Gold Miners ETF (GDX)

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Gold & Market Update: Stocks Aiming Lower as Gold Shows Signs of Bottoming
By: AG Thorson | May 18, 2022

Gold prices have plunged nearly $300 since peaking in March. The chart is building a bullish hup-with-handle pattern supporting a breakout above $2000 later this year.

Metals and miners could drop further over continued weakness in broader markets. Overall, I believe this dip will be viewed as an excellent long-term buying opportunity.

The next big rally in precious metals will come when the Fed pivots. That could happen soon if we see widespread fuel shortages and price controls, as I expect.

Our Gold Cycle Indicator is at 36 and within maximum cycle bottoming.



Gold Prices

The pattern in gold resembles a cup-with-handle. Prices formed a swing low and closing back above the 200-day MA (currently $1836) would promote a bottom. Our current forecast supports a breakout above $2000 later this year and perhaps as high as $3000 by year-end. A sustained breakdown below $1750 would invalidate the cup-with-handle outlook.

GDX

Miners bounced off long-term support surrounding $30.00. A close above $31.70 would fill last week's gap and support a bottom. Conversely, a daily finish below $30.00 could trigger additional downside.



GDXJ

After dipping below the $36.50 area, junior miners reversed immediately higher, supporting a possible bottom. As long as prices don't close back below $36.50, I see the potential for a cycle low.



DOW

I believe stocks are headed towards the 20% correction level near 29,600. We could get an oversold bounce here or there, but I don't think we see a bottom until retail trader’s panic; I haven't seen that yet.



TSLA

I think we need to see panic and a breakdown in Tesla before markets bottom. As I understand it, Musk has $88-billion in margin debt against his Telsa shares. The Twitter deal may add another $13-billion. That is a lot of debt tied to an extremely volatile and overpriced stock.

If Tesla shares crash like I've been calling for, Musk could see significant financial stress. For his sake, I hope I'm wrong. A price decline below $550 could trigger panic.



Takeaways:

• The general stock market is bouncing, but I won't expect a bottom until retail traders capitulate...watch Tesla.
• A liquidity event is possible, resulting in a flash crash. I'm keeping an eye on cryptocurrencies; they could fail first.
• It's probably a good time to hold cash in anticipation of buying opportunities if prices drop further.

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