The caution flag is flying.
Broad selling pressure is hitting the markets as gold, silver, and mining stocks slide.
Will the Fed hike? Will it cut? Or will it finally pause?
I have no idea, and nor does anyone else.
But gold’s crazy cousin has some definitive answers for precious metals bulls…
The 24.75 level in silver marks the spot for the entire precious metals space.
Why?
Silver is the high-beta play. So if investors are pulling risk off the table, that key polarity zone in silver is most likely the first level to fall.
Last Wednesday, silver futures sliced through that critical level.
Note the bearish momentum divergence print on the 14-day RSI providing a poignant indication of waning strength. The bulls have stepped aside as the bears assume control.
I have a neutral near-term bias for silver futures. Precious metals likely experience a range-bound choppy action as long as silver trades below the April pivot lows.
I will continue to focus on potential support levels, as I pointed out last week. It’s time to protect capital and recent gains.
Yet a few bright spots remain…
Despite renewed selling pressure, gold mining stocks are hanging tough. Check out the Gold Miners ETF $GDX digging in at a critical polarity zone at approximately 33.25:
That’s my line in the sand. GDX will likely fall next if selling pressure persists for these shiny rocks. But I have to give these stocks a chance as long as they hold above my risk level.
But be warned – the bears are coming for these gold mining names on a break below the gap from last spring. And they likely have gold futures in their sights…
The 1,975 level highlights potential near-term support for gold:
Gold futures are correcting through time as demand absorbs supply just beneath all-time highs. But that sideways consolidation turns lower on a decisive close below the Jan. pivot high.
I’m concentrating on the 2011 highs at approximately 1,924 if and when gold futures break below the highs from earlier in the year.
The best trades always take care of themselves. That’s one reason I’m more concerned with where I’m wrong versus where I’m right.
Silver proved my bullish tactical outlook wrong. Now I must adapt.
The market is reverberating a strong risk-off tone. Sellers are gaining momentum. And potential near-term support levels are coming into focus.
I have no idea if gold mining stocks or gold will continue to break down. But based on these critical levels, I know where to cut my losses short.
I can’t ask for much more.
What do you think about last week’s pullback in precious metals?
Was it simply a knee-jerk reaction? Or do these metals have more downside in the near future?
Let me know what you think. I love hearing from you.
Thanks for reading. And stay tuned!
Click here to watch this week’s Gold Rush Video:
And be sure to download this week’s Precious Metals Report below!
Allstarcharts Team
