Just identified a warning signal that stopped me in my tracks. Gold has dropped nearly $1,000 from its highs in three weeks. The dollar lost 0.68% today alone.
Both are selling off at the same time.
That combination is rare and dangerous. Gold is your inflation hedge. The dollar represents your purchasing power. When both fall together, it means investors are abandoning the inflation trade while their currency weakens underneath them.
I put it bluntly: we are liquidating precious metals in an inflationary environment.
Three central banks confirm the threat. The Swiss National Bank, the European Central Bank, and the Federal Reserve have all kept rates elevated to fight inflation. Meanwhile, PPI and CPI are both coming in higher than anticipated.
The only sector holding green today is energy. Everything else is breaking down.
The S&P 500 just broke through support levels dating back to October. I pointed out that the Chaikin indicator crossed below zero on a support break for the first time in over a year. Volume today is running at nearly 200% of average.
I walked through specific bearish setups in tonight's video:
- Tesla is setting up for a move to $360. I outlined a short call vertical selling the 395/400 strikes for roughly $1.85 to $1.90 in credit against $3.15 in risk.
- Carvana is within pennies of breaking a six month low. I see a potential 25% to 40% drop from current levels near $290, with downside targets at $222 and $170.
- Consumer finance names like Ally, Affirm, Klarna, and Capital One Financial are next on my watchlist as stagflation pressures hit discretionary spending.
Gold's next support sits at $4,338 if the current level fails. Should expect at least another 5% drop in metals from here, which will drag mining names like Freeport and Newmont lower with it.