The Warning Sign Inside the Gold Rally

 

Yesterday I talked about how silver’s relative weakness could have helped identify the top in gold and silver on Friday, but there was another way to spot the same warning signal if you were watching the gold stocks relative to gold itself. Sometimes the clearest tells don’t come from the headline asset, but from what’s happening just beneath the surface.

Above is a 60-minute chart of GDX, the ETF that tracks gold mining stocks. In the lower pane is a ratio line of GDX versus GLD. Early on, this relationship was about as clean as it gets. As GDX moved higher, the ratio line followed it almost lockstep picture perfect, with no divergences at all. That kind of action confirms a rally. When gold stocks are outperforming or at least keeping pace with gold, it tells me the move is healthy and broad-based.

That all changed at point B. GDX pushed to a new high, but the ratio line did something very different. Instead of confirming the move, it made a much lower high. That’s a classic relative weakness divergence, and it immediately put the rally on notice. The reason for that divergence becomes clear when you look at what gold itself was doing at that moment. GLD was exploding to the upside, yet the gold stocks could only manage a marginally higher high. In other words, the miners were no longer keeping up with the metal.

That disconnect matters. Gold stocks are leveraged plays on gold, so when gold is surging and the miners aren’t responding with equal or greater strength, something is wrong. The ratio line captured that weakness perfectly. You didn’t need to predict anything  you just needed to observe the relationship.

Sure enough, the confirmation came quickly. The first large red candle in GDX was the signal that sellers had taken control. From there, the damage accelerated. GDX sold off sharply, gapped down at the open, and closed near its lows for the day. The divergence didn’t tell you exactly when to exit, but it put you on high alert and kept you from being blindsided.

What’s even more compelling is that this wasn’t isolated to GDX. Other gold stocks like NEM, AU, and AEM showed the same type of relative weakness leading into the selloff. When multiple names flash the same signal, it adds weight to the message.

This is a great example of why I rely so heavily on relative strength and weakness. Price alone can be deceptive. The ratio line helps answer a critical question: is the market truly strong, or is the move starting to crack? In this case, it was clearly the latter.

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Record Volume and Room to Run

 

The month has come to an end, and what a month it has been for RDW. Looking at the monthly chart above, the first thing that jumps out is the record volume we’ve seen. Seriously, just look at that massive spike and what’s even more interesting is that we aren’t even overbought on the monthly chart yet. That tells me this isn’t a climactic top; it feels more like an igniting move that still has room to run. In my opinion, I think we still have a lot more upside ahead, and that makes this setup particularly exciting.

Shifting to the daily chart on the right, I’m looking closely at RDW with its simple moving average of the lows. I can’t tell you how many times this moving average has acted like a roadmap for me, helping me pinpoint some really solid pullbacks. Each time price has approached this average, it has provided consistent support, giving me confidence that it’s a level worth paying attention to. Right now, that moving average sits at about $11, and that’s the level I’m focusing on for potential entries.

I’m not going to just blindly buy at $11, though. I want some kind of confirmation on a lower timeframe before stepping in. I’ll be looking for signals like bottoming tails, engulfing bars, trendline breaks, or relative strength showing up. If any of those signs appear once RDW tests the $11 area, that’s when I’m planning to get involved. This approach gives me both a clear price level to focus on and a structured way to confirm that the pullback is legitimate.

What excites me most about this setup is the combination of huge monthly volume without being overbought and a daily moving average that’s proven itself repeatedly as support. That’s a rare mix, it gives me confidence that we aren’t looking at a short-term spike but a move with more legs. Patience will be key here. I’ll wait for the test of $11 and the confirmation I’m looking for, and when it lines up, I’ll be ready. RDW has been giving signals I can trust recently, and this looks like another opportunity to take advantage of the trend while respecting risk. I’m optimistic heading into the next month and ready to make my move if the setup delivers.

For more analysis and market insights, visit my homepage 

January Promised Everything… and Delivered Nothing

 

It’s the end of the week and the final trading day of the month, and on both the weekly and monthly timeframes we closed with red candles. That alone tells you a lot about the tone in the cannabis space right now. Above on the left is a weekly chart of MSOS, and you can clearly see that we’ve broken down from a five-week consolidation. That range had been tightening up nicely, but instead of resolving higher, sellers stepped in and pushed price lower. That’s never what you want to see coming off consolidation, especially when expectations were elevated heading into the month.

On the right is the monthly chart of MSOS, and here we’ve put in an inside month. What’s interesting is that many of the individual cannabis stocks are showing the same pattern. Inside months tell me the market is coiling and waiting, but the problem is that this particular inside month closed down. That suggests hesitation and frustration rather than constructive accumulation.

At this point it’s obvious the market is waiting for the next real catalyst. When updates don’t come specifically from Pam Bondi, impatient traders start selling. President Trump had made it clear he wanted rescheduling finalized by the end of January, and as we can all see, that deadline has come and gone. The longer the silence, the more confidence erodes in the short term.

Some people are pointing to broader geopolitical issues, like what’s going on with Venezuela and Minneapolis, as reasons for the delay. The hope is that February becomes the month where rescheduling finally gets pushed across the finish line. Maybe that’s the case, maybe it isn’t we’ll find out soon enough. For now, all we have is price, and price has been disappointing.

I’ll admit it, I came into January with high expectations. Seasonally, January and February tend to be strong months for the cannabis sector, and with all the buildup around policy changes, it felt like the timing finally lined up. Instead, all we could muster was an inside month with a red close. That’s a tough pill to swallow.

That said, I’m not throwing in the towel. I remain cautiously optimistic heading into February, but I’m also realistic. Until MSOS can reclaim the $5 level, a lot of what we’re seeing right now is just noise and frustration driven trading. The bigger move will come when price confirms it. Until then, patience is required. Let’s see what the new month brings.

For more analysis and market insights, visit my homepage 

Silver Blinked First… Did You Notice?

 

Wow, what a big down day for gold and silver and what a beautiful relative weakness setup to get positioned ahead of it. Trades like this are exactly why I pay so much attention to intermarket relationships. This one really checked every box, so let’s walk through it step by step.

Just a few days ago, I started talking about the possibility of a near-term top forming in the metals, and the reason was simple: silver was lagging. I’ve said it many times when the leader is no longer leading, that’s worth paying attention to. Silver typically leads gold during strong upside moves, so when that relationship starts to fray, it’s often an early warning sign.

To be clear, I also laid out my line in the sand. I said that if silver broke to new highs, I would hold off on shorting. And technically, silver did break higher. But instead of invalidating the setup, that breakout actually created new relative weakness divergences, which made the trade even more compelling.

On the chart above, I’m looking at a 2-hour chart of silver futures, with gold futures below it, and a ratio line of silver versus gold in the bottom pane. Start with gold. At point B, gold is trading meaningfully higher than it was at point A, a strong, aggressive push higher. Now look at silver. Even though silver also made a higher high at point B, it was only marginally above point A. You could visually see that silver just wasn’t keeping pace.

If that wasn’t obvious enough, the ratio chart made it crystal clear. At point B, the silver to gold ratio made a lower high compared to point A. That told me the move higher in silver was weak relative to gold. In other words, the breakout lacked real leadership.

Once minor support levels began to break, the outcome was decisive. Both gold and silver sold off hard, but silver led the way down exactly what you’d expect when relative weakness is present. The falling ratio line confirmed that silver was underperforming during the decline as well.

This was a textbook example of how using relative strength or in this case, relative weakness can help you catch tops that are otherwise very difficult to time. Trades like this don’t come around every day, but when they do, you want to be ready to recognize them.

If you want to see how this setup started to form, check out my original post from a few days ago, “When the Leader Stops Leading: A Key Level I’m Watching in Silver.”  

PLTR Slips Below 200-Day… Did You Catch That Signal?

 

Above is a 60-minute chart of PLTR, with the SPY shown in the lower pane for comparison. I like using this timeframe because it does a good job of highlighting developing relative strength or weakness without getting lost in the noise of very short-term charts. In this case, the message has been pretty clear.

At point B, the SPY pushed to a new high. PLTR didn’t follow. Instead, it put in a lower high, which immediately caught my attention. That’s a classic sign of relative weakness. When a stock can’t keep pace with the broader market during a rally, it’s often a warning that sellers are quietly gaining control. Sure enough, once minor support was broken, PLTR rolled over and sold off, confirming what the relative action was already suggesting.

Switching over to the daily chart on the right, the bigger picture looks even more concerning. PLTR is now clearly trading below its 200-day moving average, a level that a lot of longer-term participants pay close attention to. When price loses that moving average after an extended run, it often marks a shift in character from bullish to neutral at best, or outright bearish at worst.

This move didn’t come out of nowhere. I’ve been warning about potential weakness in PLTR since December 29th. I’ve marked a grey circle on the chart where I alerted my readers that PLTR had turned bearish. At that time, we saw a failed swing high against the SPX along with a break of the uptrend line. Those are not things I ignore, especially when they happen together. Since that alert, PLTR has put in a pretty clean move to the downside.

Just to be clear, when I say I alerted my readers, there’s no paywall or subscription involved. My blog is completely free. I post these observations in real time, not in hindsight. If you want more detail on the initial breakdown, you can check out the post titled “PLTR Turning Bearish: Failed Swing High vs. SPX and Uptrend Line Broken.”

For now, the burden of proof is on PLTR. Until it can reclaim key levels and start showing relative strength again, I’m treating rallies as suspect and respecting the weakness the charts are clearly showing.