Market whipsaws and volatility – expect more to come …

Gold and silver continue to trade in a consolidation range near their highs for the year. Neither metal has elected a buy signal on ANY timeframe: Not on a daily, weekly, monthly or annual basis.

I repeat: Not one single buy signal has been hit.

Even gold’s rally to the $1,306 level early this month didn’t cut it, and remains thus far as a probable very important cycle high, from which a steep crash could unfold, at any moment.

I know what you’re thinking: “Larry, gold sure is acting resilient. Could your models have simply missed the buy signal? And George Soros is loading up on gold.”

My answers: No, no and who cares.

As far as resilience, just take a look at the chart below and you can see several warning signs that the upside move in gold, silver and other metals is already running out of steam…

For instance, you can clearly see a bearish momentum divergence on the 14-day relative strength index (RSI). Notice the RSI below the price action. While gold hit a new 2016 high in early May, this key price momentum indicator failed to “confirm” that. The RSI registered a higher level in mid-February and is already declining – making lower highs and lower lows.

Bearish momentum divergences like this are giant red-flag warnings of important changes in market trend; in this case pointing to the downside for gold. The bulls are simply exhausted after the big move already this year, and price momentum is clearly slipping.

Gold is also retesting the triangle “breakout” point seen around the $1,265 level. It is not uncommon for markets to retest breakout points at key technical chart levels. If gold begins to trade back inside the triangle -it would suggest gold’s recent gains were a “bull trap” and would confirm a downside reversal for the yellow metal.

As for George Soros, he was also a big seller of GLD when the gold market was bottoming late last year. And I trust my own models much more than what Soros is doing in his charitable account.

For more evidence, just look at the U.S. dollar index.

The dollar has found its “legs” and is climbing, giving precious metals an additional headwind. The brief breakdown below the August 2015 low was short-lived and attracted buying interest in the dollar. The dollar is not out of the woods just yet, but in the short term, it suggests the August 2015 support floor is holding.

This means that based on my timing models, gold is edging closer and closer to falling off a cliff any day now.

Ditto for all precious metals, and for mining shares, which if anything are even MORE overextended than the metals. Miners are poised for at least a 50% decline – and probably much more – heading into late May/early June.

We’re also seeing the same consolidation-type trading action in global stock markets. But, those too, are poised for a short-term move lower along with gold.

For now, rest assured I am watching all markets like a hawk. Also note that the Direxion Daily Gold Miners Bear 3x Shares ETF (DUST), just had a 1-for-10 reverse split today. A reverse split simply means there will be a reduction in the number of ETF’s shares outstanding – and the shares you hold – along with a proportionate increase in the ETF’s share price. Nothing has really changed to your overall investment.

The overall value of your DUST ETF position or your DUST Call options, are not affected, the reduction in shares is offset by an increase in price. Continue to hold.

Unfortunately, you most likely were not able to sell your May ZSL calls options and these options are set to expire on Friday, and in all likelihood without any value. But, your new round of August ZSL calls are poised to profit from silver’s next move lower.

We’re also seeing the same consolidation-type trading action in the stock market. But, those too, are poised for a short-term move lower along with gold, while the dollar resumes its rally.

Bottom line: Continue to hold all other positions with their related stops in place.

Stay tuned and best wishes,

Larry