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.

Let’s check in where we last left off, I am still in the process of accumulating the SILJ silver miners etf, and taking a good-sized drawdown. Perhaps it is best this site project started with a loser out of the gate, after all, one must manager losing trades properly, above all else, if they are to stay in the game. So why did I choose today to write an update? Well, besides taking a beating, I see several big things happening under the surface that will be things to look out for as opportunities, as well as possible catalysts to get my current trades kicking in gear. By the way, I mention the SILJ position as it’s my largest and my focus, but viewers can see from the my managed accounts that I have several other positions, and I can’t always mention them all, but one is a standout that deserves attention at the moment. I will address it in another post another time, but Irving Resources is a gold explorer in Japan, and this one just happened to play out correctly from the starting gate. On my first purchase, accounts are up over 150%, and when the markets took the stock down in a real swoon, I about doubled my position, and the second purchase is not up 60 to 70% as well, been in this one 6 months or so. I will let the chart do the talking, so we can get onto other business.

Back to miners, I expect to see them stabilize in here and then get working higher. Why? Not only have they sold off sharply, with the HUI down about 17% is just 2 months, we are starting to see weakness creep back into the general stock markets, and in the case of China it’s getting hammered lower. There might be some opportunity there to pick up cheap shares in the future, but I still feel it’s too early. Maybe I am wrong, but the back and forth between China and the US on the trade war does not seem to be subsiding, instead it’s escalating. If anything, China holds the cards on this issue, in my opinion, so its surprising to see US stocks right up at all time highs while China gets clobbered. Take a look at the KWEB or MCHI china etfs.

One can only guess if this is winding down so markets can resume going up forever like they have done, but if that is not the case, then in might just be getting started, and that is why I will patiently wait on the sidelines for longer term charts, like the monthly’s (not shown) to give a hint they are done going down. At the moment, they suggest this might have a long way to go, so even if I take a long side trade in the China shares, it will be a short term hold, and with smaller position size, thus relatively inconsequential. Anybody that knows me, knows that I like to get outsized positions on something I really have conviction on, rather than dabble in and out for a few percent here and there. It can work for some, but I find it takes about as much energy as a setup where one can really go in for the kill. I prefer, and will wait for those type setups far more often that taking a stab here and there just because I feel something has moved too far, too fast.

Before I forget, here is that chart of Irving Resources mentioned above. Not sure why WordPress wouldn’t let me add it above, but I’m just getting used to the software. This is a beautiful chart, and while volatile, appears that it could have lots more upside, so I am in no hurry to ring the register on this one. I will let you know when I’ve sold it, but for now I am more interested in waiting for another window to add to the position.

And now we come to SILJ, the etf putting my ass to the fire. Let’s take a peek. That is one ugly chart, unless one is looking to buy and add. Still, it suggests that even if I can get near the bottom prices, it might take awhile to work out for any sizable gains on the upside. Silver miners have underperformed gold miners by quite a margin lately, with some big name silver’s like HL, PAAS, and CDE making multi-year lows. This is the type of trade I refer to when I say going for the kill. While momentum is against the silver miners, commodities be their very nature turn at some point, for example as silver miners start to put less economical projects on the back burner until higher prices. This reduces supply, and eventually the market has to price silver higher to replenish supply, even meet new demand that can be created by low prices. In any case, these are longer term trades and many will get bored out of positions before they realize any gains. I like these setups the best because the allow one to get into big size positions as virtually nobody wants to be involved with something so horrendous, and these are where the biggest gains are made when one is correct. The richest most successful people in the investing world make big, concentrated bets when they see risk vs reward far in their favor. That does not mean they always win, it just means they win much more when they are correct, than they lose when they are wrong. I will explain more about the psychology of the trade as it matures, and why the vast majority of people tend to focus on short term trades even as they learn the big money is made in the big winners, not the day to day in and out, cut losses at 10 cents a share type stuff. The only “people” making money from the very short term trading these days are the “quants” that write programs acting in nanoseconds, and often breaking the law as well by strategies such as “front-running” and spoof orders (fake orders put out to influence market participants with no intention of ever being filled). I feel sorry for human daytraders with pipe dreams, those days are past and they will lose their money over time, if not very quickly. The facts are that even most brokerage houses trade against their clients, it’s just how the business works now, and the soon one accepts it, the sooner they can adapt their trading and investing style to minimize the odds of being pickpocketed.

Since I am trying to stay in this one for what I see as a longer term opportunity, I should include the weekly chart going back several years as well. Note the 2016 high up near $20, I expect this to get visited at some point, and I expect to be still in it when it does.

So while SILJ is oversold by many measures, we can’t know when it will turn higher with conviction. All we can know is ourselves, and what it takes to get us through the difficult part of the trade, then keep us in it for the ride higher once it starts. The trade is easy, managing one’s thoughts, emotions, and subsequent actions that result from emotions, is the difficult part.

In my first post to the site, I mentioned getting long the silver miner etf SILJ. Since that time the price has dropped and I have continued to add, in order to get up to a full position and on slight margin now, with my intent to get even larger position size on further margin. Right now I am 115% invested, and that also includes starting to buy the GDXJ junior mining etf into this decline.

Eventually I would like to have a page on the site with statement snapshots updated daily, so subscribers can see exactly how I am executing my trades according to plans.

So as it stands, the accounts I manage for viewers here are currently taking a drawdown, with an average price of just under $8.46 for SILJ, and $28.76 for GDXJ. Drawdowns are a part of trading, and one cannot let them undermine our emotions. Perhaps it was best to open this site with a trade that thus far isn’t working, rather than to give traders a false sense that everything always works out, straight from the gate. It’s part of the game, and I remain focused on the plan, not the P+L. I will continue to add into pullbacks, on these etfs as they are still in uptrends that started late in 2018. I managed to buy a good chunk yesterday, for those that wish to check the accounts in the subscriber section. This trade was a great way to start the new site, an entry is rarely more difficult or trying than this trade, so lets see how we make it work for us, despite appearing a lost cause.

Here is a chart of the SILJ etf, a junior silver miner fund I have been buying. The precious metals miners (GDX and GDXJ etf) have been in an uptrend that started back in October 2018, while the silver miner etfs started their uptrend in December 2018. I like to buy groups that are in uptrends overall, but currently experiencing a pullback, of which SILJ fits the bill. I am in SILJ for a longer time horizon and will explain in subsequent posts, but for simplicity sake and because we are using the daily chart for this setup, I will size the position using the average true range (ATR) of the last 20 days to determine expected volatility, along with my total portfolio risk (TR) of 2%. With an ATR of .25, a $100K portfolio would risk 2% or $2,000 TR, which we divide by the ATR of .25, for a position size of 8,000 shares with a stop 25 cents lower than our execution price. Then, we let the trade take care of itself.