VOT Research Desk
Nov 2
Market Analytics and Considerations
While the S&P 500 is booming, gold is unable to mask its fragility. Junior miners are impacted by both, but which direction will gold stocks take?
Will the stock market rally last? Will miners rise with stocks or fall with gold? Charts offer cues.
The direction of the USD Index frequently changes.
USD Daily Pattern
That appears to be what we observed most recently. Since mid-2021, each time the USDX fell below its 50-day MA, it has indicated that a bottom was in or was poised to form.
The USDX also advanced at the same time, roughly reaching the July top and the bottom boundary of the flag formation. All of this is bullish, not just in and of itself, but also due to previously this year, in early August, we observed something quite similar. What took place after that? Well, gold sank like a pebble in water in addition to the USD Index rising.
The primary distinction this time is that gold (located in the lower portion of the above chart) is not anticipating a rise as significant as the one in July. In other words, compared to the beginning of August, gold is weaker and the outlook is more negative.
Gold was unable to rise back above $1,700 during its most recent run-up. All of it is very bearish and feeble.
Gold Daily Chart
Gold confirmed its collapse below $1,700 instead of rising back above it, and the stochastic indicator gave a new sell signal. Yes, the confluence of elements is bearish. As if that weren’t sufficient, the silver market just gave a strong sell signal.
Silver Daily Chart
The extremely brief period in which silver outperformed gold is the signal. After a rally, if something similar occurs (especially on high volume), it’s a sign that the rally has ended or is soon to end. Yes, the surge from yesterday (as well as the intraday pullback) occurred on a comparatively high volume.
If we recall the fake rally in early October? That was another instance of this strategy in use.
GDXJ Daily Chart
Although the VanEck Junior Gold Miners (NYSE:GDXJ) rose somewhat upward yesterday, our short sellers in them are still favorable (and we maintain the 2022 trades’ 100% profitability, at least when using the GDXJ).
Incidentally, according to the two black, outlined support/resistance marks, the most recent short-term upswing practically occurred at the triangle’s vertices. Since the vertexes frequently imply opposite filps and the most current movement was upward, the implications are negative in this case
The stock market is the section as to which We get the most inquiries.
Investors’ attention was recently drawn by the S&P 500’s recent rally to new monthly tops. The head and shoulders pattern might still be fulfilled, though, as the index remained below its June 2022 top.
The S&P 500 index has clearly broken through the descending highlighted resistance line centered on the peaks of September and August 2022.
Nevertheless, this becomes evident that the scenario is considerably more bearish than it appears on the surface once we zoom in and concentrate on E-mini S&P 500 Futures.
Since the index futures trade during longer trading hours than the index, the data range in the aforementioned chart is larger. In many instances, overnight trading would not be as significant as the U.S. session; however, in the case of the S&P 500 index futures, those trades are significant due to the fact that this extremely popular index and futures are traded worldwide, and the sizes of those transactions are not insignificant.
At the end of the day, focusing on the S&P 500 record prospects is smart.
A failed attempt to break above the declining resistance line, the October highs, and the 50% Fibonacci retracement based on the decline from August to October is depicted in the chart above. A potently bearish combination, this one.
In addition, the session of yesterday was a daily reversal. And, it is true that all of this is bad news for the stock market.
As a result, the positive influence that the stock market had on mining stock prices is likely to be reversed. The very bearish outlook for mining stocks, particularly junior mining stocks, remains current, at least for the upcoming weeks and months, according to this and the bearish implications of gold and silver charts. They are likely to rebound in the long run, in my opinion, but not without a larger decline first.
