Many people got very excited about gold’s breakout to new highs, while it was obvious that it would fail.
Miners’ prior weakness as well as gold’s final intraday-chart-based reversal point was due, so the rally pretty much “had to” reverse. Yes, I know, there are no certainties on any market, but this was very likely.
Gold now invalidated the breakout, and it’s clear that both of the above-described techniques worked.
We’re now just after the triangle-vertex-based reversal, so the most recent top was likely the final one. The fact that it was an intraday breakout to new highs that then failed confirms it.
I previously wrote the following about miners’ performance:
GLD moved to new highs, but GDXJ barely rallied. It’s still close to last week’s lows. As I said it multiple times before, weak miners relative to gold are one of the key confirmations that the top is in or at hand. The way GLD and GDXJ behave relative to their early-Feb. highs (green line helps to see that) is really telling and bearish.
And adding my yesterday’s comments:
Gold futures are up (so far) today, so we might get a run up in the miners early in the day, but as gold (likely) reverses, the same fate probably awaits miners. Perhaps it would take the form of a powerful intraday reversal – we’ll see.
The reversal was more profound in case of gold futures than in GLD, but in case of miners, the move up and then back down is clear. It didn’t happen on the intraday basis, but rather during yesterday’s session and in the first hour of today’s trading.
Yesterday’s “strength” was the cherry on the top – an anomaly that we sometimes see after a period of underperformance – miners show strength just before sliding. The opposite happened in early 2016 at THE bottom.
The SPY ETF (proxy for the S&P 500) also invalidated its breakout and the same goes for the S&P 500 Index and the index futures.
Meanwhile, copper is repeating its late-2024 top. The second attempt to move above the 61.8% Fibonacci retracement level failed, and now we see some back-and-forth trading – just like in October 2024.
FCX is back in the decline mode as well. Please note that while copper moved way past its January high, FCX managed to only move back to those highs. Given copper’s likely top and in light of its continuous weakness, the FCX remains to be a superb shorting candidate in my opinion.
The USD Index also has a good reason to rally, and since it’s inversely correlated with precious metals and copper, it all fits.
The USD Index just moved higher from the lower border of the flag pattern (black, dashed lines). At the same time, this is a move back up after correcting to the 38.2% Fibonacci retracement level based on the 2024 – 2025 rally. It seems that the upswing can now continue.
Extra Confirmation
There’s also one extra confirmation that we got. Remember how I wrote that emotions get red-hot at the tops, and people get most bullish then? And how facts or arguments are dismissed? Some people go further on the scale, and they get hostile if someone threatens their super-bullish outlook.
You know the Internet rule about its users and online trolls, right? As Tim Ferriss put it, about 10% of people you find online will find a way to take anything personally, and 1% is batshit crazy. What happens when you combine those statistics with red-hot emotionality of the market at the tops – and someone daring to have a different opinion on that matter than them (and perhaps problems with alcohol or drug usage)?
You get lots of hate mail, or the regular haters become more active. You know, I’ve been writing analyses for over 15 years, and I think I’ve seen and read it all. There are people who will be sending obscenities, lies, threats and so on during those times. It’s not the most fun part of this work (fortunately, all the messages showing gratitude that I get more than make up for this), but its data, nonetheless.
The reason I’m writing this is that I’ve noticed this pattern in recent days. In fact, even tonight, one guy bragged in a message about messaging other people on Golden Meadow with some nonsense. If you received one of those messages, you saw the confirmation that this effect is coming into play right now with your own eyes. I apologize if this caused inconvenience on your end – our security will become tighter against this kind of behavior. For now, we’re disabling direct messages, and in the future, we’ll introduce a way to filter out those fake accounts / messages.
As for the author, I feel bad for him, as this is not the way in which an adult would behave. That’s one of a hurt child who’s probably re-playing some kind of scenario from their earlier days and is emotionally reacting to it – not so much to someone’s (here: my) opinion on the market. Until the part of them that needs something (probably acceptance, love, attention, or something similar) gets it, they will likely continue to get triggered by many things that are really not what they are fighting against. This is also important from the investment point of view – with unhealed emotional wounds one’s emotional “resilience” is so low that trading gets dangerous as people might act on the slightest feeling of discomfort. Nonetheless of me feeling bad for him, it is our duty to protect our community, so we’re already in touch with our legal counsel.
Again, it’s still valuable data that further confirms points made in the technical part of the analysis. Charts are one of the ways to analyze the market emotions (indicators, trendlines, retracements and so on), and seeing how some people’s reactions change serves as another – different kind of – confirmation.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief