Looking back a little over two years ago, we see the GDX vs. SPY chart showing an inverse head and shoulders pattern, and the ratio is trying to break above that horizontal line of resistance. I drew it loosely, because much of technical analysis is subjective, such as where to place a line, or which tops or bottoms to connect. In any case, it looks to me that the ratio is trying to work back up over my trendline, meaning gold miners should be outperforming the S&P 500 going forward. If the ratio can stay above that line, miners should outperform for more than a year, maybe two, as money flows out of the general stock market and into the precious metals sector.
When I say sharp dips are to be bought, we can use a chart like gold and silver miner CDE to illustrate the point. Notice the violent bashing it took over just 4 days in the beginning of the month. Now, it has come back to where it was before the selloff, after rallying 43% the last two weeks. For those that had the nerve to buy or add to their positions, its a very nice return! This stock was the most glaring example I came across, but similar action was seen in many miners, so we added to several of our positions including CDE, SVM, HL, EQX, EXK, BTG, and a few others.
The junior miners, as represented by the GDXJ etf which is really a fund of mid-cap miners, is nearing breakout levels. This chart goes back over three years, and GDXJ isn’t far from taking out the high made in April 2022. This stochastics cross higher has seen a launch in prices, suggesting very strong underlying momentum. Be long, hold strong, buy any sharp dips, and don’t expect them to last very long in this type of action.
Next stop appears to be 338.04, then the 2020 highs up around 374. Many stocks are making new bull-market highs, like NEM and GOLD, but also some mid-caps like SA, and smaller caps like JAGGF, which has rallied 50% in just seven trading days. GDX is only 20 cents away from making a new 52 week high, this is the stuff of which bull markets are made!
In bull markets, dips are to be bought. Get long and hold, proper position-sizing relative to one’s risk tolerance will allow them to stay on the bull.
Stepping back to get the bigger picture, this SLV chart goes back 8 years, the horizontal trend line is my doing. While I don’t trade in or out because of trend lines, mostly because I feel they are more loose areas than lines in the sand, I still find them useful to identify areas where something might find support or resistance. Seeing SLV oversold on the weekly stochastics, combined with coming into a range of possible support going back many years (it was past resistance), helps one pull the trigger.
Bought 3 contracts of the. SI futures December expiry at average price of $28.08. However, below I posted the more active September contract. You can see that stochastics on both the daily and weekly charts are oversold, and silver looks to have pulled back into an area of possible support, after a near 20% correction, all good enough reasons for me to buy here. While the weekly shows a further 40 cent dip to the trend line is possible, more so with the metal coming into support at it’s 200 day MA. If we see silver pull back another 40 cents or so, I will use that a an opportunity to add to the position. On a side note, the Chinese continue to buy silver hand over fist, as reported here https://twitter.com/oriental_ghost.
The weekly ATR (average true range) is $1.82, which I will use as a general area to stop out, so the $26.26 area on the December contract. Keep in mind its trading at about a 40 cent premium to the September contract. So if I had bought the September futures, my stop would be about $25.88.
After recently being stopped out of our Wheat futures, I am again trying the long side and have bought today, but this time I have bought LEAP options on the WEAT etf, with an expiry in January 2026. I might also add the futures again, if I get traction and decide to add to my position. Both my Wheat and recent nickel miner purchases have very limited total risk to our portfolios, my main focus and heavy bet is still on the precious metals and miners at the moment. That is where I see the bull market action already in motion.
Just for a marker, I need to mention that I bought several nickel miners over this last week. One can follow the group using the NIKL ticker, which is Sprott’s nickel miner etf, but I bought individual names including IGO.AX (IGO Limited), NIC.AX (Nickel Industries), both producers with 9.29% and 6.06% dividend yields respectively, along with a couple junior explorers, TLOFF (Talon Metals) and CNC.V (Canada Nickel). I might be early in this group, but with good dividends I can afford to build these positions over time. Below is a chart of the etf to give you an idea of how they look,
After several days of big gains back to back in our accounts, in the 6-8% range, I thought I would mention a few things. Many of our miners are taking out their 52 week highs again, supported but moving averages that are trending solidly higher. The GDX etf made a new high today with components like NEM, AEM, and WPM doing the same, while many of our individual holdings such as PAAS, CDE, GATO, JAGGF, EXK, SILV, NGD, and even our SILJ etf got within a penny of a new high for the year, as I type. This is a bull market action, if I were not already heavily long, I would get buying now.
I will point out a few other things that might be showing us the way forward, for example, today is the first day in long time the tech stocks are won more than 2%. The fact miners are not getting dragged down with the general market is a big flashing BUY signal, I would not wait for a marker correction hoping miners drop with the market so I could buy them cheaper. It won’t likely happen, as we are already up 138% in CDE, 116% in GATO, with many more positions up 80-100% so far, and most investors still don’t acknowledge miners are in a bull market. This means there is a lot more to come, as they get converted to believers and start to chase the higher prices. I recently bought Silver futures (Sept contract), in the $29 range to add some more metal to our portfolios, and took advantage of the correction over the last month to add to most miner positions. So if the general stock market starts to weaken this summer, and we see more days like today, I would expect to see a lot more money flow into the precious metals and mining stocks. Take a look at the ratio chart of SILJ:QQQ, with a solid jump above all the moving averages, and note the 10 day moving average turning sharply higher as well. I expect this ratio to get over the horizontal line I have drawn above, very soon. What’s more, the junior explorers still have not kicked into serious bull mode yet, typical action in a new bull market is for the bigger, safer miners to make highs first like GDX has done, then new money flows into the mid-cap producers, later on the smaller, more risky juniors. This tells me there is still time for people to jump in now, I would focus on mid-caps at the moment, but I would not wait any longer. We have just passed the historically worst ime of the year for miners, they typically get strong after July 4th and run higher into September. Combined with the fact we are now beginning to see weakness in the general stock market, bitcoin and other competing investments, implies we could get a real rocket ride over the next few months. Remember that the biggest gains come in very short time periods. To illustrate, I will also post a chart of JAGGF (Jaguar Mining in Brazil).
Sharp rallies occur that make it hard to buy into a stock, NGD is another example.
There is also the problem of what to do if one of the miners you want to by didn’t even pull back much in the one-month correction we rode through, like CDE. It won’t partake in the downside, but more than happy to join the party when the group is rising. What a beautiful chart, and with a 138% gain already in the position, it will now be easier to hold for the duration of the bull. This stock often gains 400-800% in bull markets for miners, so while these names are extended in the short term, I will not sell anything as they won’t make it easy for me to buy back in.
I realize a trend line with only three touches of the line is not always a reliable line, but I drew it to illustrate how steep the ascent has been, out of the March low. The takeaway is the miners rally sharper than just about any group, and one doesn’t want to miss bull markets in them because they can be life-changing events. The fact is we keep getting additional confirmation that a bull has recently started, and the things we want to see fall into place, like a weakening stock market and economy are now showing themselves as well.
