They say that the first session of the year is a good predictor of the entire year. Can it be really that profitable?
On the first trading day of the year, the markets agreed with pretty much everything we wrote recently, suggesting that there’s much more of that to come. Let’s jump right into the charts.
The USD Index soared profoundly yesterday, and that was the biggest daily gain in months! Talk about a bullish indication! The USDX moved higher also in today’s pre-market trading. This is in perfect tune with what I wrote previously, and those comments still remain up-to-date – they continue to support even higher USDX values.
Let’s check the facts:
- The USD Index is after a sizable, short-term decline, which caused it to be very oversold in RSI terms.
- The last two times, when the RSI was similarly oversold, immediately preceded bottoms and rallies (including the yearly bottom).
- The USD Index is slightly above the all-important 100 level, which serves as a strong support due to psychological reasons (everyone notices it as it’s a perfectly round number).
- The USD Index is at its previous bottoms – each time the USD Index got close to the current levels in 2023, it then bottomed and rallied.
- It’s very close to the turn of the month, and the USD Index has a strong tendency to reverse its course close to those moments (as marked with blue, dashed lines). Since the last move was to the downside, the reversal has bullish implications.
There is one additional clue on the long-term chart.
It’s the rising, long-term support line that started in 2011. It was reaching this line that triggered the reversal and caused the yearly bottom to form. Precisely, the USD Index broke slightly below this line, and it was the invalidation of the breakdown that created the bottom.
The USD Index is EXACTLY in the same position right now!
Due to all points listed below the USD Index’s short-term chart, the U.S. currency is very likely to rally at least in the short run. This, in turn, means that it would invalidate the breakdown below the rising, long-term resistance line, just like it did at the 2023 bottom, thus flashing a similar, long-term buy signal.
We just saw the invalidation of the breakdown below the rising, long-term support line – we once again saw the key buy signal!
Since gold is now willing to decline even while the USDX is moving lower… Gold is likely to truly plunge (and the same goes for other commodities, like natural gas) when the USD Index finally rallies. And it looks like both are about to take place.
This has profoundly bearish implications for the precious metals market.
Also, do you remember what we (Anna and I) wrote about copper on Friday? That it was likely to decline?
We just saw a breakdown! This is another sign that commodities are about to move lower as the USD Index is rallying.
Silver is both an industrial metal and a precious metal, so one would expect it – in the current market environment – to decline due to the situation in the USDX / gold and in the stock market / commodities. And that’s exactly what’s happening.
Silver attempted the rally on the first session of the year, and after failing, it closed the day below the opening price. The decline continues in today’s pre-market trading.
What’s even more bearish is that based on the last few months of performance, silver almost completed a bearish head-and-shoulders top pattern. Once it breaks below the rising support (neck) line, the breakdown will be completed, and silver will be poised to slide to much lower levels.
Declining stock prices would definitely help to push silver (and junior mining stocks!) lower.
Remember what I wrote about the NASDAQ yesterday? How was it likely to decline?
It just did. And it didn’t just “decline”. It invalidated its breakout above the previous all-time high! This is a massive sell signal for the tech stocks.
The same happened in the S&P 500 Index, which serves as yet another confirmation that the “tide is about to turn”.
In my Dec. 27, 2023, Gold Trading Alert, I wrote the following:
- So, when will those declines finally take place?
At this time, I wouldn’t be surprised to see them really begin early next year. The reason is that they are quite likely to be correlated with the declines on the general stock market (note: Paul is preparing to take profits from his long positions in stocks), and… Wall Street pros want their yearly bonuses, don’t they?
As the performance is often assessed in yearly terms, and most funds / asset management companies are invested in stocks (and are not shorting them), it’s in their best interest not to see significant slides before the end of the year (three more sessions including today’s one). Once we have the final yearly price, it seems that the prices of stocks can “be allowed to” slide. And the same goes for the prices of precious metals and mining stocks.
That’s precisely how the situation developed – the year ended, the pros (“pros”?) cashed their bonuses, and they can now exit their position and “allow” the market to slide. That’s what it did yesterday and early today.
I previously wrote that Paul Rejczak (who is specializing in the stock market and has decades of experience) was considering exiting his long positions – and indeed, Paul just took big profits from this long position.
Gold is declining in today’s pre-market trading as well.
No wonder – it’s after a breakdown below its rising support line, and the attempt to move back above it failed.
Much lower gold prices are likely ahead – which is in perfect tune with falling stock and copper prices, and in tune with rallying USD Index.
Junior miners declined almost 2% yesterday, even though the GLD ETF was down by just 0.24%. Why?
- The stock market fell.
- The big, medium-term trend in miners is down, so the really big moves are likely to be to the downside.
The fact that miners recently invalidated their attempt to move above their December and July highs only adds to the bearish narrative.
Miners are now likely to fall hard, greatly benefitting those who are positioned to take advantage of it.
You can find its details in the full version of today’s analysis – today’s premium Gold Trading Alert. Also, please note that my subscribers stay up-to-date at all times – when things get hot, I’m sending intraday Alerts and that’s the part of the service that my subscribers often say that they enjoy the most. Join us and profits with us today.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief