Gold & Market Update: Stocks Aiming Lower as Gold Shows Signs of Bottoming

Technical Analysis Expert & Editor @ GoldPredict.com
May 18, 2022

gold forecast

Gold prices have plunged nearly $300 since peaking in March. The chart is building a bullish hup-with-handle pattern supporting a breakout above $2000 later this year. 

Metals and miners could drop further over continued weakness in broader markets. Overall, I believe this dip will be viewed as an excellent long-term buying opportunity. 

The next big rally in precious metals will come when the Fed pivots. That could happen soon if we see widespread fuel shortages and price controls, as I expect. 

Our Gold Cycle Indicator is at 36 and within maximum cycle bottoming. 

Gold Prices

The pattern in gold resembles a cup-with-handle. Prices formed a swing low and closing back above the 200-day MA (currently $1836) would promote a bottom. Our current forecast supports a breakout above $2000 later this year and perhaps as high as $3000 by year-end. A sustained breakdown below $1750 would invalidate the cup-with-handle outlook. 

GDX

Miners bounced off long-term support surrounding $30.00. A close above $31.70 would fill last week's gap and support a bottom. Conversely, a daily finish below $30.00 could trigger additional downside. 

GDXJ

After dipping below the $36.50 area, junior miners reversed immediately higher, supporting a possible bottom. As long as prices don't close back below $36.50, I see the potential for a cycle low. 

DOW

I believe stocks are headed towards the 20% correction level near 29,600. We could get an oversold bounce here or there, but I don't think we see a bottom until retail trader’s panic; I haven't seen that yet.

TSLA

I think we need to see panic and a breakdown in Tesla before markets bottom. As I understand it, Musk has $88-billion in margin debt against his Telsa shares. The Twitter deal may add another $13-billion. That is a lot of debt tied to an extremely volatile and overpriced stock.

If Tesla shares crash like I've been calling for, Musk could see significant financial stress. For his sake, I hope I'm wrong. A price decline below $550 could trigger panic.

Takeaways:  

  • The general stock market is bouncing, but I won't expect a bottom until retail traders capitulate...watch Tesla. 
  • A liquidity event is possible, resulting in a flash crash. I'm keeping an eye on cryptocurrencies; they could fail first.
  • It's probably a good time to hold cash in anticipation of buying opportunities if prices drop further. 

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here.

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AG Thorson is a registered CMT through the MTA and an recognized expert in technical analysis of the precious metals markets. He is also the Editor of GoldPredict.com where members receive daily updates and regularly scheduled reports 3-days a week. He prides himself on making his analysis easy to understand through the use of adaptive and creative charting methods. You can reach AG at [email protected].


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