The Fed is going to meet today. Typically I do not trade Federal Reserve FOMC days as they can be prone to wild swings on the close that end up reversing the next day. So I want to see where things stand by Friday at 2:00 PM before making a big conclusion about the action in any market.
That doesn’t mean I’m not watching – and you need to watch too!
Gold and gold stocks are on the verge of critical technical breakouts that will bring new buyers into them both when they happen.
In the first phase of a big rally only “smart money” and big money accumulators like the commercials inside the futures market buy as the masses have zero interest and many even doubt there is a worthwhile reason to buy even when prices tick up.
That has been the case with gold and mining stocks since October. Both have rallied to outperform the US stock market averages, but the masses have been asleep on it with only one single little gold stock now on the list of the 100 most owned stocks on Robinhood.
But, phase two of a big rally begins when a long-term resistance point gets broken. That brings in technical buyers (traders with a plan). They may watch the market and want confirmation before buying. A big breakout serves as such confirmation for them.
And when they get it they act.
That’s where the GDX is with the $24.00 level and gold with $1350. Take a look at this chart.
When you look at this chart and see the GDX you may be thinking to yourself something like well it has gone up to $24.00 again and it will probably pullback so I won’t buy here.
But you know if it goes through $24.00 it can take off so you watch it in case it does, because you know if it goes through this long base it will go up like crazy.
That is exactly how thousands of chart readers watching this all over the world are thinking about this chart.
And they are thinking the same thing with the gold $1350 level.
These are the two key levels now and we are essentially on a breakout countdown.
It could happen today.
I don’t know if it will – and personally I’m always skeptical of the action right after a Fed announcement.
So for me what happens Friday will be more important.
If by the close on Friday we see the GDX above $24.00 and gold over $1350 then we will know that the key technical breakout has indeed taken place this week and the move up is turning into a pure launch.
And we’ll know what to do.
If it doesn’t happen by the end of this week then we’ll keep our eyes out for next week and the G-20 meeting.
What we will do is keep our eyes on the technical price clock.
We are now in a countdown.
This is it.
As when the chart traders get confirmation they will begin to buy.
And the masses own nothing as I explained this Sunday in this video:
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-Mike
