The Patterns Depend on Your Perspective

Weakness in the precious metals and miners this morning seems to be frustrating gold bugs who urged folks to not miss out on an imminent leg higher in the complex this week. This holds especially true considering that the Dollar is only marginally bouncing, which is something I was not expecting--I was thinking (and still do) that the Dollar is likely close to a relief rally to squeeze the recent influx of short-sellers in the greenback who decry the downfall of American and its world's reserve currency. 

With the Dollar bounce, I thought precious metals and miners would then correct their recent and potent multi-month rallies, given the typical (but not guaranteed) inverse correlation between the Dollar and gold. 

However, I am not looking for a major top of any kind in the precious complex. In fact, I expect the current consolidation/dip to eventually set up another excellent long entry for the coming months. 

Thus, the rather obvious head and shoulders bearish topping pattern on the GDXJ (ETF for junior gold miners) daily chart, first below, needs to be given context. Yes, it is an obvious pattern which seems more viable this morning on the gap down with the Dollar green. And, yes, it may very well confirm lower in the near-term especially if the Dollar bounce gets squeezing. 

But the weekly charts offer better perspective for this metals and miners. 

The second chart is the weekly timeframe for the same GDXJ ETF. Note the room to drop into the $40, which would be quite painful for overeager gold bugs, near-term. However, even a drop into the $40s would not invalidate the long-term technical bull case. 

Recall that we are still dealing with a highly volatile asset class, which means patience is paramount during periods of consolidation even while keeping a constructive view long-term.