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Precious Metals Set to Swap Trends With the Stock Market

Stocks in this article: GLD GDX ES

NEW YORK (TheGoldAndOilGuy.com) -- Two big trend reversals are about to take place, but they have not yet started. Everyone has been waiting a year for this to occur.

While I do think 2014 is the year we see gold, silver, miners and many other commodities rally, it is important to follow the trend and wait for a reversal to form before getting overly excited and long commodities.

Each time we see the daily chart form some type of bullish pattern, gold market traders become instantly bullish. And each time this happens they get another reality check about their trading technique, which is trying to pick a bottom.

I just published a book in December which teaches readers how to identify trends and stages in the market: Technical Trading Mastery -- 7 Steps to Win With Logic. Buying into a bear market rally is not a high-probability winning position. Odds favor that sellers will pull the price down, likely to new lows.

This January is one of those times. Gold market traders are getting excited and buying long positions. While the bottom may in for precious metals, buying a bounce in a bear market is tricky. You had better have some trading discipline to exit if the price starts to sell back down.

Eventually we will see the stock market roll over and break down below its support trend line. Then gold will rally. But keep in mind, some of the largest percentage-based moves take place just before a reversal. What does that mean? It means that the stock market could easily go parabolic and rally for a few more weeks, then reverse down sharply. And precious metals would do the opposite: sell off, make new lows, then reverse back up and start a new bull market.

This chart illustrates the trend line between the S&P 500 and the SPDR Gold Trust (GLD).


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