Global Markets Crash Warning

Dow Danger Chart

•    Most global stock markets are struggling.  Major tops take time to form, and the rollover can be subtle

•    The US market has held up quite well, until April.  Now, heavy distribution volume is making an appearance.

•    Note the MACD indicator.  That is showing a continuous breakdown, and setting the stage for deeper declines.

Japan Stock Market Crash Chart

•    Japan’s stock market looks like pint-sized towering inferno.

•    Horrifically, the crash has helped build a massive head & shoulders top pattern.

•    The target on this index chart is the 100 level.  If it is hit, Japanese investors would be crushed, and I believe some of them would turn to gold!

TLT (T-Bond Proxy) Major Top Chart

•    Most technical indicators have been warning that something is wrong with the T-bond.

•    In particular, MACD could be termed a technical “train wreck”.

•    Bonds have rallied strongly, for 30 years. Quantitative easing has forced yields lower and lower. From here, even a modest decline in bond prices could cause a panic in global markets.

•    The US bond market has formed a substantial head & shoulders top on the weekly chart, and recentlybroke the neckline.

US Dollar Rounding Top Chart

•    When the bond market goes down, yields go higher.  That usually supports the underlying currency.

•    The dollar is now falling while rates are rising.  The appearance of this rounding top pattern is disturbing chart action, and suggests there is a growing loss of confidence in American fiat currency.

Gold Triangle Chart

•    Gold has been a little disappointing in the last week, but a short-covering rally could quickly take gold up towards $1580.

•    From there, a fall to new lows in the $1250 area can’t be ruled out, unfortunately.

•    Volume will be the key in interpreting the gold market in the coming weeks.

•    Patience is required.  The triangle formation suggests that gold is either headed towards $1580, or down to $1200.  Let’s cheer for the bulls!

GDX Sentiment Extremes Chart

•    Gold stocks are hated by most investors, which is an opportunity for the long-term investors with patience.

•    When investor sentiment is radically lopsided, prices can quickly move in the opposite direction, and in this case that would be to the upside.

•    This chart highlights my sentiment indicator.  In 2008, prices kept falling, even though sentiment reached extreme levels.  Regardless, the entire $25-$40 area seems to represent good value for sentiment players.

GDX Moment Of Truth Chart

•    An inverse head and shoulders bottom pattern is in play.  The right shoulder is almost complete.  That’s bullish, but I want to see a two day close above $32, before getting too excited.

•    The upside target is $37.  Volume patterns are more constructive for gold stocks than for bullion.  Gold stocks could lead the metals higher, which would be a welcome change!

GDXJ Trend Line Action Chart

•     My next target price for GDXJ is $16.

•    The formation of the right shoulder of the inverse h&s bottom is good news, but the price is back down below a key trend line, which is a little disturbing.

•    Junior gold stock investing is not for the faint of heart, and all investors can do is hope that the juniors follow the senior stocks up the chart!

Silver Chart

•    From a technical stand point, MACD is acting like it wants to turn higher.

•    When silver was peaking two years ago, almost nobody wanted to sell the white metal. Today, there are few buyers.

I added physical positions this week, in my $19-$23 buy zone.  Although I own more gold than silver, I think silver may surprise investors, by holding the recent lows, while gold breaks them.