The enormous decline in FCX that I featured in Wednesday’s intraday Gold Trading Alert just got even bigger.
FCX declined by over 6% yesterday and it’s down over 20% this week.
Your profits here soared quickly, and they are likely to increase even more.
FCX Magnifies the Decline
Why? Because copper seems to have completed its correction by rallying a bit above its 38.2% Fibonacci retracement and then failing to hold above this level.
The previous move lower was huge, and copper’s long-term technical picture favors huge declines. FCX is a perfect (or worst, depending on how you look at it) position to magnify this decline.
Critical Juncture for Silver
The other key thing that’s happening in the precious metals and related areas is the silver’s unstoppable rally.
Yesterday, it moved above its second 2011 high, and today it’s moving even higher.
Silver just jumped to almost $46 level.
This is the key moment for the white precious metal as well as for other related markets. If the current breakout (above $44.14) is invalidated, silver will likely slide immediately. If not, then silver would be likely to rally all the way to its $50 resistance provided by its 2011 and 1980 all-time nominal highs.
As we have no trading position in silver, and we have full positions in gold and silver in the insurance capital, and we have a significant silver position in the investment capital, both: declines in FCX and rallies in silver are working on our favor.
Silver’s big picture provides an interesting possibility for the medium- and long-term. Namely, the entire 2011 – now period looks like a giant cup of a cup-and-handle pattern. The upcoming decline in silver would likely create the “handle” part of the pattern. Then, once the decline is over, and the pattern is complete, silver will likely be ready to finally break above it’s all time high, and… Well, soar in an exceptional manner.
Yes, I’ve been writing about silver’s likelihood to decline along with the rest of the precious metals sector for some time, but let’s keep in mind that this has always been about medium term. I kept writing that silver has great long-term potential, and I continue to be convinced about that.
The way I see it resolving right now, is as above – we’ll likely get a slide from here either right now, or after silver moves to $50, and then – once silver bottoms – it could be “sky’s the limit” for the white metal – with $100 being the lowest of possible upside targets.
But, for now, it looks like silver will start a decline either right away or soon – after moving to $50 or so.
The USD Index pulled back a bit, but it’s still after a breakout and after a comeback above its April low. This is a very bullish combination – especially that the USD Index’s revival is taking place amid rate cut discussions and while Fed’s independence is being questioned. In other words, the USD Index is managing to rally despite everything being thrown at it.
The previous big rallies in the USD Index and the previous big declines in the precious metals were aligned, but not to the letter. The declines in the PMs and miners started or picked up once it became clear that the USD Index is indeed in the rally mode once again. AT this moment, I wouldn’t say it’s clear to most. Most people would likely say that the USDX is stuck in the 96.5 – 100/102 trading zone. Even if the precious metals sector doesn’t react to the initial part of the USD’s rally, it’s likely to react (and then catch up in a profound manner) when USD’s rally is clearer.
And yes, the profits on the short position in the FCX are likely to grow significantly regardless of whether it corrects today or not.
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