As per the title – we’re seeing more and more confirmations that the trend has changed.
USD and GDXJ Return to April Extremes
The forex market clearly supports it. The USD Index just moved above 99, and it’s the first time this month that it’s happening.
Conversely, even before today’s session – during yesterday’s trading – the GDXJ moved to new monthly lows in intraday terms, and then closed the day at the fresh new monthly low in tune with my previous comments.
That was also a daily close clearly below the flag pattern. Unlike the mid-July breakdown, this one is clear as GDXJ closed well below the lower border of the pattern, not just slightly so.
It was also a close below the April intraday high. This is bearish, but it will be even more bearish when we see a daily close below the highest close of April. To simplify, a close below $65 in the GDXJ will serve as the final warning – if you missed the entry to short this sector beforehand, this might be your last chance before the decline accelerates.
In fact, if you look one more time at the previous USD Index chart, you’ll see something special about the price moves that ended at the current price levels.
Namely, the April slide in the USDX and the April rally in the GDXJ both ended more or less where both instruments are trading right now. The moves in both directions can be similar, with the moves to the downside having a chance of being even more volatile (fear is a stronger emotion than greed).
This means that once USDX’s rally accelerates and GDXJ finally breaks below the April high, the move lower could be quite sharp. In fact, it wouldn’t surprise me to see a quite quick slide to the $50 area – to the April bottom.
I realize that this might not seem realistic given that GDXJ did barely anything in the recent weeks, but I assure you that this is more than possible. In fact, periods of low volatility tend to be followed by periods of high volatility and vice versa. It looks like a sharp move is going to take place soon. And given the confirmed breakout in the USDX and confirmed breakdown in the GDXJ, it is also quite clear in which direction the markets will move.
Right now, we are on the verge of those moves – also in gold. We can see something similar in other markets, too.
Platinum already moved back below its June high, but it’s taking a break before declining more. Again – it’s on a verge of the big move lower.
SILJ Volume Spikes Echo 2021 Top
Silver price broke below its upper rising support line, but it hasn’t broken below the lower one yet. Once this level and June high are broken, the door to much lower silver prices will be wide open.
And as you saw in April – silver can decline very fast.
To clarify, silver remains my favorite long-term investment, however, it doesn’t change the fact that I think that it’s going to decline when the USD Index rallies, especially if the stock market declines as well.
The final chart for today is the one featuring SILJ – the silver junior mining stocks ETF.
The thing that I want to emphasize here is the increase in volume that we saw very recently. This is the second volume spike in a relatively short period. We saw something similar in the past, and it happened right at the 2021 top.
SILJ did NOT break into new highs, it simply encountered very strong resistance. The sudden increase in volume represents the sudden increase in interest in this ETF – that’s what tends to accompany tops, and the analogy to 2021 proves it.
Thank you for reading my today’s analysis – I appreciate that you took the time to dig deeper and that you read the entire piece. If you’d like to get more (and extra details not available to 99% investors), I invite you to stay updated with our free analyses - sign up for our free gold newsletter now.
Thank you.
