Precious Metals Are About to Swap Trends With the Stock Market
The bottom may be in for gold, but should investors count on a rally?
While I do think 2014 is the year we will see gold, silver, miners, and many other commodities rally, it is important to follow the trend and wait for a reversal to form before getting overly excited and long commodities.
Each time we see the daily charts form some type of bullish pattern, gold market traders become instantly bullish. And each time this happens, they get another reality check about their trading technique of trying to pick a bottom.
I just published a book in December 2013 that teaches readers how to identify trends and stages in the market: Technical Trading Mastery – 7 Steps to Win With Logic. Buying into a bear market rally is not a high-probability winning position. Odds favor that sellers will pull the price down, likely to new lows.
This January is one of these times, and gold market traders are getting excited and long positions. While the bottom may be in for precious metals, buying a bounce in a bear market is tricky, and you better have some trading discipline to exit if price starts to sell back down.
Eventually we will see the stock market roll over and break down below its support trend line, and gold will rally. But keep in mind, some of the largest percentage-based moves take place just before a reversal. What does this mean? It means that the stock market could easily go parabolic and rally for a few more weeks, then reverse down sharply. And precious metals would do the opposite, sell off, make new lows, then reverse back up and start a new bull market.
Stock Market Vs. Gold – Gold Market Traders Be Aware!
Below are a few more charts showing my big-picture trend analysis for silver and gold miners.
In short, the precious metals sector is still in a bear market and has not yet reversed to the upside. As you know, I don't pick bottoms or tops that go against the longer-term trend. In this case, the trend is down for precious metals so I am not trying to pick a bottom.
While I am starting to get excited about the eventual bottom in gold, I am still sitting on the fence with my cash.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
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