Was that a top? Quite possibly. More importantly, even if it wasn’t a top, it’s likely that we’ll get one soon given what stocks are doing.
And in particular, what are the previous leaders doing. For now, let’s take a look at the metals and miners.
They all moved lower today, and GDXJ even (temporarily) moved down by over 2%. This is notable, but not yet groundbreaking. What is getting groundbreaking is gold’s performance and its invalidation of the move above $4,600.
Quoting my yesterday’s Alert:
Gold stopped at its rising resistance line and it’s moving back and forth around the $4,600 level – will it confirm the breakout above $4,600 and $4,500? I think that an invalidation is still the likely outcome as the dust seems to be settling after the recent attack on Fed’s independence.
$4,600 failed. $4,500 is likely next.
Silver is also down over 5%, however, silver didn’t invalidate a move above its previous high. Technically, the white precious metal is still in a stronger position.
Dollar Finds Support
Meanwhile, the USD Index reached a higher level of its rising support lines, and it’s already moving back up. The uptrend remains intact, and sooner rather than later, other markets will be influenced by it.
As I wrote yesterday, this might happen to a greater extent when the USDX holds above 100 – until that happens, most traders will view the situation in the USD as unclear.
Still, the thing that I’d like to emphasize today is that if the general stock market slides, the same is likely to happen with gold, silver (temporarily, but still), and mining stocks.
On a stand-alone basis, the situation in stocks is just somewhat problematic. Yes, the S&P 500 invalidated its move above the 2025 high, but there were so many attempts that we might as well see another one next week.
That’s not where the problem can be seen.
However, when we zoom out and check what’s happening with stocks that used to be market leaders, it’s clear that a storm is brewing.
Tesla first failed to gold above its 2024 high. Immediately after this invalidation, I wrote that this was a powerful sell signal, and since that time, we saw another one – a confirmed breakdown below the rising, dashed support line.
The latter is important because the first attempt to move below it was invalidated and followed by a rally. Not this time. The breakdown is fully confirmed, and Tesla looks ready to slide.
NVDA Stops Leading
While Tesla is important and it caught a lot of attention last year, it’s even more important to check what’s happening with NVDA – investors’ AI darling.
And the thing is that it’s no longer outperforming.
Conversely, it’s lagging. It’s generally the case that when leaders lag in any market, then this market is likely preparing to decline. This is happening as early buyers exit based on stock being overpriced, and at the same time, the general public investors in other companies that are cheaper – hence other stocks outperform temporarily.
That’s exactly what seems to be going on with stocks right now.
It’s not just theory, either. I marked two other cases when NVDA’s top preceded the top in the S&P 500. The former was already after its top while S&P moved higher. This didn’t last, and big declines followed.
Now, this is important because if we’re going to get a bigger slide in stocks, PMs and miners are likely to react. They reacted significantly in 2008 and 2020 – especially silver and mining stocks.
Now, silver has multiple reasons to be resilient right now, but mining stocks can still slide profoundly. And that’s exactly what I think is likely.
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