It turns out that we cashed in profits in SPXL pretty much at the short-term top – congratulations once again.
The key question for today is if that was indeed the final top for this correction, and – in consequence – is it high time to re-open the short position in the FCX. After all, the latter has already moved to my previous upside target.
In short, it seems to me that we might get another daily rally in stocks either today or tomorrow, which could be accompanied by a relatively stronger rally in the previous laggards: silver, copper, and FCX. That’s how the markets often operate – the investment public enters the market close to the end of the rally (and right at the top) often buying what’s cheap without considering that it might be cheap for a reason. And that’s why we see laggards catch up in those times.
Given the performance of silver, copper, and FCX, we are not there yet.
Now, we don’t have to have this signal, but its absence means that we are not in the very favorable risk/reward situation for new trading positions, but rather in “only” moderately favorable one.
There are some signs suggesting that this is/was the top, and there are some suggesting that we’ll get another move higher. This is important also for gold and mining stocks, as they would be likely to decline along with stocks – and along with rising USD Index. Right now, the latter is still moving lower, which tells us that the markets are still highly emotional (remember, the tariffs which only got delayed not abandoned, are bullish for the USD Index for many months).
Also, if you’ve been wondering why would we be shorting mining stocks and not some other sector, one of the reasons is the situation in the USD Index. Stocks are likely to decline much more AND the USD Index is likely to rally substantially in the medium term. Mining stocks are likely to be very negatively affected by both. So, unlike many other sectors, in this case, we have two big reasons for declines, instead of just one (declining stocks).
In case of FCX, we have an additional indirect reason and it’s the likely decline in copper (which is also related to the rally in the USDX, but as you saw, copper can slide even without USD’s help).
Having said that, let’s take a look at the signals that we have right now.
Stocks moved to their previous lows and the upper part of my target area (slightly above it). Based on it, the top is likely in.
Zooming in allows us to see that while stocks bounced off of their resistance, they haven’t declined that much. They have another strong resistance created by the declining line and the 61.8% Fibonacci retracement based on this year’s decline. This would be my realistic maximum for this correction (in theory, stocks could exceed the previous high and rally further, but I don’t think it’s likely to happen anytime soon).
The last time we saw similarly sharp declines based on global events was in 2020. Here’s how stocks performed back then.
Even though nothing changed from the fundamental point of view in early March 2020, stocks corrected about half of their initial slide, and there was more than one strong daily rally. There were two daily rallies separated by a single breather.
As history rhymes, this suggests that yesterday’s rally might not have been the final one. We have a breather (so far) today, so perhaps the final top will be tomorrow, and stocks will slide shortly thereafter. This would be bullish for the immediate term.
Also, since the current situation seems similar to what we saw in 2008 from the economic point of view, let’s see how stocks performed after their initial ~20% decline (after all, that’s more or less how much S&P 500 declined from its 2025 high recently).
Back then, stocks quickly corrected about 38.2% of their initial decline. They already corrected slightly more than that, so based on this analogy – when taken directly – the top might be on.
On the other hand, back then the initial decline took about twice as long as it did this year, which is in tune with what I wrote about the changes with regard to this decline yesterday (from the fundamental point of view). Since this decline is sharper, the correction is also likely to be sharper.
Now, the point of the correction is to cool down people’s emotions or balance them. Time helps. And since in this case we might not have as much thereof during the correction, the correction itself might be bigger in order to move market participants from fear to greed (thus forming the top).
So, can we see another move up – to the 61.8% Fibonacci retracement and the declining resistance line? Yes. Can the markets decline right away? Also, yes.
My intuition tells me to wait a bit, and I noticed that if it provides some indication, it’s usually good to follow it.
Especially that the analysis of the European stock markets doesn’t help much today.
The German DAX almost corrected to its 61.8% Fibonacci retracement. Could this be the top? Yes – the retracement was almost reached. Could we get another rally so that stocks could touch this level properly? Also, yes.
The UK stocks did the same thing but with regard to the 50% retracement. The implications are just as unclear.
Analysis of copper seems to indicate that the correction should be bigger, which would likely imply a bigger correction in stocks as well.
From the broad point of view, we see that the initial declines were previously followed by at least a 50% correction.
The current one was particularly sharp, so we might expect this correction to be bigger, not smaller than the previous ones.
So far, copper didn’t even correct 38.2% of the decline. This suggests that the corrective upswing is not over yet.
Having said that, let’s move to what you might be most interested in – gold price.
In yesterday’s intraday Gold Trading Alert, I wrote the following:
“Today’s intraday high in gold futures was $3,116.76 – less than $7 above the upper border of my target area. This might be it for this corrective upswing. Alternatively, we might see a second top, like we saw in 2011, but the former seems more likely to me. As I wrote previously, I’m not shorting gold here, nor do I plan to do so.”
Given today’s rally in gold, it appears that the yellow metal has chosen a more direct analogy to 2011. Here’s what happened back then:
And here’s what’s happening now:
Please note that the first sharp decline took three days in both cases - a great clue.
It then took several days for gold to test its previous high and top for good, but this time, the rally is quicker, and it’s perfectly understandable. Simply put, back in 2011, we didn’t have such dramatic changes regarding global economy so frequently.
Will gold break higher here? I doubt that – a double top seems more likely, given that the next big medium-term move in the USD Index is likely to be to the upside.
Remember: back in 2008, the decline in the precious metals market really picked up only after the USD Index bottomed.
Meanwhile, silver is up, but it’s not outperforming gold.
There was no (fake) breakout, either. Silver simply moved to its resistance provided by the previous low.
This further validates the theory, in which we’ll get a bit more strength in the markets before the top. That’s when silver would probably jump, providing us with a superb shorting opportunity.
Miners are testing their highs just as gold is.
Are they really strong here? Normally, one might say so, but these are not normal times. This is more like 2020-style “strength”. Remember what happened then?
GDXJ moved temporarily higher only to give it all back and then much more in the following days.
While we don’t need to get a slide that’s just as fast as it was in 2020, this analogy tells us not to take miners’ strength at its face value.
All in all, multiple charts have “this is almost the end of the corrective upswing” written all over them. There are some suggesting that the correction is over, but that’s a minority.
Consequently, I’m keeping the current positions intact, while preparing to re-enter short positions in FCX and enter fresh short positions in silver.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief