Precious Metals Flashing Caution

“You may recall we were looking at the Japanese YEN / PM complex combo chart several months ago comparing the YEN to the PM complex. For whatever reasons how the YEN goes the PM complex tends to follow. It’s not a perfect correlation but close enough to pay attention. Today the YEN gapped below an important trendline that goes all the way back to October of 2018, second chart from the top.

While the YEN has broken below its October trendline the PM complex is showing a possible 3rd reversal point in the August 2019 trading range. When I went to cash last September it was based on the PM complex building out a 4 point consolidation pattern to consolidate the previous impulse move up. At the time I had no idea what the consolidation pattern may look like only that we would need to see at least 4 reversal points at a minimum.

With the YEN gapping below its October 2018 trendline today we are now beginning to see what the August trading range may look like. I’ve labeled each reversal point in each index that shows the 3rd reversal point may now be in place with one more reaction down to the bottom rail of the blue consolidation patterns. At this point these are just possible consolidation patterns in the on going bull market for the PM complex which is what I was initially suggesting back in September of last year. It’s by no means the end of the PM bull market but a pause that refreshes.

I expect the stronger PM stocks to decline much less than the weaker ones showing relative strength. For now I feel more comfortable just going to cash and wait for the next setup that may come at the possible 4th reversal point in many of the PM stocks. If one is long-term bullish then you can ride out this consolidation phase or sell some of your weaker PM stocks to raise a little cash to be able to hopefully buy some bargains when the time is right.

I moved the recent black dashed vertical line just a bit to the left side of today’s breakout of the YEN so you can see it better and the high at reversal point #3 on the PM complex.”

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