Even though the markets didn’t move much today, there are a few things that I would like to comment on.
One of them is the support in the USD Index that held up nicely.
USD support holds firm
The rising support line held, and the USD Index is now back above its mid-October high. The current situation is not like what we saw in August – this time the USD declined moderately, and it’s already coming back up. It looks ready to finally rally above 100 and hold this breakout.
This is important because the precious metals sector is once again reacting to what’s going on in the USD Index.
This return to normalcy began about a month ago, and right now the price moves are quite aligned – in opposite directions, of course.
This, in turn, means that the breakout above 100 in the USDX would be likely to result in severe declines in gold, silver, and mining stocks.
For now, silver is holding up above $50 (and it even managed to form two intraday reversals), but if the USD rallies, I doubt that it will be able to hold in the short term, even despite the 100 reasons for the silver price to move higher. We could still see a sharp decline as early as this week.
Bitcoin breakdown deepens
The same goes for bitcoin, which we’ve been shorting since it was trading at about $104k.
The “new gold” or “anti-dollar” is in deep, technical trouble.
Not only did it break below both rising support lines (and it verified those moves), but it also invalidated its move above the key psychological $100k level.
Please note that this happened with very little strength in the USD itself. When the latter rallies – and it’s likely to happen sooner rather than later – bitcoin is likely to truly plunge. When it moves below $75k – to new yearly lows – the panic will likely start, leading to even sharper declines.
Sliding bitcoin is likely to lead the way. Declines in bitcoin would lead to fear regarding AI stocks, leading to their declines, and once you have that, it’s a slippery slope to massive declines everywhere else, as it’s the AI stock bubble that’s keeping the stock indices so high.
This time already IS different in the case of stocks, because they clearly invalidated the move to new highs. That’s not what happened in the previous months.
Circling back to the precious metals sector – if stocks slide and the USD Index soar, we’ll have a 2008-like situation. That was when declines were both: big and sharp. And despite the positive fundamental outlook, silver and mining stocks declined in a massive way at that time. Declines in copper and commodity stocks were truly enormous.
I’ll be watching the markets closely for the trading opportunities during this decline and the subsequent rally (as well as during the rebounds). This decline will most likely provide us with the mother of all buying opportunities – at least for silver.
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