Gold Breaks First

1) US DOLLAR – While your daily media tourist clickbait will be clinging to “Warsh” (Trump’s pick for Fed head) headlines, our US Dollar signal is still bearish with an increasing probability of a counter-trend bounce moving toward $97.66 before likely failing and maintaining its downward bias. Importantly, our Fed Front-Runner (the US Treasury 2yr Yield Signal) is LOWER in the last 24 hours (down from 3.57% to 3.55%), which implies A) dovish incoming data and Fed Head and B) a steepening yield curve alongside a Goldilocks US economy in Q1.

2) GOLD – I commented yesterday that with gold volatility this high, sooner or later something has to break…either gold price or gold volatility. So far today we have our answer. Gold price…currently down -7% to $5,006/oz. Is this the end of the gold bull? Probably not, but it likely marks the beginning of the digestion of the run-up since DEC 2025. The top of TREND – a logical place for gold to find some support – is at $4,836. Gold is very overbought here as well, so that digestion/consolidation increases in probability with that. I have no idea what the media’s narrative about gold is today. Bottom line is that gold is down because A) it was straight up since DEC, and B) because the US Dollar is bouncing off a trend that has been in place since 2008! Remember the inverse correlation of -0.93 too. Gold Volatility (GVZ) of 46 isn’t mathematically sustainable…so, as I said, something has to break. Gold’s volatility had 2 moves > 40: into the 2011 gold peak and in 2020 (pandemic). Think that’s high? Silver volatility is running at 111! Potential TRADE range for silver is now 94.54 – 118.48. What does that say about where silver is currently priced? There is an increasing probability that the $87 level is tapped and that these pullbacks in silver can likely be accumulated. But like gold, silver is likely entering a bit of a digestion phase, so buyers are going to need some patience.

3) SPX – The 7000 level for the S&P 500 is extremely important. Not because I say so, but because the market itself has been validating it for months. I don’t discuss it very often, but Fibonacci math is embedded in market action. You can look up how it works on your own, but suffice to say that it has a long history of validity. That said, Fibonacci levels are not exact science, so you use a crayon versus a sharp pencil when working on a chart. The chart below is busy…apologies. This chart steps back and looks at the S&P 500 through the entire 2021-22 bear market. The 100% retracement of that decline (green arrow) brings us back to the early 2022 all-time highs. As you can see, that former resistance turned into critical support during last year's correction, just above 4,800. Now focus on where price has been stalling more recently. That resistance lines up almost perfectly with the 261.8% extension of the entire 2022 bear market decline. In Fibonacci math, 161.8 and 261.8 are very important numbers. The extension levels from the 2022 bear market are pointing to the exact same area as the extension levels from last year's correction. Different timeframes. Different swings. Same price zone. When Fibonacci levels cluster together like this, they reinforce the importance of the level. And right now, that cluster sits right around 7,000. A clean break and hold above 7,000 would be one of the most bullish developments for the S&P 500 that we have seen in a long time. But right now, it has work to do and the longer the S&P 500 stays below 7,000, the bigger the problem becomes. The faster it can reclaim and hold above 7,000, the more powerful the upside setup gets. But, as I said, the index has some work to do, and the flows are suggesting that work isn’t done. Up until WED market close, we were pretty fully invested. But into that close WED, our models cut S&P 500 exposure to 14.5% for our Great White model and to 24% for our Tiger model. The models will gross back up again when they see flows becoming more positive.