The bounce has arrived, and so far, so good. It has been a sharp one, taking the strongest miners of the last 9 months back up to their recent highs, some making new post-2016 highs in just a few trading days. So, is this something that will fizzle out in a week or two, or a resumption in trend to the upside that started last October? It’s too soon to know for sure, but to me the force with which this bounce took place is telling us a lot. The miners want to go higher, but might still be held back by the typically weak summer when few people get involved. I will stay invested because a month or two wait, if that is what it takes, is the price to be paid for making the big gains that this group can serve up, for those that can stay invested. There are also precedents, like 2016, where the miners went up all year long straight into August, I’m not betting on this, but the point is that it can happen, and that was the best year for miners since 2011.

I also note that the general stock market, like the QQQ etf, bounced with equal force in these last several days. However, I’ve been looking for their upside to peter out, and a day like today where they opened strong (up 1% or so), but closed negative on the day. If the stock market can weaken again in the near term, that should support the precious metals and their miners. In any case, I am heavily long, and also added another stock today by the symbol MUX at $1.40 per share. See the chart above.

Much of the strength in metals can be attributed to the weakness in stock markets, which is also reflected in the industrial commodities and oil, which has taken a severe beating lately, so bad that the OIH etf is now at lows not seen in a long time (at least since 2006 or more, if I recall correctly). We are seeing that the stock market, once being bought up at every opportunity and closing positive every day for months on end, now doing the opposite. While we look short term oversold by technical measures, and a bounce could ensue at any time, it seems that all rallies are being sold into, and many days the market starts positive, it still finishes the day weak and often near the lows. “Sell in May, and go away” seems to be in full force this year. Note the SPY is sitting close to its 200 day MA, but that the MACD indicator sports a wide open “mouth”, suggesting more downside, which if the SPY cuts right through it’s 200 MA like a hot knife through butter, will renew fears of a bear market on the horizon. My precious metals miners should benefit with higher gold, in a flight to quality. There simply aren’t too many attractive options to compete with at the moment, which could possibly cause the metals to really ignite and accelerate to the upside. This is not a prediction, as nobody can know, but the probabilities suggest more upside and I will be there for the ride if it only goes a little, or a long way higher. One step at a time, sit and let things continue to fall into place. I will sell at overbought levels on the longer term charts, but we have no idea how high the prices will be at that time. I will not exit anything based on price alone.

A wise investor is always looking down the road for new setups and catalysts. With that in mind, I will keep and eye on other commodity stocks, specifically oils (OIH), copper stocks as well (COPX), and even Uranium stocks (URA). I think it is too soon to get involved in those just yet, so will sit and watch for a long term bottom to be put in place. Why the focus on commodity stocks? Simply, The US dollar has been on a tear higher and could be turning the corner lower, and commodities vs the S&P are way undervalued on a historical basis. These type observations have nothing to do wtih short term trading or timing, they are just things to know as we look for other technical signs of a bottom being formed. I will also keep an eye on past leading groups in the stock market, as they often rebound the hardest once a turn comes. In that area, I will watch the XBI biotechs and the MJ marijuana stocks, but so far they have been in a very strong downtrend, again too early for me to want to invest. I want them to wash out so hard that nobody wants to hear those symbols mentioned ever again!

No doubt these stocks are due for a bounce, as they are all well oversold on most technical measures, but I will stand aside and not try to play the long side in these. It is HOW THEY BOUNCE (strongly, or barely at all) that I am interested in, and if I was looking to do a short term trade, considering the lower highs and lower lows (downtrends), I would instead look to possibly sell short into the rallies if they are weak. This is similar to being long miners as they often move opposite the stock markets. So, a weak bounce in these groups that rolls over quickly, will have me pushing aggressively long on my mining positions rather than trimming or taking profits into a bounce.

Of course, we cannot know how strong the move will be, but it appears the turn high in miners that I have been stalking is finally here. Starting on Thursday, May 30, 2019 and following through very strongly and on huge volume Friday. I was adding here and there over the last several weeks, patiently waiting for miners to resume their uptrend. Further, the GDX also closed up over it’s 50 day moving average in an explosive move, the GDXJ fought back above it´s 200 day moving average, and almost all the precious metals etfs triggered PSAR buy signals (the pink diamonds on the charts), suggesting the trend has changed. See GDX and GDXJ below.

And gold itself looks positively splendid, jumping on big volume and turning the trading pattern back into an uptrend (higher highs, and higher lows). A lot of this has to do with what is happening in other markets, like the US dollar and stock markets, as well as oil, which I will cover in the next post. For now, suffice to say it’s good to see the downtrend halted in its tracks and miners turn higher, it just remains to be seen how far they can run, but I suspect it will surprise on the upside. I am already heavily invested (see how accounts I manage are invested on the paid portion of this site), but will be looking to add to positions carefully over the next few days and weeks. I will not run out and pay up on Monday, but will look for oversold signals on the 30 minute bar charts to take advantage of small pullbacks to add. Still, an investor should already be mostly invested, now is the time to just add some extra leverage, but never chase prices higher when buying large positions.