Copper, Silver and Gold

After last week's very slow rate of signals in 3C, is exciting to get some action back in the market. What must be said is that for the last week or two the market has been dominated by EUR/USD correlations so many of the move we have seen are simple legacy arbitrage and not improvement in underlying conditions. Of course GLD, SLV and Copper all benefit from a weaker dollar and the Euro is a decent proxy (in an inverse correlation kind of way).

So the dollar weakness/Euro strength is naturally going to move metal and energy/oil up just from a correlation standpoint, it doesn't necessarily mean there's anything more then that going on so good FX analysis is crucial right now.

Here are the metals today

 First FCX/opper, we have a very obvious triangle in place, that makes for fertile false breakout breeding ground. The question is whether this was a false breakout or not. Based on the main catalyst which I am bearish on, the Euro, I would lean toward a head fake here as the triangle is too obvious for Wall Street not to use it. Volume sure doesn't look like a strong breakout in FCX, but rather a correlation move that momentum chasers pled in to.

 Here's the correlation between FCX and the Euro (in red), a little bump in the Euro leads to that kind of move? Fishy. I'm more interested in the dislocation between the two which would suggest FCX is over-valued and a head fake is 80-85% of the time, the last thing we see before a reversal for a number of reasons that you all are probably very well aware of.

 Intraday the 1 min chart tells me 2 things, 1) it looks like there was a ton of distribution into today's move and 2) in the white area there is NO positive divergence which we would almost certainly see on a planned cycle move or larger bullish sentiment toward FCX/Copper. This suggests to me a Euro based move with momentum monkeys chasing it, providing Wall Street demand to sell in to.

 Look at the leading negative divergence on the 2 min today, that looks like very strong distribution, so keep your eye on FCX for a move below the apex as a potential short trade.

 The 5 min chart from left to right, in green we have 3C confirmation of the move down, then a negative divergence with a head fake breakout move at the yellow arrow which as usual, leads to some sharp/quick downside.  Then another negative divergence/distribution in to the 23rd sending FCX lower. The 28/29 of Dec. saw some accumulation, but we knew the Euro would be bouncing , thus the reason the trades last week were hit and run. In the red box, that is the worst kind of divergence possible, a leading negative divergence and the 5 min chart carries some weight, so al 3 timeframes for today lean toward heavy distribution in to a move that just so happens to be a probable false breakout of a triangle, which technical traders would chase 9 times out of 10.

 As for longer term analysis, until I see better signals I'm not making any trade calls on gold miners, but today did have a leading negative divergence that got worse as price went higher, classic Wall Street sell in to strength.

 Here is GLD and the Euro correlation, for months now I've been suspicious of gold, thinking we have either hit a bubble or an intermediate top. The triangle (this large) is usually a top. In the white box, look what happens when the price is manipulated away from the correlation.

 Here's the 200-day providing resistance

 And the long term support of the 150 day failed for the first time in 3 years recently.

 Here's that break of the 150 and on a break away gap no less.

 GLD 15 min saw some accumulation in white and distribution in red.

 However look at the short term 2 min hart's distribution today, someone seems to think the Euro is not going to break through resistance I pointed out earlier today.

 Silver shows a few accumulation zones and while I'm not endorsing a SLV trade, I will say it acts better then GLD right now.

However after some accumulation (white) and confirmation today (green), SLV saw the same distribution late day that I suspect is all FX related.

If nothing else, FCX may provide a decent trade. GLD would be next on my list, I'll sit out SLV for the time being.

More to come in a bit