USD Index and copper are suggesting that a big move is just ahead.
However, as far as the near-term situation is concerned, it’s a whole lot of nothing once again – so I’ll keep today’s analysis brief [EDIT: I didn’t, as I found a few interesting things that I just had to share with my subscribers – e.g. the GDXJ to SPY ratio – and I ended up sharing it in this free article as well].
The precious metals market moved a bit higher today, while the USD Index once again tested its support levels, which – once again – held.
It is the latter that matters the most. The USD Index held up well, which means that nothing changed.
The U.S. currency moved to the 100 level, to its declining resistance line, and the previous short-term high. All those levels provided support - and they held.
This means that the very bullish implications of the breakout remain intact. This means that the USDX is currently preparing for another big move higher.
Simple as that. This, in turn, provides context for the moves in gold, silver, and mining stocks.
Before looking at them, I’d like to show you just how important the support level was that was reached back in April. I already emphasized it from the long-term Fibonacci point of view, and today, I’d like to draw your attention to the powerful rising long-term support line that also held.
This is no tiny, local, short-term support. This is the line that’s based on two key (2011 and 2021) bottoms. The line is crystal-clear, and the fact it’s no wonder that the USD bottomed after reaching it.
Now, since the USDX is still verifying its short-term breakout, it’s not that surprising that the precious metals are moving higher. It’s all likely just a breather before the declines continue – please bear with me (pun not intended).
We see a clue suggesting that something big is about to happen from one of the key commodities – copper.
Just like silver, copper is doing very little these days, moving back and forth in an increasingly tight trading range. Those cases – where the volatility declines in a visible way – tend to precede days when the volatility soars. In our case, it’s likely to indicate that the upcoming decline will be sharp.
The above perfectly aligns with the USD Index’s breakout’s verification. Both point to a big move lower in copper in the near future.
Please note that copper is visibly weaker than silver – after the late-April high, the declines in copper were bigger than the ones in silver.
Stocks are not doing much today – they are finally declining, but will they manage to close the day lower? Did the 6,000 level finally trigger a reversal?
That remains to be seen. In my view, it’s quite obvious that the next big move lower in stocks is going to be to the downside, and it’s based not just on the technical grounds, but also based on the damage done to world trade by tariffs – despite the recent truce (it’s far from being a deal) between U.S. and China, the tariffs are still higher than they were before April, and this is likely to continue to impact the markets.
Stocks previously made several attempts to move and hold above the 6,000 level, and each attempt failed. It could indeed be the case that this time stocks won’t manage to even get above this level before turning south.
On a side note, Paul Rejczak just took profits from his JPM long trade – 6.5% in about two weeks (here’s a link to the analysis where he opened the trade, if you’re interested – he even correctly predicted that it would last 1-2 weeks). He also has a protective stop-loss in his long position in stocks (getting his subscribers out with a profit if it gets hit).
So far, he’s been correct on this rally, but it seems to me that a turnaround is really close, especially given the big likelihood for the USD Index to soar.
Before summarizing, I’d like to show you one more thing. It’s a ratio between junior miners (GDXJ ETF) and stocks (SPY ETF)
The ratio rallied so much in the previous weeks (not very recently, but during the previous rally) that the RSI (upper part of the chart) based on it jumped visibly over 70, while the Rate of Change indicator (momentum indicator; lower part of the chart) jumped above 20.
This is a rare combination, and it almost always (4 out of 5 previous cases) meant major (!) tops in the GDXJ.
This tells us that the recent top in mining stocks was not a local thing that’s likely to be followed by another big upswing. No – it was very likely THE top for the months to come.
I keep my most detailed projections, like the near-term target for the GDXJ, and specific trading ideas and opinions for my subscribers. However, I also want to share some valuable insights into these free analyses. Your support makes this work really important to me. Whether you’ve been following me for a while or just found my analysis today, I really appreciate you taking the time to read these market updates.
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Also, I’m not sure if you saw the notification on Golden Meadow or if you read it in my previous free analyses, but on Thursday (2PM EST), we’re hosting a webinar with Keith Weiner, CEO of Monetary Metals. Keith also serves as President of the Gold Standard Institute USA and holds a PhD from the New Austrian School of Economics.
I’ve spoken with Keith and he’s a kind and extremely knowledgeable person when it comes to all-things-gold. During the webinar, he’ll cover his outlook for gold, and he’ll answer questions that the viewers might have (ever wondered what would a seasoned Austrian economist with many years of experience in gold investing say about something? It’s your chance to ask.) What might be most interesting is that he’ll explain how can 100 oz of gold become 121 oz over five years time.
I’m sure that you’ll enjoy being there. Reserve your seat today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief