Don’t Sell Off Your Gold & Silver Now, Buy The Dips Before The Massive Rally | Chris Vermeulen

Key Concepts

• Precious Metals Projections: Forecasts for the future performance of gold, silver, and platinum.
• Bull Flag Pattern: A bullish continuation pattern in technical analysis, characterized by a sharp upward price move followed by a period of consolidation.
• Parabolic Move: A rapid and steep increase in price, often unsustainable.
• FOMO (Fear Of Missing Out): An emotional response in trading where investors feel compelled to enter a market due to fear of missing potential gains.
• Fibonacci Extension Tool: A technical analysis tool used to project potential price targets based on previous price movements.
• Fibonacci Retracement Tool: A technical analysis tool used to identify potential support and resistance levels based on previous price movements.
• GDX/GDXJ: Exchange-Traded Funds (ETFs) that track the performance of gold and gold mining companies, respectively.
• Seasonality: The tendency for certain assets to perform predictably during specific times of the year.
• Asset Revesting: A trading strategy focused on managing risk and compounding gains through consistent, smaller wins.

Precious Metals Projections for November

This summary details the precious metals projections for November, building upon previous analysis and looking ahead. The discussion focuses on gold, silver, and their mining sectors, with an emphasis on technical analysis and market sentiment.

Gold Analysis and Projections

• October Performance Review: Gold experienced a significant rally, exceeding the projected target of $4,100 and reaching a peak of $4,400. This was followed by a sharp pullback, bringing prices back below $4,000.
• Parabolic Blow-off and FOMO: The rapid ascent in gold was characterized by a "frothy" short-term blow-off phase, fueled by significant volume and widespread FOMO among investors. This emotional surge led to a "feeding frenzy" where those not invested felt compelled to enter the market.
• Current Pullback and Sentiment: The current pullback is viewed as a natural consequence of the preceding emotional surge. The speaker notes that while gold is now unpopular and perceived as having topped out by many, this sentiment often precedes a bottom.
• Technical Projections (Fibonacci Extension): Using the Fibonacci extension tool on the previous bull flag pattern, upside targets for gold are projected at $4,680 as the first target, followed by $5,150-$5,200. The speaker believes this move could be "very, very explosive" and potentially happen quickly, drawing parallels to historical market bubbles.
• Technical Projections (Fibonacci Retracement): Applying the Fibonacci retracement tool to the recent rally, the "sweet spot" for a pullback is identified between the 38% and 50% retracement levels. The speaker notes that gold has already touched the 38% level and bounced, but a further dip towards the 50% mark is possible and would likely "spook a lot of people out." This zone is considered a potential dip-buying opportunity.
• Market Psychology: The speaker highlights the predictable nature of market emotions, where fear and panic often lead to capitulation at the bottom, and euphoria drives prices to unsustainable highs. The current lack of interest in gold is seen as a bullish indicator.

Silver Analysis and Projections

• October Performance Review: Silver also experienced a significant rally, breaking new all-time highs after exceeding the $48-$49 target and trading above $50.
• Concerns of 1980/2011 Repeat: Investors are concerned about a repeat of the sharp reversals seen in 1980 and 2011, where silver prices collapsed after reaching highs.
• Technical Projections (Fibonacci Retracement): Silver's chart is described as "messier," requiring a larger percentage pullback. Potential retracement levels are identified between $45 and $42, with the possibility of pulling back to $44 or even $41 depending on the specific low used for calculation.
• Wild Card and Potential for Ugly Reversals: The speaker acknowledges the potential for "ugly" reversals in markets experiencing bubble-like price action. While a pullback is expected, the market could still recover.
• Historical Parallels (2008): The speaker draws parallels to 2008, where the S&P 500 hit all-time highs, gold pushed up, and then both experienced pullbacks. In that scenario, money flowed from stocks into precious metals, leading to significant rallies in gold, silver, platinum, and platinum.
• Projected Upside: The speaker suggests that silver could potentially see another large green bar, pushing prices into the high $50s and $60s, based on historical patterns from 2000 and 2008.

Precious Metals Miners Analysis

• GDX/GDXJ Performance: The gold mining sector, represented by GDX and GDXJ, has been experiencing significant selling pressure, with GDXJ down nearly 5% on the recording date. This is occurring despite gold trading around $4,000, while miners' earnings are based on gold prices between $3,400 and $3,500.
• Fundamental vs. Technical Drivers: The speaker emphasizes that stock price action is primarily driven by emotions and technicals, rather than fundamentals alone. While strong fundamentals can provide confidence, they don't always translate to immediate price appreciation.
• Emotional Overreaction: The sharp pullback in mining shares is attributed to an emotional overreaction by investors who were shocked by the rapid decline after a significant run-up. This has created uncertainty about whether the peak has been reached.
• Testing Previous Breakouts: The GDX is seen as potentially testing previous all-time highs around $66 as support, a common market behavior after breaking out to new levels. Similar price action is observed in silver miners (SIJ).
• Monthly Chart View: Looking at the monthly chart, the speaker sees a potential zone of support through previous tops. The sector is expected to settle into this area before potentially turning around.
• Potential for Quick Reversal: Despite the current weakness, the speaker believes the precious metals space can "turn around on a dime and shoot higher." The current pullback is viewed as a "hiccup phase" before further upside.

Seasonality and Outlook

• November Seasonality: November is not typically the strongest seasonal month for precious metals, with September and October being more favorable. However, December and January are historically the best months.
• Current Position in November: As of November 4th, the market is still within the typical pullback period for gold in November. The speaker anticipates a tailwind for gold to move upwards in the remaining weeks of November.
• Stock Market Correlation: The stock market has also experienced a breakout followed by a pullback, which is expected to test the breakout level before potentially entering a holiday rally.
• Holiday Rally Expectation: The speaker predicts a holiday rally for both gold and silver towards the end of the year.
• Controlled Pullback: The current pullback in gold is described as "controlled," despite a significant one-day drop. This is attributed to a large number of people exiting on the same day, rather than extreme volatility.
• Recommendation to "Hang Tight": Investors are advised to "hang tight" for about a week to mid-November, allowing seasonality and overbought conditions to fizzle out, before expecting a significant upward move.

Fundamental Factors

• Supply Deficit in Silver: The underlying fundamental support for silver remains strong due to a supply deficit.
• Central Bank Demand for Gold: Central banks continue to be significant buyers of gold.
• Potential Fed Policy Changes: The possibility of a new Federal Reserve chair who might cut interest rates by 200 basis points is mentioned as a supportive factor.

Chris Vermuelen's Trading Strategy (The Technical Traders.com)

• Focus on Risk Management: Chris Vermuelen emphasizes managing risk as the core of his strategy.
• Asset Revesting: He employs a strategy called "asset revesting," which focuses on catching market waves and achieving consistent "first and second base hits" through 5-12 trades per year that compound over time.
• Low Volatility Approach: This strategy aims for a steady, long-term, low-volatility approach, avoiding high-risk trades in individual miners or stocks.
• Daily Analysis: He shares his daily analysis of market conditions and their impact on his portfolio.

Conclusion and Takeaways

The analysis suggests that despite a recent sharp pullback and current investor nervousness, precious metals, particularly gold and silver, are poised for significant upside potential. The current dip is viewed as a healthy consolidation phase, driven by emotional overreactions rather than fundamental weakness. Historical patterns, technical indicators like Fibonacci levels, and seasonal trends all point towards a strong rally in the coming months, especially towards the end of the year. Investors are advised to remain patient and hold through the current consolidation, anticipating a substantial upward move.