The fight is on between the bulls and bears in the PM complex. Currently, the necklines are being backtested from below, which we were expecting. Now the question becomes, will the backtest hold resistance or fail? If the backtest holds resistance, then a bigger correction is going to take place. On the other hand, if the backtest fails to hold resistance, then we could see the first reversal point low and the beginning of the 3 to 6 week consolidation pattern start building out.
Below is a new daily combo chart for the PM complex, which shows the possible H&S tops, with the minimum price objective just below each index. As you can see, the critical backtest is now taking place.
Below is a daily chart for the HUI, which shows the Bollinger Bands on top with the BB squeeze on the bottom. From the short-term perspective, the BB squeeze took place back in July, which stayed below 8.60 for quite a long time, which led to the rally into the most recent high..
Yesterday, the HUI closed below the BB, signaling short-term oversold, but doesn’t mean the possible correction is over, as the price action can still ride the BB lower, as long as the price action doesn’t close below it for more than three days in a row, which is when the stock or HUI, in this case, can become extremely oversold and may force a countertrend rally. Currently, the BB is still expanding, which is not a bad thing right now
Next is the daily chart for the GDX, in which I laid out the possible new trading range in a recent update. So far, the correction has retraced 50% of the rally that began at the 4th reversal point low in the April bullish expanding rising wedge. The current price action is testing the red 50-day SMA with the RSI now down to the 45 area, where previous lows were made.
The GDXJ is showing the same setup as the GDX chart above, with a 50% retrace from its 4th reversal point low in the bullish rising wedge back in August. The PM complex is now at a very critical inflection point, which is going to be decided in the next few days. All the best…Rambus
