It’s far too early to say the basic materials stocks like VALE, and BHP are turning around, yet they all had very high volume on the turn higher yesterday, and I have been waiting patiently for them to put a bottom in. Situations like this can take time, so patience is necessary, but since we are in a commodity bull market and the USD appears to have at least found a temporary top, I am inclined to start a position in Vale soon. When they have growing earnings they pay out some hefty dividends. I typically wait for an uptrend to be established, as defined by the daily moving averages all heading higher with the 50 day above the 200 day MA, but that will take some time to materialize in Vale, as its trading so far below the MAs. These cases can work well, and the position can get profitable right out of the gate, though a rip-roaring bull will not come soon. First the stock has to bottom, like we might be seeing now, then it gets a decent rally into the moving averages or some trendlines where it will take time to get through them, and trade solidly above. Only then do momentum and trend traders come into the stock, and we get a smoother and more significant ride higher. However, if Vale can pay some dividends to me while I wait, and I can be up 15-20% on the position quickly, I don’t mind buying earlier than I normally would. I haven’t decided to buy yet, and since its Friday before a long holiday, I will not buy until next week if I decide to get involved. Here are the monthly and weekly charts, the monthly goes back twenty years, and both show stochastics in oversold territory.

I tend to agree with Patrick Karim that horizontal trend lines are most important. The weekly chart of SILJ is mine, but I suggest you follow the link to Mr. Karim’s fine work as well, it looks like the $31 level on the silver yearly chart going back to 1970 is a very important area. Above $31 is a massive breakout, no matter when the metal closes there. Could it happen by December 31st? Sure, its already there and just needs to hold, or go higher. Recall that we are in the strongest season of the year for gold and silver.

Don’t forget to visit Patrick Karim on X.

We started a position in natural gas (March contract) late last week at $3.015, and will look to add to the position. Basically, after natgas has a huge +20% day recently, it broke the downtrend, and while I don’t expect it will head immediately higher with the velocity we have seen, it appears that this commodity might have transitioned to a bull market again. Stops are down around $2.80, give or take a few pennies.

I’m also keeping my eye on agriculture stocks like NTR, and the futures in both Corn and Wheat. I have not gotten involved as yet, but its possible these commodities are about to transition back to bull status as well, after a correction lasting nearly two years.

Let’s step back to the weekly (intermediate) time frame, and look at EXK. As the fifth largest holding in SILJ, this looks attractive to me since it has well-oversold stochastics, along with having completed a 50% fibonacci retracement. This is as good a time as any to get long, for those looking to add or start a position, or one could buy SILJ, since many charts in the etf look similar.

Tax-loss selling in the junior miners has been brutal this year. Take a look at ASM (Avino Silver and Gold Mines), after breaking into significant new highs in late October, it’s gotten smashed 44% lower in just the last 8 weeks! This is one I bought today, along with CHPGF (Chesapeake Gold), and a few others. I will take them off the hands of those that can’t take anymore!

I will use the weekly chart of the SLV etf for a proxy on silver, with a quick horizontal trend line added, to show why I am adding to our Silver futures (March contract) position today if we get over the $30.09 level. That level if taken out on the upside, would suggest the move lower this week was a false breakdown. Thus far, Silver has managed to get up to $30.03, so we are getting very close. I will add 20% to the current position size.

There are so many miners with similar charts, I only use this one of symbol ANGPY since I was buying it today at $5.35 per share. Its the world’s largest platinum miner, and pays a dividend of 3.3%. Apparently its a favorite stock of Jim Grant from the Interest Rate Observer, I read recently. Like I said, there are many, many miners including the SILJ etf itself that are down 30% off recent highs just made in October, so I will continue adding to positions here since we are still up nicely overall. Having a good cushion of unrealized gains makes it easier to stay calm in corrections like this, so that we can buy or add to positions versus being scared out of positions, the opposite of what we want to do.

The Russell 2000 etf by symbol IWM is already down 10.8% from its all time highs made in late November, less than a month ago. We also see groups like biotechs, solar, and financials (KBE) making new correction lows. So the question is, how much downside will they see, and with crypto junk also crashing, will some of the money leaving these overbought areas find its way into gold, silver and the miners? Stay tuned!

We are currently pulling back in the metals and miners, just ahead of the best time of the year seasonally, for the group. Time to add into dips again, on oversold technicals on shorter time-frame charts like the weekly and daily setups. It looks like a monthly close over $39.50 or so might be enough to motivate the miners to make a massive bull run to the old highs in 2011.

As I type about 90 minutes before the US markets open, SILJ looks like it will test and possibly slightly break its uptrend line, 200 day, and 200 week moving averages all at once! The excuse being used it that the Trump win puts the markets back into “risk-on” mode, and that can be seen in bitcoin rocketing to new highs, and the general stock market making new highs as well. In the face of that, we see copper stocks (COPX), and precious metals miners getting smashed. So, the question is, has the bull market in commodities and especially gold and silver ended. If one thinks so, that these recent sharp moves are going to continue, then they should make drastic changes to their portfolios, but if one is like me, and thinks these moves are just short term reactions to a Trump win and nothing will change in the overall policy of dollar destruction (more wars, more spending, etc), then this should be a good area to accumulate more heavily the miners and their metals. I am leaving copper aside for now, in fact I sold TGB and LBCMF this week to take profits, but only because I think we are more likely to see negative economic data come out soon, as is often the case early in a new presidency. The winner likes to cram as much negative news into the first year of his term, so that they can blame the other guy and lower expectations, then they can easily beat this expectations as their term winds up, and claim how well they did!

I am taking this selloff as a buying opportunity, with SILJ down near 25% already in three weeks (and 11% just this week so far). Recall that I have pointed out corrections in bull markets are short and fast, and can cut deep, all of which we are seeing now. Prior to the bashing, gold and silver miners were sporting very nice charts, making multi-year highs, and silver itself was making 14 year highs, while gold continue to make all time highs. These trends don’t break easily, so we should expect a good-sized bounce soon. Does that mean I think the fast rise in prices we saw will return quickly, and the bull market will be back on in full force? No, it could happen that way, but more probable is we get a bounce, then they sell off again, then rally, as they go mostly sideways for awhile (4-8 months?), before the bull is ready to re-exert itself with force. In any case, declines like this one that occur in bull markets, typically are places one wants to add exposure. Below I will post both the daily and weekly charts of SILJ, keep in mind trend line averages are never lines in the sand to me, they are just loose areas where we can look for support, resistance, etc. All the names I have mentioned in recent articles and even a few new ones like ASM, which is another miner that has just pulled back 33% after making new multi-year highs, are stocks I am buying, including SILJ itself. Stay focused, and take advantage of some of the sales happening right now!