Precious Metals Projections - June 2023
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Get ready for an insightful discussion as host Craig Hemke from Sprott Money News and analyst Chris Vermeulen of the Technical Traders delve into the world of precious metals. In this episode, Hemke and Vermeulen provide a comprehensive analysis of the charts to help you navigate the market with confidence.
Here's what you can expect from this discussion:
- The top performing stocks in the Technology Sector
- What is the next trend for the US Dollar Index?
- Is Gold running out of steam?
By staying informed on the latest developments discussed to make informed investment decisions and navigate the ever-changing landscape of precious metals. Watch the new episode of Precious Metals Projections on our YouTube channel today:
Craig: Hello again from Sprott Money News and sprottmoney.com. It's a new month. It's June already, in 2023. Darn near almost halfway through the year already. It's a new month, a new month of content from your friends at Sprott Money. And we always kick it off with your monthly Precious Metals Projections, among other things, actually. We'll talk more of precious metals over this call. And joining us, as usual, is Chris Vermeulen of thetechnicaltraders.com, one of Eric Sprott's favorite technical analysts. Chris, good to see you, my friend.
Chris: Hey, good to be back, Craig.
Craig: And as I reference, you're gonna, all month long, you're gonna be getting good stuff from Sprott Money. So, bookmark their page. Go there. You look at insights, there's written articles, there are podcasts like this one, and of course, there are always great deals at Sprott Money as well. Stacking physical metal, you're storing physical metal. You can just go to that site, get all the details, or, of course, you can call them. That number's right there, top of the page, 888-861-0775. They'll be happy to help you. And heck, if anything, shoot 'em a like or a subscribe on whichever channel you're watching this content, and that helps 'em as well.
All right. So, Chris, let's get at it. It's been a really interesting month of May. You know, about the time we recorded the May Precious Metals Projections, the chances of a rate hike in June were at zero. Then all of a sudden you got some economic data and the chances of a rate hike went up, and all the risk assets responded. I wanna start with one though. Again, not something we normally talk about. Let's talk about tech. Because I know you're constantly looking for whatever the best asset is right now. Man, some of those babies, especially the AI companies and the like, are just screaming higher. What do you make of the stock market in general, and maybe tech specifically?
Chris: Yeah. I mean, if we take a look at the tech sector out. Let's actually take a look at our hot list. In the technology space, it's pretty interesting when we see what's going on. We've got semiconductors, SMH, obviously on fire. It's one of the best assets right now. It has rocketed higher. It actually still has a very bullish chart pattern. So, when we look at where the money's flowing, I mean, it is piling into technology. I mean, we've got Nvidia skyrocketing, with the AI, as you mentioned. I mean, it's just absolutely kind of going ballistic. The technology sector in general, XLK, is also a top performer. And what I find really interesting here is the three ARK ETFs are all at the top of the list. Money's piling into those sectors.
And, you know, as soon as the ARK ETFs come into play, to me, it tells me it's a bit of a warning flag. I think we're in kind of a bit of a bubble phase. This big pop and move in technology is starting to get the momentum and kind of the growth, the aggressive traders, who, you know, are more so, a lot of them end up being very emotional, and they chase prices higher. And usually when all these things are rocketing higher together on big volume, around news, usually it means we're kind of probably gonna be coming to a very abrupt end very soon. But right now, technology is definitely the spot. I mean, one of the best ways to play this has been the NASDAQ. You know, we got long the NASDAQ right after it was consolidating, and we've just seen it rocket higher, hitting our targets to the upside. The NASDAQ's a great way to get involved, in a lower volatility way, versus getting into ETFs that can jump 5%, 6% a day, or fall 5%, 6% a day.
The NASDAQ is a great play for technology. You know, we got all kinds of different growth stocks in there that are rocketing higher. So this is definitely the space to be. If you compare that to the S&P 500, S&P 500 really chopped around. Got really noisy, because energy stocks were struggling. There's some energy in the S&P 500 index. Also the banking sector took the wind out of the sails, or else we'd see the S&P 500 rocketing higher. But it is now on its way up, and starting to run pretty nice, but definitely, you know, we're just seeing the money just pile into the growth and technology space, like the ARK ETFs, and that's kind of the way to be playing this market right now. And you gotta ride this trend until proven wrong. Until it puts in a topping phase and the technicals break down, it's on a rocket ship trajectory right now.
Craig: Well, you know, and maybe would that be a good thing for you to share with folks. How you try to measure, you know, that crescendo, that inflection point, when the rocket ship begins to tip over, because eventually, it's going to, and at least pull back. You know, so far this year, so many analysts have been thinking, you know, there's gonna be a pullback in the stock market. You got that fear versus greed. And I think for the balance of the year thus far, it's been fear of missing out that is the only fear that's prevalent in the market. So, how do you measure that sentiment, Chris? What do you look at?
Chris: Yeah, it's tough. I have this sentiment chart on the right-hand side. This takes a lot of different things into play. And when it's green, you know, the big money flow... This isn't really measuring so much... It is sentiment, but it's measuring where money's flowing in and out of different assets, different markets, and telling us if money's moving into risk-on areas or into risk-off areas. And so, when it's green, we're definitely in a green trend. When it goes dark green, which is hard to see here, this little bar, but dark green is a sign that a lot of money is piling into this sector. So, that's one way I can get a gist of what the big money flow is doing.
Not just the little traders, you know, driving small-cap stocks or anything, but this is telling us what big money flows are doing, and it's starting to pile into this market. But as you brought up, a great way to look at this is, I don't have the...what is it here? The put-call ratio. The put-call ratio here, the other day, spiked up, and closed above 150, which is huge. That's telling us that more or less there's the majority of people are bearish. They're buying leverage to the downside, expecting the markets to fall. Not just fall, but they're applying a lot of leverage. And that's a really high level. In fact, this day that we had this, I had probably a record amount of emails and phone numbers I've had in a long time.
There was a lot of talk about the debt ceiling. Everybody thought the world was about to fall apart. They all wanted to get out of the position. Should we tighten our stops? Should we take profits? And people were panicking, and the VIX was also up as well. And the thing is, when everybody's nervous, the market tends to go the opposite direction. And right from this bar, the market has reversed. It's rocketed higher. As you know, the market climbs a wall of worry. And when we start to see everybody get really bullish, which might happen this week, might happen next week, that'll be a sign, when everybody's now, you know, buying leverage, expecting higher prices, that's probably when we're gonna start to run outta steam. But I like the put-call ratio. It tells us, kind of, you know, short-term wise, if people are really bullish or bearish. People have been extremely bearish.
The VIX was also one of those indicators that, it rallied about thirty-plus percent of, back over here. There's a lot of fear in the market. Doesn't look like much in the grand scheme of things because the VIX has had some huge moves. But I like to look at the VIX, the put-call ratio, and of course, my own custom sentiment indicator, that is a little different. Instead of the VIX and the put-call ratio being kind of short-term, aggressive, I would say, kind of more emotional traders, my kind of custom indicators telling us what the big money, the big wealth, if it's moving into the market or moving out. It's kind of the tide. So, there're two different ways, two different groups of people that I like to follow. And typically, you know, my custom indicator is the opposite of what the short-term traders are thinking and doing. So, that's kind of how I look at that going forward.
Craig: All right. Well, talking about sentiment, I've, boy, couple interviews I did last week. The topic was often, gosh, sentiment in the precious metals is terrible. And the answer I kept giving was, well, I don't know. I mean, if you just own physical gold, it's up 10% year to date. But I think sentiment is driven by the people that own the mining shares, you know, because they're trying to make some extra fee out of the mining shares, and man, they're just two steps forward and three steps back so many times. What do you see if you look at something like the GDX or the GDXJ? I would imagine they're down toward the bottom as worst asset now. Maybe that's a good sign. I don't know. What do you think?
Chris: Yeah. So, this year's GDXJ, and the reason I pulled, or GDX, is the reason I pulled this up, although GDXJ, and the silver miners, they're all the same, they pretty much all moved together, is, I've got this indicator on the bottom here. When it's green, it means we don't wanna be involved in the stock market. Stocks are generally struggling. When it's red, sorry. When it's green, you wanna own the stock market. You wanna be long stocks. Now, this here is a chart of GDX. And what's interesting is when the stock market gives a buy signal, we've seen gold miners sell off. And then the stock market says, hey, don't be in stocks. You know, the money flow doesn't look good. Gold miners, you know, go up and have this huge rally, and become that defensive play.
And then of course, we got our last buy signal on the stock market down in this bottom here, and of course, gold miners have fallen down. So, there's definitely a big disconnect. Right now, money has been flowing out of the miners, out of precious metals, and they're saying, hey, I wanna get into something where money's flowing. And so they're diving into technology and growth stocks at the moment. When the stock market gets another sell signal, when it stalls out, it's gonna be interesting to see if gold miners become that defensive play. I think they will. The fact that we've got this disconnect, where gold miners rally when the stock market's out of favor, when they pull back when the stock market rallies, is very similar to this type of cycle here in the stock market, where we tend to see energy stocks and precious metals kind of, they're a late-stage sector.
Last year, energy was, you know, crude oil was up testing, like, all-time highs, getting pretty darn close. And then this year is precious metals have been leading the way. And every time the stock market sells off, the miners and metals rally. And that, to me, is a big warning sign. We saw this back in 2007, 2008, just before the stock market went into a big swan dive. So, this reaction that we're seeing, of miners bucking the trend, doing the exact opposite of the stock market, to me is a big red flag that we're potentially just months away from the stock market, like, rolling over and going into a big decline, which will most likely pull gold, silver, and miners down with it temporarily. But it will be, I think, an amazing opportunity, long-term, for the precious metals space to be able to get in at much lower pricing.
Craig: As the Fed turns the printer back on, inevitably, to keep things spinning. All right, just two other charts, Chris, if you don't mind. Like I said, we started May with the thought of no interest rate hikes to come, and now all of a sudden maybe we'll get one next week with Powell. You never know. But a lot of that then is reflected in the chart of the dollar index. You know, when rates are headed higher, it seems like the dollar gets stronger, and vice versa. And the dollar index is important just because there's so many trading machines out there run by hedge funds that, you know, buy the dollar index, sell gold, or sell the dollar index, buy gold, and it's like a pair trade. So, on the dollar index, as you show there, you had this peak, about nine months ago, up around 114, 115, pullback, couple attempts to break down through 101, kind of a spike bottom and then a rounded bottom. And [inaudible 00:12:18.265] kind of, to me, kind of in a little no man's land. What do you see there?
Chris: Yeah. It's trying to change its trend. I think, if it can break this high, you know, then we're really kind of off to the races, that it's confirmed in a new uptrend, which probably means metals will be falling in value. Probably also means the stock market's falling in value. When the stock market sells off, we tend to see the dollar become that defensive, cash, safe-haven play. So, a rising dollar, you know, weaker metals, weaker stock pricing. You know, if we zoom back a little bit on the chart, we can see... You know, I'm gonna just go to the monthly chart real quick. If we look at the monthly chart, there's a few different angles here to see, but I do think, you know, it had a breakout from these highs, it blew through those highs, and now it's pulled back, it's settled into these kind of, these tops.
And I do think that if we do go into another big selloff in the stock market over the next several months, we're gonna see the dollar go right back up, test these highs, potentially even spike up, and test these highs way up here at 120, 121, maybe even pierce those. So I do think there's a lot of potential. And of course, if that happens, commodities, precious metals are gonna get hit very hard. Even if they're seen as that safe haven play, money's piling into them because they're worried about banks going under and all that stuff, that'll help support the price of gold, more so than silver. But I just think there's gonna be so much headwind and so much forced liquidation, margin calls, and the rising dollar that I just don't see the precious metals, kind of, sector being able to hold up.
I do think we're gonna see a pullback, and soften up while the dollar rallies. So, the dollar's trying to carve out a bottom here, and if it does put in a bottom, it's gonna be a difficult time for investors, because metals are going down, we're gonna see the stock market go down. The only good thing about the setup I think we have now for, you know, investors is potentially the bond market. If they start cutting rates, and the stock market's in free-fall mode, bonds could post some huge returns, and could recover a lot if they start slashing rates. But, I mean, the question is with inflation, how much, you know, can they just keep chopping rates at a super quick pace, because it's gonna really hurt the whole spread between inflation and interest rates. So, we'll have to see how that unfolds, but I'm starting to get pretty bullish on the dollar, and that means a little bit bearish on the overall equities market.
Craig: Okay. How about one last chart? Let's look at gold, if you don't mind.
Craig: And just, let's focus on just one specific timeframe. We had that bottom, back, oh, October into November last year, down at around $1625, $1640, something like that. And we've had this move up, with a higher high and a higher low and that sort of thing. And now, here we are again. What do you see in the gold chart? Is there a level that you, a break of which you'd get nervous? What do you see?
Chris: I think gold is kind of topping out. In a perfect world, it flags sideways here, and then eventually pops and breaks to the upside, and breaks the high that we saw, and can close on a monthly close, more or less, ideally, above this high over here, which is, I don't know exactly what that high is, but, you know, $2090. Somewhere in there. If it was to pop and have a monthly close above there, we could be off to the races, $2700, you know, within a couple months, very quickly. But overall, I do think it's running out of steam. I think these are topping candles, where price runs up and then sellers pile back in and drive it back down. And we've seen it happen two months back-to-back, which you can call, like, tweezers. It's kind of like a double top in a way. Usually points to a few red bars after that.
So, I do feel like we're gonna see gold potentially pull back. And it could come all the way back down to $1600. It might even pierce these lows by a little bit during... If we go into a full-fledged, a huge selloff, it might just get forced down there, pierce these lows, spook a lot of traders out, it'll create a big spike, and then could very easily recover and then be off to the races. So, again, I still think there's a lot of headwinds for metals, and the monthly chart is pointing to lower pricing because it's at resistance. It's been rejected twice in the past two and a half months, and the dollar's starting to firm up and start potentially a new rally, new bull market rally. So, that's the big concern with pretty much not just gold, but the precious metals space in general right now.
Craig: And lastly, on that daily chart, Chris, again, gold's up 10%, a little more than 10% year to date. You go back to last fall, and you had the rally in January and then the pullback. Yeah, on the right-hand side of that chart. Would a break of those February lows be what you'd be most concerned about? Or what should somebody watch over the next month?
Chris: Yeah, I guess there's a few different levels here. I mean, if we start to break even this low right here, it's gonna bring us down pretty close. We can use Fibonacci extension, which I find works exceptionally well for picking upside and downside targets. If we were to just look at these levels right here, I didn't quite grab 'em perfectly, but more or less, we'd be looking at, you know, gold coming down to $1843. So, it'd come down and test these lows. If it does break these lows, then we're probably going right back down to $1680, somewhere in there. Depending on how the chart pattern plays out here, we'd be able to redraw Fibonacci extensions, get an idea of the bear flag pattern or the pattern that is formed, and where that downside trajectory is.
So, right now, it's still holding up all right. I mean, when you look at it, it's kind of settled into this top here. This is where it broke out and ran higher. It's still holding up at a good level, but if it does break this low, then we're probably going down to $1840 very quickly. And then however it recovers from here will give us an idea of how low it's gonna go, potentially lower. So, there's definitely these key levels. $1811, if it breaks that, we're probably going down very quickly, to probably $1700 area, and then right back down into this, you know, $1650 and change. So, it's not a really bad chart at this point. All gold is doing is pulling back and consolidating. It hasn't really broken any critical, major pivot lows. This here is the first major pivot low. If it breaks this one around that $1800 mark, we're probably eventually working right back down to the $1650 area.
Craig: Well, it's a lot to think about, and it's gonna be a busy month, with the Fed meeting next week, and then, obviously, all the rest of the data and the latest inflation data, and the next jobs report in early July before we meet again. You and I won't probably speak before then, but certainly, people can contact you, and join your website, thetechnicaltraders.com. Tell everybody a little bit about that before we wrap up.
Chris: Yeah, sure. At thetechnicaltraders.com, every morning I provide a kind of a video report, just like you and I are doing. I usually focus on shorter-term intraday charts and daily charts. We talk about what happened yesterday, what's happened in overnight trading and pre-market, how it could affect our positions, and what we're looking for in terms of our next targets. And pretty much, I share every trade that I do with subscribers, so you can just follow me. You can even have my trades auto-traded for you if you don't have time, you don't want to learn the markets, you don't wanna follow and chase the markets, you can have it done for you. So, I focus on ETFs, generally, the major sectors, indexes, bonds, the U.S. dollar, those are my core plays. I don't get into individual stocks or crypto or anything like that, but I just focus on big asset classes and sectors, and play those kind of wave-like patterns that happen in the markets.
Craig: Great stuff, Chris. And again, for more great stuff from Sprott Money, be sure to check sprottmoney.com. I think there's even an email link you can sign up to be notified every time something new gets put out. It's gonna be a very busy month, so you might wanna stay on top of the news, the headlines, and we'll see where we go from here. Chris, always good to visit with you, my friend.
Chris: Same, Craig. Take care.
Craig: All right. All the best. And from all of us here at Sprott Money News, at sprottmoney.com, thanks for watching. We'll have more content with Chris once we get through the month of June and we get into July. Thanks, everyone.
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