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Beware of the Dead Cat Bounce

by Lobo Tiggre
Monday, August 20, 01:20pm, UTC, 2018

Some plain talk today. Precious metals rallied Friday. Huzzah!

But does this really mean the pain is over? Before breaking out the champagne, we should consider the possibility that this is just a reaction to the preceding dramatic declines—a so-called “dead cat bounce.”

Let’s pull back to look at the bigger picture.

As you can see, Friday’s uptick isn’t even visible. From this chart, I draw three conclusions:

  1. This is not gold’s biggest correction in recent years.
  2. There is no technical support at current prices.
  3. Friday’s uptick does not establish a new upward trend.

I am not turning bearish on gold and silver.

I’m just saying that it’s very possible we’ll see more weakness in the days and weeks ahead, before the real rally resumes.

The sideways trading so far today confirms this in my mind.

This is not a time to chase resource stocks. It’s a time to weigh valuations carefully and place selective bids for undervalued assets.

That’s what I’m doing.

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