mean near-term pain for short holders.

The daily chart reminds us that silver never retraced even 38% of the previous rally, but could have more bounce to it with a 50% Fib at 50, 62% Fib at 51 and heck, 78% Fib 52.50, which would go well with the implied bounce target of 53 noted above.

Gold (daily chart) retraced more than 38% from the high and is posturing a little bounce pattern, which would target the 4170 area if it plays out.

Bottom Line

Watch USD. That would be job 1. Indeed, the whole broad U.S./Global year-end party scenario would depend on USD failing here at its logical failure point as it tests resistance at 100 again and postures to fail again, in pre-market. The significance here is that this time if it fails, it would do so after finally testing the downtrending daily SMA 200 (major trend indicator).

This is obviously a bearish setup. The question has been whether Uncle Buck would put on a contrary rally with the Gold/Silver ratio in tow. This morning’s indications say “no”. We’ll see if forward reality follows.

The relevance for the precious metals could be that which led the whole rally upward in 2025 (the precious metals) may turn out of have led it into an interim correction before strong recovery into the post-October holiday party season. Boys?

So, considering the USD above, if the Silver/Gold ratio holds and bulls again, we could be on a year-end party, including the precious metals, which…

…could well end up leading the thing. Gold/SPX took a hard crack recently, but this chart has cleared the pipes for resumption of leadership either from the SMA 50 (blue) or the SMA 200 (orange). A fly in gold’s ointment could be Goldilocks, which is thus far just an option, not nearly a reality. But we’ll keep an eye on her.

After that all bets are off, after the party, if we do go party mode.

It’s as previously noted for the precious metals; more correction now = more bullish sooner.

Less correction now and a rejoining of the party would likely = less bullish and a lot of down/up grind ahead with the resumption of the bull market possibly delayed by as much as a year or so.