For those unfamiliar with the WallStreetSIlver thread on Reddit, I posted this same article over there today. It’s a group of investors focused on silver for many reasons, with lots of great analysis and interesting opinions, I would suggest everybody check it out and bookmark it, as its one of the fastest growing groups on Reddit. Here is the link.

When I started out as a trader about 25 years ago, one of my “mentors” (ie. trainers) in my firm taught me to always assume support and resistance will hold, vs be broken in a continuation pattern. Of course, support does not alway hold, but he taught me that even when a trendline breaks, its not usually followed through with lower prices, more often than not the trendline is more of an area than a definitive line in the sand. Some have said we should draw trendlines with a fat crayon, rather than a pen, because we can blow through support and get many investors shaken out just before prices turn higher and run. I mention this with the WEEKLY chart of SLV I post below. I have seen many around the internet pointing to this chart suggesting its nothing but downside for SLV now, but I recall what me mentor taught me, and I am sure he would be a BUYER at the new lows rather than a seller if he were to take a trade. This is not at all a commentary on the fundamentals of silver, which most here would agree are very bright, this is just about how we interpret lines when they are crossed, so lets see what happens as I am typing this we are still well below the $20.50 “line”, if I am correct we are more likely to see SLV rocket back over that level and higher over the next few days or a week. Even if SLV goes lower over the next day or two, which I tend to think is unlikely, it should be back above that breakdown level 70-80% of the time. Let’s watch!

Here is the simple chart, like Patrick Karim of badcharts.com, I have found charts are most useful when kept simple…

I haven’t posted much the last few days because there just hasn’t been much to share, on top of the fact I am in mode to manage my psychology as we continue to get hurt in our positions. Sometimes it takes all one has to stay focused on the mission, and now is one of those times as miners made new lows at the close of last week’s trading. Still, if we were to sell or trim anything it would be into strength, not weakness.

There are also a few glimmers of hope setting up. Despite all the tough-talk from the Federal Reserve, we realize we only have to get through this period and the rhetoric surrounding it, to get our next big move higher. To that end, the charts of the major mining etfs are now showing oversold technicals on both the daily and weekly charts. The end of the month is later this week, and with that we will get new data points on our long term charts, likely to show the miners with oversold stochastics on the monthly charts as well. I will show a few charts below, but let me say that if we were not already heavily long the miners, we would certainly be buying hand over fist right now, ahead of the earnings reports coming out in late October and early November. There is also interesting action occurring in the sector, such as Kirkland Lake trading higher most days and today up over 5% on rumors it is going to be taken over. we don’t own KL stock, but another big merger/takeover in the sector would certainly bring some interest in the group. In short, yes it hurts to be getting “schooled” at the moment, and no, we aren’t the least bit concerned that our trades eventually work out. We are aggressive, and have been in this situation many times, knowing that we must be invested IN ADVANCE of the move higher, and especially in a group like miners where the runs are super fast and steep. Recall our 2016 positioning, it seemed as if we waited forever and everybody had given up, then our stocks went on to gain 400-500% in just 6 months, making up all losses and piling on some huge gains. It’s a tough game, but we understand how it works, and now is definitely NOT the time to sell your metals and miners. It’s only a question of how much can you tolerate holding through the difficult periods that always accompany major bottoms?

James Flanagan over at Gann Global ( I am now a happy subscriber) showed a chart this weekend of the ratio between commodities versus gold which I found interesting, especially as he focused on the now famous pullback between 1974 and 1976, in the middle of an overall huge bull market for gold. The takeaway, if we are in a similar environment after a 14 month correction from all time highs in gold, is that while the other commodities have rocketed vs gold in this period now just like back in the 1970’s correction, the ratio also looks due to turn again in gold’s favor. If so, we might be on the verge of the biggest and best part of the bull, the near vertical run to top it all off. With the fact miners are trading at multi-decade lows versus the metals prices, you can see why we get excited at the prospects over the next 3-4 years. If something similar plays out, we should start heading higher soon, and gold should keep building momentum over the next year or so before it ignites into an all out frenzy and dash for real assets. Since most real assets are no longer a bargain, that leaves gold and especially silver. I wanted to show you the monthly chart going back twenty years, and how overbought the ratio is, but for some reason I am getting “network error” signals. I will get that fixed and be sure to post the chart, it might be an important indicator that warrants our attention, but know for now it is very, very overbought on the monthly, and even overbought on the weekly as well!

The team at Crescat Capital explains the last few months pullback in precious metals miners, and what they think they are really worth at today’s metals prices. I could not agree more, and they explain it better than me, so try the link below and see why many miners are worth 11x today’s prices!

https://www.crescat.net/three-themes-coalescing/

I have a few comments and observations on yesterday’s action, and what I am looking for this morning. Since miners technicals closed in the mid-range, neither overbought or oversold, there shouldn’t be any trade signals for at least the first hour of trading. However, some interesting developments are starting to fall into place so lets get into it.

First, the mining sector was strong today for the first time in awhile, and was able to build on gains throughout the day, only pulling back a little about a half-hour before the close. Better, the miners were gaining ground mid-day when the stock market started to sell off. This is important because many are afraid to touch miners before a stock market decline they see as inevitable. It doesn’t necessarily have to play out that way, and action like today’s suggest miners might be the direct and immediate beneficiary of money leaving stocks. Another positive is that the mining sector was up while the metals themselves were flat or lower on the day. Lastly, I saw trades occurring that are not typical lately, like somebody taking 300 SILJ LEAP call options, the buy cost roughly $75K and all were at the offering price meaning the buyer was not willing to wait for a better price. Of note, this was not a day trade, as the volume only reached 320 or so contracts by the end of the day, the buyer held overnight.

We weren’t super active as we are already loaded up and ready, but still saw a few opportunities to add to SILJ, IRVRF, and GDXJ and took advantage. GDXJ had a very good day, up over 4%, and the type of move we look for when making a turn that will stick. It was good to see all the miner etf and indexes we follow close above their 200 MA’s on their half-hour bar charts, a necessary prerequisite to initiate a new uptrend. Lets look at a few charts, one of mine, and also a couple from Patrick Karim, a silver and gold analyst with some interesting charts he posted on his Twitter channel that does some great work with the long term outlook in the sector.

So things look good for tomorrow. We also should have time to watch things unfold in the morning before getting any buy signals in the mining sector. As far as other setups in things like the KWEB etf, we will examine them and mention if there is anything we might buy or add to in the morning, but for now our major focus remains on the precious metals sector and their miners in particular. Especially the etfs at this point as they are the safest play (SILJ, GDXJ, GDX, etc) until the group really gets moving higher.

Last week was another tough one, as miners resumed their downtrend. I didn’t write a post Friday because there wasn’t much to say, and I wasn’t too active in the markets as I wait for the run higher. However, I did get the chance to add to Irving Resources (IRVRF), and also GDXJ LEAP call options expiring in Jan. 2023. As I type, gold and silver futures have opened Sunday evening electronic trade essentially unchanged.

About the only positives I see right now are that miner etfs are almost oversold on the weekly charts again, and are fully oversold on the daily charts. Sentiment is also rock.bottom, nobody and I mean nobody wants anything to do withy precious metals miners, which is strange being many are currently valued withy PE’s (price to earnings ratios) in the 9 to 11 range, while sporting earnings growth rates of 20%. Adam Hamilton, who posts on Bob Moriarty’s site 321gold.com http://www.321gold.com/editorials/hamilton/hamilton091021.html remains one of the very few bulls and even he is only a recent one!

On the negative side, we are getting due for a Daily Cycle Low (DCL) in gold, and that could imply another week of sideways to lower prices. I am still looking to add into this decline to stocks like IRVRF, MUX, and maybe the miner etfs as well like GDXJ and SILJ, but this trade is testing my fortitude, no doubt. I wll keep it short and leave you with a couple charts, lets see what the new week brings.

Not much to report, but I am going to put this post out now rather than wait until after the close, since the intraday technicals on my stocks have already reached oversold. I followed my plan and have orders in to buy at price limits below the market, there is no need to pay up when we are in the middle of a two day pullback so far. What I expect is soon, either today or tomorrow, we will see the miners start weak but close near unchanged or even positive on the day. That will be the sign the pullback is over and we should look out for how high the next rally can take us.

I have heard people around the internet capitulating. For example, Gary Savage over at Smart Money Tracker in a video interview with GoldCore yesterday said he is disillusioned with miners so won’t trade them again!!! WOW! What a strong statement, and a typical sign of capitulation from a person that has traded them close to 20 years, if I’m not mistaken. I’m not picking on him, but do think public statements like this are almost always a strong sign we are not only closer to the bottom than the top, but maybe near the start of something big!

For now, I will just post a DAILY chart of the GDXJ with fibonacci retracement levels to give us an idea where support might come in. I used GDXJ because I have limit orders out there trying to buy below the bid if it can get a quick drop lower, one I hope won’t last too long, just long enough for us to pick up more shares.

Just a quick update after the long holiday, since I didn’t have much that needed to be said after last week’s nice close on Friday. However, I wanted to lay out today’s game plan before the open, so readers can know what I might buy and when.

Since the mining etfs closed in their middle to upper range in regards to intraday technicals on Friday, there won’t be any trade setups for the first hour, at least. This is welcome since it will allow us to watch out buy list to see which are holding up the best as the technicals pull back to oversold later in the the morning or even the afternoon.

A day or two pull back now will not alter our opinions on the sector at all, we will use it to buy more. Some names we might buy or add to are NGD, PGM.V, AUY, IRVRF, OCGSF, IAG and several others. I will post a couple charts below, but lets see which look best after the group gets sold lower on the market open.

I will mention that the bigger miner etfs like GDX, GDXJ, SIL, and SILJ all traded above their 50 day moving averages for most of the day on Friday, a very positive sign, but they did not hold above the MAs, and chose to pull back just below the line. We expect they will get over and stay over their 50 MA’s soon, even this week, so its something to keep our eyes on.

Here is PGM.V (PureGold Mining)…

And here is NGD (New Gold)…

Lastly, Outcrop Gold is a more speculative junior miner but reported great drill results this morning. When this one gets moving it can really run, so its just a waiting game at this point. We have shares, but are not yet up to a full-risk position size, so will continue to bid for shares below the market.

Not much to report today, it’s pretty quiet before Labor Day on Monday, so it won’t surprise me if tomorrow is similar. While I love the markets, at least when they traded freely, I also have things I would rather do than sit at the computer pecking the keyboard like a monkey when opportunities are limited. In fact, we had only one small trade today, a partial fill on out IRVRF (Irving Resources) buy limit order.

Since I don’t like wasting people’s time or my own, let me just post a weekly chart of IRVRF so you have an idea of the potential this stock has. Irving is an extremely high-grade explorer in Japan, and a favorite of Bob Moriarty over at 321gold.com, and last I knew it was his largest holding. It’s tightly held (most shares in the hands of a few people that are in it for the long haul), and we made a very nice score on this stock our first time around. It’s time to get involved again, in my opinion, so that is what we are doing. I don’t like chasing stocks or paying up, so I just sit on the bid or slightly below, and take in any shares that people cannot stand holding anymore. It’s worked before, it will work again. Here is the WEEKLY chart of IRVRF….