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There are times to keep being focused

on higher timeframes, yet the finer ones do send valuable signals at times too. And today, every precious metals investor better pay attention to their message. Take a look at the below chart featuring the miners.

We will compare the junior miners to what GLD ETF and SPY did. The latter are ETFs representing gold and the S&P 500.

We zoomed in to the 2-hour chart to show you something specific that happened in the last few days and to provide the likely explanation for it.

Namely, the miners started to show odd strength relative to both: GLD and SPY, and we marked it with a green rectangle.

The relative strength started in the final part of the previous week, when the GDXJ approached the $36 level. Instead of falling further, just like GLD did - or at least like the SPY did on Tuesday - the GDXJ stayed above it.

The gold trading tip for today would be always question such situations before taking them at face value. Why would that be the case? What factor could have been strong enough to trigger such strength? Or maybe - in the absence of such a factor - was the mining stock sector really strong enough to withstand the powerful bearish forces in the form of declining GLD and SPY?

There is a good reason for the miners' "strength". It's the $36 price level itself. Or, more precisely, the strong support that it provides.

This is the price level from which junior miners rallied in early March.

This is the price level at which juniors reversed on an intraday basis on March 9^th.

This is the price level that stopped the decline on March 10^th.

And this is the price level that - once broken on March 11^th - triggered waterfall selling that quickly took the GDXJ below $20.

This is also the levels that stopped the late-March rally, and the level that initially served as resistance on April 9^th.

It also served as support after the initial - April 15^th - decline.

Given that this price level worked as both: support and resistance so many times, is it really surprising that without a major breakdown back below the previous 2020 highs in the GLD ETF, this level is holding strong?

It's absolutely normal. Let's not overestimate this support's importance, though. This level doesn't invalidate the bearish gold price forecast, it only changes its shape a bit. Instead of declining just like GLD, the GDXJ is taking a breather above $36, but once GLD moves decisively lower, the GDXJ would be likely to break below this level, and slide profoundly - catching up with the pace of the slide.

Please note what happened on April 9^th and April 13^th. The miners first declined (about $2) based on the resistance, but once they finally broke above the $36 level, they soared until topping almost $6 higher. What's happening now? The GDXJ moved higher first (about $2) and as soon as it gets the bearish lead from gold, it's likely to catch up, by breaking below the $36 level, and sliding much further.

The very same chart features a specific self-similarity suggesting that the junior miners are likely to get this kind of bearish kick shortly. Not only is the current situation in the GDXJ itself very similar to what happened in mid-March, right before the slide, and right before the breakdown below $36 - it's also the case with the GLD ETF.

The GLD is moving back and forth around its blue moving average, while the RSI indicator (note: everything on the chart is based on the 2-hour candlesticks, not the daily candlesticks) is moving around the 50 level.

The similarity in each ETF on a stand-alone basis might just raise an eyebrow, but the fact that both similarities aligned at the same time - along with a breakdown in the general stock market and rallying USD Index - should make one's both eyes wide open.

The next big move for the precious metals market is likely to be down, and it's likely to be really significant.

The full version of today's analysis includes details of our currently open position as well as targets of the upcoming sizable moves in gold, silver and the miners.

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Crude oil was just trading below 0. Well, not completely, but the nearest futures contract was trading below 0 for the first time ever. Ridiculous, right? Well, yes, and no. It's not that ridiculous if you take into account bigger supply due to earlier OPEC+ disagreement and lower demand due to Covid-19. Producers have to produce crude oil on a daily basis, because shutting down production is costly. One cannot store oil just anywhere and the facilities designed for it were already getting full. This means that people were unwilling to buy it, because it was not really possible to store it. To encourage people to buy it (and take delivery) anyway, producers paid extra instead of charging per barrel - more than $30 per barrel.

Sure, it was just the May contract, which expires today and the delivery is next month. The following futures contracts (the ones that expire in the following months) are priced at about $20 or higher. But will they be able to remain as high? The market thinks that the situation will somehow be resolved within a month. But will this really be the case? If not, we could see something similar once again.

Crazy times, and economic history in the making.

Why are we starting today's Gold & Silver Trading Alert with remarks about crude oil? For two reasons. First, the above is the news that gained the spotlight yesterday, so you might have wanted to read a quick explanation. Second, this is a clear message to all investors and traders worldwide:

The unthinkable in the markets can happen, and it can happen overnight.

If anyone still thought that silver below $10 (or $9) is impossible, they probably no longer think so to. And this means that support at these levels will be much weaker, and the odds that these levels will be breached, just increased.

Actually, silver is also primarily produced as a by-product (in copper mines). As copper is produced, they also have to extract silver. This is an oversimplification, but it will be sufficient for this discussion. The point is that since the new silver supply will keep on coming anyway, the price might decline substantially if the demand doesn't match it.

Of course, there will be huge demand for silver bullion as the price moves lower... But, if the mints can't produce enough to satisfy the demand, we could see relatively high silver bullion prices while at the same time seeing a big decline in silver futures. Well, we already see this today, but based on what we saw in crude oil, it's obvious that the premium for silver could increase substantially.

The actionable part of the above is two-fold:

1. If one has silver stored as insurance, we don't suggest selling it based on the likelihood of the upcoming decline, as the premium on these silver coins or bars could increase, making up for some of the decline. At the same time, it might be particularly difficult to get back in the physical market at the bottom (as described by the futures market).
2. The decline in the futures market and other proxies for the precious metals market other than the physical, tangible ownership could be severe (which is in tune with what we've been expecting to see anyway).

Having said that, let's turn to charts, starting with the USD Index.

In short, the self-similarity to the early-March continues, which means that our previous comments on the above chart remain up-to-date:

The USD index soared after forming an intraday reversal. It then declined, rallied back up, and declined quickly once again - all just as it did in early March.

The final 4-hour decline was sharp and it took place as the USDX broke below the rising support line that was based on the early intraday lows. We saw the analogous decline on Friday, and the USD Index has been moving slowly up since that time. Both situations are very similar from the pattern point of view.

Back then, the analogous price action triggered further upswings, which translated into lower prices of the precious metals. The bearish implications remains in place at this time as well.

Please note that the recent price action also almost created an inverse head and shoulders pattern (we'll have H&S patterns in other markets as well). Once the USD Index breaks above the mid-April highs, the pattern will be complete, and it would like result in a rally to about 102 level.

How could the above translate into a gold price prediction?

It would simply be likely to make gold slide. Quite likely in tune with its 2008 decline.

The full version of today's analysis includes details of our currently open position as well as targets of the upcoming sizable moves in gold, silver and the miners.

Subscribe at a discount today and read today's issue ASAP.

• Read more

Available to premium subscribers only.

The full version of today's analysis includes details of our currently open position as well as targets of the upcoming sizable moves in gold, silver and the miners.

Subscribe at a discount today and read today's issue ASAP.

• Read more