by Gary Savage
It’s still too early to enter the metals sector.
As always happens after a strong rally in anything, traders begin to anticipate another leg up. They buy the first corrective move back down because they missed the initial rally, and they don’t want to miss the next one. This is the current setup in the metals sector.
However, all markets are subject to regression to the mean. When price gets stretched too far in one direction or the other, one of two things has to happen. Either a correction back to the mean has to take place, or price has to go sideways long enough for the mean to catch up.
You can see in the next two charts that both gold and miners have gotten stretched extremely far above their 100 day moving averages. Too far, in fact, for there to be much chance of a continuation of the metals sector rally until price either corrects or goes sideways for a couple of months to allow some time to work off the stretch.