Everything seems to be on track, and precious metals and miners should reach a tradable low next week. The only fly in the ointment is silver. A bullish engulfing pattern formed on Friday when prices rallied back above $17.00. However, volume was modest, so I think it was just temporary short covering.
Miners closed just once below their 10-day EMA’s. Prices should reach a minimum 38.2% retracement level before even attempting to produce a bottom, a 50% retracement is more likely.
The dollar is overdue for a bounce, and we should get one next week. A close above the 10-day EMA is needed before the rebound officially starts.
The Fed announces on Wednesday, and the non-farm payroll numbers are out Friday. Expect volatility surrounding these events.
-US DOLLAR- The dollar looks to have put in an interim low, but prices were unable to close above the 10-day EMA on Friday. A low can’t be established until that happens.
-GOLD WEEKLY- Prices formed a weekly bearish engulfing pattern. We are still expecting a low next week. A sharp decline into an 8-year cycle low is unlikely. It would take prices breaking below the $1,124 level to restore that potential.
-GOLD DAILY- Prices should drop a little more next week as the dollar bounces.
-SILVER WEEKLY- The weekly silver chart was on the verge of forming a bearish engulfing pattern similar to gold, but Friday’s rally rescued it.
-SILVER DAILY-Silver was bouncing modestly on Friday, but shorts were squeezed when prices surged above $17.00. This activity produced a bullish engulfing candle. It may be nothing, but it could suggest a shallow cycle low. A shallow cycle low would imply a strong bullish undercurrent and that prices could move quickly higher. I will address buying strategies if prices follow-through and close above the blue trendline ($17.45) next week.
-GDX- Prices haven’t dropped far enough to register a correction. They need to fall to at least the 38.2% retracement level ($22.08) before considering a bottom.
