The enormous decline in FCX that I featured in yesterday’s intraday Gold Trading Alert just got even bigger!
Here’s how it looks like from the weekly point of view (FCX is down by over 20% this week):
And that’s the hourly view:
The slide is truly exceptional, and I want to once again emphasize that even though the exact trigger for the decline came from outside of the “world of charts”, technical analysis provided key input.
Quoting my yesterday’s analysis:
The direct trigger for this decline is this (quoting from Yahoo!Finance):
“Freeport-McMoRan (FCX) faces significant challenges after a fatal accident at its Indonesian mine, leading to a drop in shares and a force majeure declaration.”
While technical analysis doesn’t forecast accidents, it can tell, if an upcoming move (response to a trigger) is going to be significant, and moves in which direction are going to be magnified.
I wrote the following on the FCX just two days ago:
“The FCX was already after a top at that time. The same appears to be the case right now. (…) In fact, FCX just broke below its rising support line based on this year’s lows.”
Indeed, the top in the FCX was in. The November put options on it with the strike price of $40 (the ones that I’ve been featuring recently) are already in the money after rallying over 300% today.
Does my $24 target for the FCX still seem so “impossible”?
Absolutely not.
In fact, it’s even more likely given today’s slide. The copper hasn’t plunged yet and the USD Index hasn’t soared – those things are still ahead of us, and given today’s slide in the FCX, it seems that the latter will fall much further when we those moves materialize. If this seems unlikely, please look at what happened to FCX in 2008 and in 2015. Those enormous declines CAN happen – they already happened in the past. These are not uncharted waters; it’s a well-known path lower.
The share price is down by over 5% today, and the Nov. $40 put option that I’ve been featuring is up by another 25% or so today after rallying by over 300% yesterday.
This compounds, so it’s actually up by over 400% this week. Once again – congratulations.
In case of the precious metals market, gold and miners are rather flat today, and it seems that yesterday’s decline was not accidental.
Conversely, given the continuation of the rally in the USD Index, it’s quite likely that gold and miners have formed their yearly tops.
- Why is “this time different” for the USD Index? After all it’s been doing nothing for weeks…
Because this time we had a very powerful buy signal (hammer reversal candlestick and invalidation of the tiny breakdown to new yearly lows) right when the interest rates were cut. Precisely in the move-on-the-rumor-reverse-on-the-fact manner. Quoting my Sep. 17 comments:
The USD Index declined initially and now it recovered most of the declines. It briefly moved to new yearly lows and now it moved back above the previous (July) low - invalidating the breakdown.
A lot will depend on the press conference, but so far, the markets confirm what I’ve been writing about recently.
I then – in the following days – wrote that given how the precious metals market topped in 2011, it wouldn’t be surprising to have a weekly delay between the bottom in the USD Index and the top in the precious metals sector.
Quoting:
Back in 2011, neither gold, nor miners, topped right when the USD Index bottomed. They PMs top was delayed by a few days. In particular, miners topped about a week after the USD Index did.
The USD Index bottomed last Wednesday, so if the analogy is to continue, gold and miners can top literally any day now.
It seems that gold and miners topped on Tuesday – very close to the 2011 weekly delay.
And silver…
Silver could be topping right now, as it just moved slightly above its second 2011 top.
- But doesn’t that mean that silver just broke out?
Yes, but at the same time, silver is known for fake breakouts, and if the situation in gold, miners, and USD Index is as I have outlined, then it’s likely that silver is confirming the top by being strong on an immediate-term basis.
When silver invalidates the move above this second 2011 top ($44.14), some might want to short it, but I’ll stick to other trading positions which (in their most recent format) are available to my subscribers.
It seems that we won’t have to wait long for mining stocks to decline in a really profound manner. If you’re wondering if this really is possible, just look at what FCX is currently doing once again. And how much money you’re making (or might have been making) on shorting it.
Thank you for reading my today’s free analysis. There’s more (including trading details) in the full version of my analysis – today’s Gold Trading Alert. Those, along with 11 other premium services are included in Golden Meadow®’s Diamond Package.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder
Golden Meadow®