Breaking News
Investing Pro 0

Invalidations Across the Market Have Major Implications for Gold

By Przemyslaw Radomski, CFACommoditiesDec 07, 2022 01:27PM ET
www.investing.com/analysis/invalidations-across-the-market-have-major-implications-for-gold-200633243
Invalidations Across the Market Have Major Implications for Gold
By Przemyslaw Radomski, CFA   |  Dec 07, 2022 01:27PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
XAU/USD
+0.20%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XAG/USD
+0.32%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US500
+1.47%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Gold
-0.05%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Silver
-0.06%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
-0.12%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

The invalidations of breakouts and breakdowns are strong signals in the opposite direction, and we just saw them throughout the market—also in gold.

Gold Daily Chart
Gold Daily Chart

The gold price has recently invalidated its small breakout above the 38.2% Fibonacci retracement level, which is a strong bearish sign. If it was just gold where we saw this kind of performance, we could say it was by chance.

However, since we saw it almost everywhere (at least in almost every market that really counts for precious metals investors and traders), it’s something that shouldn’t be overlooked.

Especially since this invalidation coincided with a sell signal from the RSI indicator, which had just dropped below the 70 level. I used red arrows to mark previous cases where we saw something similar, and — you guessed it — declines followed in the majority of those cases.

Silver Daily Chart
Silver Daily Chart

Silver is the odd guy, because it didn’t invalidate the breakout above the 38.2% retracement based on the 2022 decline. Instead, it invalidated its tiny breakout above the 61.8% retracement.

Fair enough, since silver is known to outperform gold just before bigger declines. The size of the correction seems to confirm this trading technique.

This is a subtle indication that silver’s very short-term outperformance remains intact, and it continues to have bearish implications for the short term.

Stocks Invalidated Their Breakout, Too

As I wrote earlier, it’s not just the precious metals market that invalidated its recent breakouts – we saw something very similar in the S&P 500 Index.

The broad market moved lower this week, and there are two good reasons to think that, this time, the small move lower is just the beginning of a much bigger move to the downside.

S&P 500 Daily Chart
S&P 500 Daily Chart

One of the reasons is that this move lower came right after the triangle-vertex-based turning point. The declining black and red lines (both dashed) intersect at more or less the very recent top. As their name says, those turning points mark… Well, turning points. And since the most recent short-term move was to the upside, it currently has bearish implications.

The second reason is that stocks now broke below their rising support line (marked with a solid black line), and that’s not what happened during the two previous small moves lower.

The analogy in the price-volume link (marked with red rectangles) also points to much lower prices in the stock market.

What About the U.S. Dollar Index?

Why is this important for gold and silver investors and traders? Because the last two big moves took place more or less in line with each other – in stocks and in precious metals (and miners). The slide in stocks could also trigger something similar in the case of commodities like crude oil. The same thing is likely to happen again this time, especially given what’s happening in the U.S. dollar index (USDX).

U.S. Dollar Daily Chart
U.S. Dollar Daily Chart

The USDX just invalidated a small breakout below its previous 2022 lows and its 38.2% Fibonacci retracement level. And it did so while being oversold from RSI’s point of view.

In fact, looking at the RSI, the current situation is very similar to what we saw in early June 2021. And you know what happened to gold shortly thereafter? It plunged.

So all in all, the outlook for the precious metals market is currently very bearish, not just from a medium-term point of view (which is mostly based on factors that I didn’t cover above), but also from a short-term point of view. Given the situation in both precious metals, and the stock market, it seems that the junior mining stocks are poised to decline the most.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Invalidations Across the Market Have Major Implications for Gold
 

Related Articles

Invalidations Across the Market Have Major Implications for Gold

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (8)
Trikorfo Trader
Trikorfo Trader Dec 09, 2022 8:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I followed this guy in the gold eagle editorial section for years. His analysis is terrible, so much so he received so many negative comments. In the end the site was re structured (  probably by his complaints to the adminstrators about the negative comments ) such that comments were not allowed any more. Avoid his musings like the plague!!
Tom Scheuermann
Tom Scheuermann Dec 08, 2022 9:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
this guy is such a charlatan. I caution anyone to take his advice. just because he appears confident in his analysis and writes well, proceed with caution. he has made many gold traders lose a ton of money the last several years. he will make calls like he did a few weeks or a month ago calling the bottom of the DXY and the top of gold and then when his technical level are clearly breached he maintains his original analysis.... this is not what a good technician does. they are humble and are willing to change their position as warranted. this guy will lead you straight into the woodchipper.
peyo vioblue
peyo vioblue Dec 08, 2022 9:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Can you name some of those gold traders ? And why aren’t they here to expose him
Tom Scheuermann
Tom Scheuermann Dec 08, 2022 9:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
idk why they aren't here, they are probably out of cash? just look at the comments here though, they are not favourable. every now and again you see a favourable one and I swear it's him himself posting lol. anyway, his articles are public record....just go back and look at his articles and place them on the gold price chart and see his handy work. he has been right the last couple years but only because he is a permabear....eventually that was going to happen anyway. start here, very easy.....there was a bottom in gold in sept 2018 and a top in Aug 2020, just look at his articles during that time frame. note that gold went up 70% in that time and miners up 150%
peyo vioblue
peyo vioblue Dec 08, 2022 9:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tom Scheuermann you know i did that and you are right he is bearish since the Eve got pregnant 🫡
peyo vioblue
peyo vioblue Dec 08, 2022 9:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
And form 1650 to 1800 that is 150 dollars trade which i read some time in his article as “not worth trading” i wonder what is
peyo vioblue
peyo vioblue Dec 08, 2022 9:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tom Scheuermann but also technical analysis is subjective ,most of the time there are both bullish and bearish patterns to be found so you can count on him to draw the bearish line ,one less thing to care right? Besides i guess he also takes long positions as well just not mentioning them in his articles a lot which i don’t know Tom Scheuermann but also technical analysis is subjective ,most of the time there are both bullish and bearish patterns to be found so you can count on him to draw the bearish line ,one less thing to care right? Besides i guess he also takes long positions as well just not mentioning them in his articles a lot which i don’t know why
Sammy Pierce
Sammy Pierce Dec 08, 2022 1:47PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I guess you guys just dont understand that people have no confidence in the US dollar and the metals they buy are because of that they are keeping in their hand Its abull ******paper market and it all has come to a headThe only fix is take away the politicians ability to print dollars Then we get out of this mess
Saun Melkon
Saun Melkon Dec 08, 2022 12:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The author contends that gold will go down even though he says the dollar will go down as well. What an insidious mental midget.
Bernd Langer
Bernd Langer Dec 07, 2022 8:52PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Unfortunately, the comments section has become a haven for spammers. Maybe the administrator can do something about it? The wording of these spam messages are always similar, so it shouldn’t be too difficult to detect.
Dwain Hobbs
Dwain Hobbs Dec 07, 2022 8:52PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
True but here they seem to be in the right place with their master spammer Radomski
Jack Sailor
Jack Sailor Dec 07, 2022 3:39PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
you have now written close to 30 articles bearish on precious metals even though DXY has collapsed about 10% ... Why is you analysis not insync with dxy .... Central banks around the world are taking physical possession of Gold
Tom Scheuermann
Tom Scheuermann Dec 07, 2022 3:39PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
because he clearly has a bias. this makes his analysis worthless. he has been bearish at least the last 4 years even though gold went up 70% between 2018 and 2020 and miners something like double that. so if u were listening to his analysis between that valley and peak you probably when broke shorting gold and miners.
Dwain Hobbs
Dwain Hobbs Dec 07, 2022 3:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The only thing invalid here is your brain, anything you say the opposite happens ,, give it up dude , you are embarassing the CFA group
Don Licio Lucchesi
DonLucchesi Dec 07, 2022 3:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bernd Langer
Bernd Langer Dec 07, 2022 3:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
LOL
Domenic Ng
Domenic Ng Dec 07, 2022 3:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I support you
Mitch Hoch
Mitch Hoch Dec 07, 2022 2:47PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Przemyslaw Radomski, you are by far the best contra indicator for precious metals on this site. Thank you!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email