The USD Index formed a cup-and-handle pattern, which means that it could launch a quick upswing any day or hour now.
The USD Index formed a cup-and-handle pattern, which means that it could launch a quick upswing any day or hour now.
The USD Index had three strong months, so if we see another correction, it will be quite natural. However, given how the values of the U.S. currency moved recently, it seems that we’re going to see even higher prices in the near term.
This would be in perfect tune with what I wrote previously about the incoming turning points in the USD Index and in the GDXJ.
Seeing another quick downswing in the precious metals sector would also be in tune with the very weak performance of mining stocks.
Gold moved higher very recently, and so did the S&P 500 Index. Miners had two good reasons to move up as well, and they haven’t, which is a strong sign telling us that the miners really (!) want to move lower. So, yes, the odds are that the profits on our short positions will increase further shortly.
Gold is down by about $15 at the moment of writing these words, which might be the start of the year-end slide. “Might”. We might as well see another daily pause and then a decline.
There’s also the possibility that we won’t see a decline this year and that it will come in January, but seeing it is still likely in my view. We have three more sessions before the markets close for the year.
Interestingly, both: FCX (I wrote about it in greater detail recently) was down yesterday, even though gold was up. It’s an additional confirmation that we are in the correct proxies for this decline.
Other than that, there’s little to report technically, as the comments that I made yesterday and in the previous days remain up-to-date.
One more thing before summarizing – I’d like to once again quote one of Simon’s posts as I agree with the point that he’s making in it, and it supports the case for a downturn in stocks sooner or later.
The analogy to 2008 is one of the several others that point to lower prices. I already discussed the situation from the global point of view and I commented on the Sahm rule, and the above is yet another confirmation.
Finally, I’d like to quote my yesterday’s comments as they provide some insights into the outlook:
If gold moves to $2,500 during this short-term decline, I’ll be leaning toward opening a long position then, but it’s too early to say with 100% certainty and to say which instruments I’ll use. During the previous long trade, I used GDX (we entered on Nov. 14 and took profits on Nov. 21 and we entered a short position in GDXJ on the next day) , which may or may not be the case this time.
As always, I’ll keep my eyes open, and I’ll report to you – my subscribers – accordingly.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief