Three weeks ago we turned more cautious on Gold and Silver as they hit our price objectives, but today we're back with a development which suggests they may be ready to start their next leg higher.
The first section of this article is going to be a repeat of what I wrote for US subscribers today and then we'll get into what the implications are for Metals in India.
A weak US Dollar has been a big theme of ours since it broke down a few months ago...and this week it's back in focus.
Let's take a look at the chart and discuss why it needs to be on your radar in the days/weeks ahead.
Here we're starting with the daily chart that's been our road map for the last couple of years. Prices broke through 96, fell quickly down towards 92 and now is trying to stabilize as momentum diverges positively. Prices are also extended from their 200-day moving average and sentiment is running hot, with large speculators in the Euro, the Dollar Index's largest component, holding their largest net long position in history.
All of these factors are at play, and yet the Dollar Index can't seem to find its footing and stage a meaningful bounce here. When we see situations like this where conditions that should spark a rally do not, we pay attention because when they fail they fail hard. If prices break back below 92.50, we could see a swift move down towards 90.50 and potentially 88.50.
Click on the chart to enlarge view.
And for an intermarket signal, we're looking at Silver, which has been the leader in the Precious Metals space since the March lows. Both prices of Silver and the Silver Miners ETF are flagging tightly and look ready to continue in the direction of their underlying uptrend.
We turned more cautious on Precious Metals a few weeks back when our upside objectives were hit and momentum was running too hot, but after some nice consolidation, further weakness in the US Dollar could be the catalyst for their next leg higher.
And on top of its relevance to the Precious Metals' space, the Dollar's next move will have significant intermarket implications for a variety of assets...many of which we've been discussing here on the blog.
So whether you're trading these charts or not, keep these two on your radar.
It's do or die time for the US Dollar Index.
And JC seems to agree with my sentiments as he quickly added a follow-on post discussing Gold, Silver, and Mining Stocks in the US, which I'd recommend at least skimming through.
The point we're trying to make in the above article is that the US Dollar Index has been unable to stage any sort of counter-trend rally despite the conditions being present for it to do so. This leads us to believe that the next leg of its downtrend is likely ahead.
In that environment, the recent consolidation in Metal prices would likely resolve to the upside and they'd begin their next leg higher. As such, we want to update our risk management levels so that it's clear what levels to trade against on the long side.
