Equity indices managed to extend briefly to follow through on last Friday’s minor breakout despite the intra-day reversal into the close. However, this bounce is expected to fail sometime this week which could happen between Tuesday and Thursday before turning lower to break December 2022 lows. While Monday’s Technology strength was seen as a positive for one-day performance out of this sector, Treasury yields and the US Dollar are right near support, and likely start to turn back higher over the next couple weeks. Overall, key areas to focus on lie near 3950-70 for SPX as resistance, and 3794-3800 as support. Given no meaningful structural improvement for SPX, watching for evidence of this triangle pattern being broken will give the most clues as to near-term direction. Based on the 80-day cycle and current lack of confirmation of DeMark weekly confirmation of the various TD signals on many tech stocks, I’m expecting this range is broken initially to the downside. Any violation of 3794 should bring about a pullback to test and fractionally break 3700 before lows are in place for January.
Both Gold and Silver look susceptible to stalling out this week
The Metals rally in both precious and base metals has managed to extend up to areas which now look likely to cause some important resistance on this first major lift off the October lows.
Interestingly enough, but not surprisingly, this recent rally coincided with a similar but opposite move in both the US Dollar and also US 10-Year Treasury yields, both of which are now nearing support this week.
TD Sequential and TD Combo “13 Countdown” signals along with a completed TD Sell Setup are now present on the daily charts of spot Gold, which represents the first time these have appeared since last Fall’s bottom.
Given that the US Dollar is now nearing support and TNX should also make a low this week and turn back up briefly, the combination of these could likely allow for some consolidation in the Metals trade.
Cycles show positive trajectory for the Metals in 1H 2023. Technically, I’m expecting this allows for some continued gains to the upside (potentially back to new all-time highs) once some pullback happens to alleviate recent overbought conditions.
Overall, I view Gold, Silver and Copper as high risk for initiating new longs at current levels. However, one should look at 38-50% corrections in all of these based on the rally from last October to current levels, as being buyable for a much larger rally this year.
GDX also nearing the first area of resistance from its Sept 2022 lows
Gold miners (VanEck Gold Miners ETF – $GDX) also look to be nearing resistance, and while GDX has now successfully reached the highest levels since Spring 2022, this looks like it could stall out based on the following three reasons:
First, Elliott-wave structure shows this to be nearing completion of its fifth wave higher off the lows from last Fall. While this might extend another 2-3 days, the upside looks minimal and GDX increasingly appears like a poor risk/reward for new longs.
Second, prices have now retraced 50% of the prior high to low range from last April. While a test of 61.8% can’t be ruled out, the upside looks marginal from here, technically speaking.
Third, DeMark TD Sell Setups could appear within 3-4 trading days, marking a likely temporary high after this sharp rally from last Fall’s lows.
Overall, I like buying dips on any pullback of 38-50% of the rally from last October’s lows. I’m expecting that 2023 cycles give the metals a decent chance of pushing higher this year. However, at present, I’m more inclined to sell into strength in the near-term, looking to buy weakness on pullbacks in the weeks to come.
Copper breakout should allow for near-term strength only; This also should be nearing resistance this week
Copper has successfully broken out of its two-month consolidation, a short-term bullish development which could allow for further strength to $4.25-$4.30 this week.
However, similar to the precious metals, I’m expecting that many base metals, like Copper, should be nearing resistance and could be vulnerable to peaking out.
Similar to Gold and silver charts, this week’s surge represents what should turn out to be the final wave higher off the July 2022 lows, taking the form of an ABC pattern. Thus, while the breakdown in DXY and TNX has helped to lift metals like Copper, I’m expecting this likely is closing in on resistance, just as Copper ($HG_F) is nearing the 50% retracement of its decline from last March.
Given the bullish buying of Commercial hedgers per CFTC Data, it could be likely that any pullback in Copper over the next few months should be buyable for much higher prices this year into 2024. At present, one should consider stocks like $FCX to be a bit stretched at current levels, and it looks better to hold out for consolidation into February before initiating new longs.