Watch JNUG for a trend line break
Updated
The junior gold miners' leverage ETF has been making a long-term downward trend line since September as the dollar showed strength and gold showed weakness. Surprisingly, gold and JNUG have stayed in their downtrends despite dollar weakness throughout the month of October.
That's presumably because the dollar index, now at 97.48, has a support trend line around 96.86. Gold and JNUG will break upward out of their downtrends if the dollar breaks downward through that support.
It probably won't happen before the Fed meeting, although conceivably it could. Futures traders are pricing the probability of a Fed rate cut at 94%, and yesterday's headlines included "The Fed Just Printed More Money Than Bitcoin’s Entire Market Cap." The dollar is up today, but only because it's making a technical pullback from oversold territory. I expect it to touch its support line soon.
Assuming the futures markets aren't completely out to lunch, we should get a rate cut next Wednesday and then our breakout should come.
That's presumably because the dollar index, now at 97.48, has a support trend line around 96.86. Gold and JNUG will break upward out of their downtrends if the dollar breaks downward through that support.
It probably won't happen before the Fed meeting, although conceivably it could. Futures traders are pricing the probability of a Fed rate cut at 94%, and yesterday's headlines included "The Fed Just Printed More Money Than Bitcoin’s Entire Market Cap." The dollar is up today, but only because it's making a technical pullback from oversold territory. I expect it to touch its support line soon.
Assuming the futures markets aren't completely out to lunch, we should get a rate cut next Wednesday and then our breakout should come.
Note
JNUG tried to move across the trend line, but got rejected. I am going to slightly readjust the trend line and continue watching.Note
Beautiful breakout this morning!Note
Today's rally in gold comes simultaneously with a rally in the dollar. One or the other's gotta give. Since 1500 is going to be a little above the channel by the time the Fed announces its rate decision Wednesday, I think gold is going to have to either cycle back down or break out of its channel early sometime in the next three trading days.With futures traders predicting a 95% chance of a Fed rate cut, it could be the early breakout scenario. But am I crazy to think that 95% is way too high? Evans said like a week and a half ago that we don't need another rate cut this year. I wouldn't be surprised to see the rate cut odds correct downward in the next few days, which could be a catalyst for gold to cycle back downward.
JNUG has strong resistance from 60.95-61.50 today. Should it get above that level, the next target is the 62.45-63.70 range. The trend line break is bullish and JNUG could easily just keep shooting higher, but personally I am hoping for a bit of a pullback tomorrow so I can buy a larger position. I caught today's breakout a bit late, so I've only bought a small position for now.
Note
Adding to my comments earlier about how the probability of a Fed rate cut may fall in the next few days, check out this morning's jobs report. "Initial jobless claims, a rough way to measure layoffs, fell by 6,000 to 212,000 in the seven days ended Oct. 19." True, this morning's durable goods report shows that manufacturing demand continues to fall and that investment in that sector is down. But with the job market strong, I think futures traders may reevaluate the chances of a rate cut this evening.
Note
JNUG's move this afternoon above the high from October 17 forms a double bottom chart pattern:Gold also broke out of its channel today. I have doubled my position in JNUG.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.