As I wrote in yesterday’s Extra Gold Trading Alert, gold and copper’s declines were particularly bearish signs.
They happened while both markets were “supposed to” move higher as the USD Index moved lower. We see more of the same in today’s pre-market trading, and it is particularly clear in the case of copper.
Gold is simply trading sideways instead of rallying, which is a bearish sign, but copper is being more decisive.
After touching its declining resistance line and my target area for this rally, copper futures turned south, and they haven’t looked back ever since.
FCX, which we re-shorted then, hasn’t moved yet, but it’s normal as the stock market was closed yesterday. It’s likely to catch up and decline today.
Silver is down today, but only slightly so. It’s not the thing that I’d like to emphasize on this chart. The thing that I’d like to emphasize is that silver DID fake a breakout. I previously didn’t draw the declining resistance line based on the closing prices (only one based on the intraday highs), which made it look like silver almost reached its resistance line instead of faking a breakout like it often tends to do at its tops.
This, in turn, might have made one thing that something was still missing from the rally and that it will continue. However, when you add the line based on the closing prices to the mix, it all becomes clear. Silver did break out right at its recent top – that was when it closed above the declining resistance line based on the previous closes. And then – being silver – it invalidated this breakout.
So, we have it all. We had a very short-term outperformance, and we had a fake breakout.
The top is very likely in.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief