The action in the general market today was blasé, but the action in the commodities arena was historic. Gold, silver, and copper (amongst others) were sold viciously, and the precious metals broke multiyear support on massive volume…

Gold longs have enjoyed 12 years without a loss, surviving even the 2008 crash unscathed. However, after peaking in September of 2011, gold has been in a multiyear rectangle consolidation pattern bouncing between the low $1500’s on the low end and $1800 on the high end. After bottoming in 2008 at $681, gold almost tripled in price to $1923, and until today the subsequent low of $1523 in December 2011 represented only a ~21% retracement. Despite teasing both bulls and bears alike for the last 19 months, gold is now completing a more normal, healthy price retracement with a weekly close below support. While bulls are anxious to buy (and this could always be a bear trap), it is more likely the energy built up from the consolidation will be released further to the downside before finding support:

April 13th Gold Weekly Support

April 13th Silver Weekly Support

April 13th Copper

The concern is that the recent daily cycles in both gold and silver topped very quickly and are now extremely left-translated with momentum strongly negative. This would mean 3-4 more weeks of declines before finding an intermediate cycle low despite being oversold in the short-term:

April 13th GLD Cycles

April 13th SLV Cycles

The mining stocks, which are completely reliant on the price of gold and silver for their margins, are now in danger of completely collapsing until the metal price can stabilize or some technical buying occurs. Daily, weekly, and monthly moving averages are now pointing sharply downward:

April 13th HUI Weekly

The bullish-percent for miners is now at zero, and the last time this occurred was in 2008 but it happened after the mining stocks had already bottomed:

April 13th HUI BPGDM

April 13th BPGDM Daily

April 13th BPGDM Long Term

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Good trading all.

Steve Chapman, TRI

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