opinion

Greed creeps into stocks while metals sentiment swoons

Kitco Media
By Jonathan Da Silva
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The $1832 spot level in gold finally proved accurate this week, with the metal touching $1830. This from Monday's piece - "I continue to be wary of more selling in the very short term if looking for a chance to pick as close a low as possible."

I originally anticipated metals would begin to form a bottom around $1832 gold last week. Now that we are here, I don't see the harm in waiting for some sign of an imminent resumption in the upward trend, further to the bottoming signals described below.

  • Support at the anticipated $1830ish level is holding
  • Daily stochastic RSI is deeply oversold (we are assuming the uptrend in the greater cycle is to resume)
  • Price is finally testing the bottom Bollinger band on the daily time frame for the first time since early November 2022.

Short-term sentiment in the metals sector has also corrected from overly bullish conditions, which, as I have written, is a pre-requisite for the sustainability of a longer-term trend. I will be interested to see where sentiment levels are at end of this week. Of course, nimble traders may attempt to enter the long side, perhaps with a stop at or under this week's low. Should bulls fail to support price at this level, I believe the next leg down would reach the bottom of the yellow box shown in the above chart.

As for stocks - nothing has changed. The onus is still now on sellers to prove that there is still no new bull underway. Last week I wrote that an inverse head and shoulders pattern may be forming in S&P futures and that I would like to see the next level up as a weekly close over 4295. The below weekly chart shows the IHS formation with the price still flirting with an upward breach of the neckline.

Note that despite my current general bias for a renewed bull, I also think the short-term sentiment in stocks is becoming stretched. Therefore I would not anticipate the price to smash through the yellow zone shown above with any type of ease. In fact - sentiment in stocks may begin to cool off in the near future along with a price correction (at 4295 resistance?), as we are now seeing in metals.

Kitco Media

Jonathan Da Silva

Jonathan Da Silva developed a passion for hard money and economics from a young age having been influenced by family who sought to teach me that "nothing is free", and the importance of intrinsic value early on. My interest in markets grew keener during the great financial crisis of 2008; leaning on family with vast trading experience, I began to self-educate on technical analysis and economics- drawing inspiration from the works of individuals like W.D. Gann and Adam Smith. I have been a proud member of the Kitco team since 2017 and hope that my writing inspires readers to consider an objective view of the metals, and the greater financial markets.

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