·        Most technical indicators have been warning that something is wrong with the T-bond.   

·        In particular, MACD could be termed a technical “train wreck”.

·        Bonds have rallied strongly, for 30 years. Quantitative easing has forced yields lower and lower. From here, even a modest decline in bond prices could cause a panic in global markets.

·        The US bond market has formed a substantial head & shoulders top on the weekly chart, and recently broke the neckline.

US Dollar Rounding Top Chart

·        When the bond market goes down, yields go higher.  That usually supports the underlying currency.

·        The dollar is now falling while rates are rising.  The appearance of this rounding top pattern is disturbing chart action, and suggests there is a growing loss of confidence in American fiat currency.

Gold Triangle Chart

·        Gold has been a little disappointing in the last week, but a short-covering rally could quickly take gold up towards $1580.  

·        From there, a fall to new lows in the $1250 area can’t be ruled out, unfortunately.

·        Volume will be the key in interpreting the gold market in the coming weeks.

·        Patience is required.  The triangle formation suggests that gold is either headed towards $1580, or down to $1200.  Let’s cheer for the bulls!

GDX Sentiment Extremes Chart

·        Gold stocks are hated by most investors, which is an opportunity for the long-term investors with patience.  

·        When investor sentiment is radically lopsided, prices can quickly move in the opposite direction, and in this case that would be to the upside.

·        This chart highlights my sentiment indicator.  In 2008, prices kept falling, even though sentiment reached extreme levels.  Regardless, the entire $25-$40 area seems to represent good value for sentiment players.

GDX Moment Of Truth Chart

·        An inverse head and shoulders bottom pattern is in play.  The right shoulder is almost complete.  That’s bullish, but I want to see a two day close above $32, before getting too excited.

·        The upside target is $37.  Volume patterns are more constructive for gold stocks than for bullion.  Gold stocks could lead the metals higher, which would be a welcome change!

GDXJ Trend Line Action Chart

·         My next target price for GDXJ is $16.

·        The formation of the right shoulder of the inverse h&s bottom is good news, but the price is back down below a key trend line, which is a little disturbing.

·        Junior gold stock investing is not for the faint of heart, and all investors can do is hope that the juniors follow the senior stocks up the chart!

Silver Chart

·        From a technical stand point, MACD is acting like it wants to turn higher.  

·        When silver was peaking two years ago, almost nobody wanted to sell the white metal. Today, there are few buyers. 

·        I added physical positions this week, in my $19-$23 buy zone.  Although I own more gold than silver, I think silver may surprise investors, by holding the recent lows, while gold breaks them.

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Morris Hubbartt: Chief Market Analyst, Trading Risk Specialist.

-- Posted Sunday, 16 June 2013 | Digg This Article