All the markets are like watching paint dry today. Dead as a doornail, boring, tedious. But that’s not to be surprised, considering nearly all market participants are awaiting the Fed’s rate decision today, and just as importantly, the mental gymnastics they like to play with any news statement that is also released.
Me? I wouldn’t be surprised if the Fed moves today, or holds back. If the Fed does hold back from raising rates, I would expect their press release to be a bit more hawkish toward a July or September hike.
Either way, it doesn’t matter all that much. Gold – indeed all markets’ destiny – are already foretold by the macro and micro economic cycles I study, as well as the individual cycles that give each asset class their own personality, so to speak.
For the precious metals and the mining sector, let me be perfectly clear: They are way overdue for a sharp correction, one that can start any minute.
Today I wanted to give you more perspective on it. For those of you who follow Elliott Wave Theory (EWT). I am steeped myself in EWT and its many patterns, and do sometimes use it as a secondary type of analysis. I never, however, base trades on EWT, since the timing aspect of EWT is virtually non-existent.
Here is a chart of gold in EWT terms. As you can clearly see, gold bottomed late last year, and in classic EW action, developed a nice five-way rally that topped in early May. You can see waves 1, 3 and 5 up with the intervening corrective waves 2 and 4.
What is unfolding now is a higher degree wave 2 correction (red arrow lines) with wave A down due now, followed by a B wave bounce, and then wave C down to complete this higher degree correction.
Wave C should bring gold to anywhere from roughly the $1,120 level to the $1,180 level, with the $1,160 to $1,180 zone the more probable target area for this wave 2 low.
Next would be a higher degree wave 3 rally, toward well above the $1,400 level.
I show you this chart for one and only one reason: It closely parallels what my AI neural net models are telling us. And that’s one more powerful reason why gold is likely to head much lower before it really takes off again. Gold may test the $1,300 to $1,307 level one more time today and in the days ahead, but it is very unlikely gold will take off “for good” again, as so many pundits seem to be claiming right now.
The pattern is similar for the other precious metals. As well as the miners. This is also the major reason why …
1. I am NOT going to recommend any long positions at this time and instead …
2. We will patiently await the pullback and then load up the truck.
Hold all open positions and related stops, and stay tuned …
Best wishes,
Larry
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