The Near-Term Profits and the Key Long-Term Factor

Miners’ rally failed, gold’s upward momentum is broken, and the USDX appears to have bottomed. Very interesting times ahead!

Let’s start today’s discussion with GDXJ’s short-term charts, as that’s where we see the most interesting action.

The Near-Term Profits and the Key Long-Term Factor - Image 1

While the recent rally might have seemed like a big deal, in reality…

Junior mining stocks simply verified their breakdown below the rising, black resistance line. And it happened in perfect tune with the sizes of rallies that we saw after the previous negative surprises from the nonfarm payrolls (marked with vertical, dashed lines). This means that the top is very likely in.

The Near-Term Profits and the Key Long-Term Factor - Image 2

Zooming in allows us to see that the GDXJ actually broke below its very short-term support line, which is yet another bearish confirmation. After all, when that happened after the August-September double-top, it was followed by a sizable decline.

The next (temporary) stop is the previous 2023 lows.

Speaking of those lows, the price of the FCX is already testing its yearly lows.

The Near-Term Profits and the Key Long-Term Factor - Image 3

I described the technical weakness of this company multiple times in the past, and indeed, it’s been moving lower recently. This year’s lows are the final short-term stop before this company’s shares tumble to its 2022 lows and then – quite likely – much lower, similarly to what they did in 2008. In other words, it’s not only that profits from our short positions in the GDXJ are likely to increase in the future – the same goes for the profits from our short position in the FCX.

Let’s switch gears and zoom out significantly.

Enter the very long-term USD Index chart.

The Near-Term Profits and the Key Long-Term Factor - Image 4

This day this, the other day that – it’s easy to get sucked into the “short-termism” while ignoring what’s really going on.

And what IS really going on in the USD Index is this:

The USDX is after a very long-term breakout and its verification. It was likely to soar based on this breakout, and when I was warning about it in the previous years, almost nobody listened. Once the USDX soared through 110 like a hot knife through butter, people paid attention, but since it corrected, people are questioning the rally once again.

Let me tell you this: Corrections. Are. Normal.

The fact that the USDX declined to its 2017 high (ok, it moved a bit below it) and then rallied back up, means that the breakout above this level was verified, and that the USDX gathered strength for another massive upswing.

This is exceptionally bullish for the following weeks and months – for the USDX, that is. And since the latter and precious metals tend to move in opposite directions, this has profoundly bearish implications for gold, silver, and mining stocks. And it has profoundly optimistic implications for those positioned to take advantage of those moves.

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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief