Another day, another confirmation of the great disconnect. My analysis today will be rather brief, as what we saw in the past 24 hours simply confirmed what I had posted yesterday and what I’ve been writing previously.
Silver is up over 6% today, and miners are flat – it’s obvious that not all of their drivers are aligned.
The Market Disconnect Deepens
When silver finally tops and declines, it’s likely to slide profoundly – likely to the $50 – $60 area. What used to be a daring bullish target area is now a distant support. Truly remarkable for the white metal.
It could top any day or hour now, but the momentum is so extreme that it might as well continue. If silver soars all the way up to $120, I will likely consider taking profits from the investment position, as that’s where the next technical target is.
You see, years ago, silver used to follow a very specific pattern. Each subsequent top could have been forecasted based on the previous ones using the Fibonacci extension. I applied this technique to the previous tops, and it worked remarkably well.
This technique doesn’t tell us anything about the interim tops, but it did pinpoint the key ones with great accuracy. The $120 target that it’s currently pointing to has one additional feature – it’s above the level most investors will focus – $100. This means that silver will be after a major breakout when it moves to $120… And that’s exactly why it could top there.
Downside Risk for Mining Stocks
The thing is that silver is known for fake breakouts, and while it didn’t prevent it from soaring past $50 recently, it did work on multiple other occasions, so it should be kept in mind. This makes the case for the $120 top stronger.
As I wrote earlier today, mining stocks are flat. After their early attempt to move higher, they moved back down – in tune with their long-term resistance that I discussed yesterday.
The likely reason behind it?
The sizable daily decline on the stock market.
It’s not just any daily decline, either. It’s an invalidation of the breakout above the 2025 high – an important sell signal.
Remember how I told you that miners were much more likely to react to declining stock prices than silver due to the latter’s unique fundamental situation? That’s exactly what’s going on.
Right now, silver is soaring while miners are flat, but when the moves higher and the entire precious metals sector declines, the dynamic is likely to change. Namely, miners are likely to decline more significantly and/or with smaller rebounds than silver. Or perhaps they will fall hard together.
And that’s the thing – the USD Index is still likely to rally – it just held up very well despite an extreme attack on the Fed’s independence. Gold stocks are still likely to decline in the medium term, and this is much clearer than saying that the same will very likely happen in silver’s case.
