June 8th Charts

We are at a crucial point in gold.  A stall here suggests a double top formation and a likely reversal.  Taking a current snapshot of the chart suggests massive divergence between price and technical indicators.  The divergence is present across the board in every indicator I use.  I depicted these with orange lines.  As can be seen, the slope is negative on these lines and is in disagreement with essentially flat price slope.  Ideally, we would like to see flat or positive slope on these orange lines to agree with prices.  With that said, higher prices through the week can get rid of this divergence.  So, we are at a point that is frustrating and is the "wall of worry" gold loves to climb.

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Silver is exhibiting aspects of head and shoulders formation.  If you are looking for a classic pattern setup, this is it.  Right shoulder lower than left.  RSI, MACD, and volume less on right shoulder than left. Typically, price will rally to the downtrend line (red), then fall off (dash blue) to the projection, in this case 14.75.  The projection is the height from head to the neckline (magenta) projected downward like a mirror image.  Silver's prospects lie with the silver short and how aggressive they are in maintaining control.  I believe a weak stock market and gloom and doom in the global economy emboldens them to hang onto their short.  If this current atmosphere prevails, I see this pattern validating.  With a big stock market rally and revival of the risk trade, silver blows out of this thing back toward 20+.
      
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As with silver, the miners have a perfect setup for a head and shoulders reversal.  I covered my shares of GDX last week at essentially the current price level.  The miners have grossly underperformed gold for quite some time.  Again, we are at a critical juncture on this chart.  If gold is going to continue higher, I think these shares have plenty of room to run to make up for lost ground.  If gold stalls, this head and shoulders reversal is almost certain to happen IMO.  I have not altered this chart since last week, notice how price followed the dotted blue trajectory.  This pattern will validate with a breach of 46.  Otherwise, this chart is nothing more than the "wall of worry."  

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