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Gold Stocks: Massive Drop Is Around The Corner

Published 03/06/2022, 12:30 AM
Updated 05/14/2017, 06:45 AM

Mining stocks would likely suffer when the general stock market slides, and it seems that we won’t have to wait too long for that.

MSWORLD Weekly Chart

World stocks have already begun their decline, and based on the analogy to the previous invalidations, the decline is not likely to be small. In fact, it’s likely to be huge.

For context, I explained the ominous implications on Nov. 30. I wrote:

"Something truly epic is happening in this chart. Namely, world stocks tried to soar above their 2007 high, they managed to do so and… they failed to hold the ground. Despite a few attempts, the breakout was invalidated. Given that there were a few attempts and that the previous high was the all-time high (so it doesn’t get more important than that), the invalidation is a truly critical development.

"It's a strong sell signal for the medium- and quite possibly for the long term.

"From our—precious metals investors’ and traders’ —point of view, this is also of critical importance. All previous important invalidations of breakouts in world stocks were followed by massive declines in the mining stocks (represented by the XAU Index).

"Two of the four similar cases are the 2008 and 2020 declines. In all cases, the declines were huge, and the only reason why they appear “moderate” in the lower part of the above chart is that it has a “linear” and not “logarithmic” scale. You probably still remember how significant and painful (if you were long that is) the decline at the beginning of 2020 was.

"Now, all those invalidations triggered big declines in the mining stocks, and we have “the mother of all stock market invalidations” at the moment, so the implications are not only bearish, but extremely bearish.

"What does it mean? It means that it is time when being out of the short position in mining stocks to get a few extra dollars from immediate-term trades might be risky. The possibility that the Omicron variant of COVID makes vaccination ineffective is too big to be ignored as well. If that happens, we might see 2020 all over again—to some extent. In this environment, it looks like the situation is “pennies to the upside and dollars to the downside” for mining stocks. Perhaps tens of dollars to the downside…You have been warned."

Here's how the situation currently looks from the U.S. point of view. The chart below features the S&P 500 futures.

S&P 500 Futures Chart

The key thing about the above chart is that what we’ve seen this year is the biggest decline since 2020, and the size of the recent slide is comparable to what we saw as the initial wave down in 2020. If these moves are analogous, the current rebound is normal—there was one in early 2020 too. This also means that a much bigger decline is likely in the cards in the coming weeks.

The thing that we see with regard to the short term is that stocks moved above their declining resistance line. However, this line was already "broken" in a similar way earlier this year. The fact is that this "breakout" actually resulted in its invalidation and another wave down.

If history is about to rhyme with regard to both short-term and the analogy to 2020, the next move lower might be much bigger.

This would be likely to have a very negative impact on the precious metals market, in particular on junior mining stocks (initially) and silver (a bit later).

Latest comments

this guys TA called for much lower prices the last couple years as prices have only risen to ATHs. how come he never cites his old articles in this sense, only when it seems convenient to does he cite his past articles. anyway, I'm well diversified between cash, miners, and gold ETFs and physical so if miners get killed I will rebalance into them and do even better even though I dont think he's right, as usual.
Absolutely makes no sense, indeed junior mining (gold) is one to beware of, but to bunch silver in with larger precious miners is simply sensationalism, sell him EXK when it hits $10
How long will gold defy Radomski? Just how much higher does gold have to go to defeat his call?
How long will gold defy Radomski? Just how much higher does gold have to go to defeat his call?
How long will gold defy Radomski? Just how much higher does gold have to go to defeat his call?
Gold is popping in spite of DXY rising. The 15 year chart looks like a giant cup and handle that started in 2010, has formed a handle in the last 18 months and is in the midst of a breakout. Countries are replacing foreign currency reserves that are just an IOU ftom another country with atoms with 79 protons. The price of gold is the #1 driver of gold stocks. Gold stocks wont tank unless gold dors as well …. And it isnt
thank you Radomski!! You can wait to buy gold at 900 and silver at 5 ok! we love you bro!! Keep on writing it! When Dow gold ratio hit 1, we will sell you those gold ok!! 🥳🥳🥳
Radomski is my favorite contrarian indicator. Just do the opposite of what he says and you should do great 📈
Abe bhag sale bewkuf
this guy is such a joke
Months publishing articles with his mythical trendline since Aug 2020, plenty of "invalidations". Now that we have seen a breakout there, that narrative can't be used anymore. Hence, he had to come up with something else, but what? "Oh right, now that stocks are under pressure due to "Fed Policy", I can play with the fact that whenever there is a liquidity crunch gold sells off in AVG 60% less than stocks." You know what? This is just pathetic. And, SP already declined ~15%, and JP already said that they will be monitoring and they are ready to slow the throttle.
Short XAUUSD, thanks.
total bs
always been a fan, however cash flows at newmont, AEM, barrick are going to be insanely high.  So, I'll be long and have stops working....
Appreciate your point of view
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