Gold Miners Index May Be Warning Us…

The past cou­ple weeks I have been keep­ing a close eye the price of gold and the gold min­ers index. I check to see if its point­ing to higher or lower prices in the near future using inter-market analy­sis, price and vol­ume, along with tech­ni­cal analy­sis. At this time the charts are still point­ing to lower prices in the com­ing days or weeks.

Tak­ing a look at the daily chart of Gold
As you can see it has formed a bear flag with declin­ing vol­ume and the price has drifted up into a resis­tance level. This com­bi­na­tion typ­i­cally leads to lower prices.

With inter­na­tional fears float­ing around and the fact that infla­tion has started does make me a lit­tle weary of short­ing gold but one thing I have learned over the years is that trad­ing on fun­da­men­tals and news clips seen on TV is not a rea­son to pass on a setup if one forms in the com­ing days. The only thing that pays in the stock mar­ket is when the price action goes in your favor. This is why I focus on price, vol­ume and momen­tum while avoid­ing what oth­ers are say­ing else­where. Trad­ing is a num­bers game and I put my money on the table when the odds are clearly favor­ing one direc­tion. Unfor­tu­nately I am trad­ing trades against what the masses think and feel is the right thing to do.

Gold Miner stocks are form­ing much of the same pat­tern as gold bul­lion but today (Wednes­day) the chart actu­ally put in a pos­si­ble rever­sal can­dle. If this is cor­rect then we should see gold and most likely sil­ver fol­low suit tomor­row by mov­ing lower and pos­si­bly even start a correction.

Gold Swing Trad­ing Con­clu­sion:
In short, gold stocks sold off strong today while both gold and sil­ver closed only slightly lower. When this hap­pens near a resis­tance zone, with a bear­ish price and vol­ume pat­terns I start to look for a short­ing oppor­tu­nity. It has yet to hap­pen and I’m not going to jump the gun, but I am wait­ing for the right oppor­tu­nity to take advan­tage of these trad­ing instruments.