The gold and silver stocks have put in a bullish weekly reversal but Gold
and Silver have not confirmed it. The interplay between the metals and the
shares has been complicated in recent weeks. Hopefully this missive will make
some sense of it as the two groups are sending mixed signals.
Gold and Silver are charted below in weekly candle format. Before this week
the metals looked bullish. Each tested support and rebounded strongly towards
resistance. However, both metals gave back much of the recent gains. Bulls
would say they are correcting and still in position to test resistance. Bears
would say the metals failed to reach resistance and are headed to new lows.
Though the mining stocks are selling off today (Friday), they've completed
a bullish reversal and double bottom on most weekly charts. Below we plot GDXJ,
GDX and our Top 40 index. Other than GDXJ just about every miner index has
completed a double bottom. Though GDXJ made a new low it did form a bullish
reversal. GDX and the Top 40 index formed bullish hammers and potential double
bottoms. We say "potential" double bottoms for a reason. The double bottom
is a very bullish pattern in which the market should explode up from the second
bottom. Only time will tell if the miners follow that path or if the reversal
fizzles.
Interestingly, the metals and the miners have been disjointed in recent weeks.
Gold lost 2% this week while Silver lost 6% yet the miners put in a positive
reversal. During the two prior weeks metals rebounded strongly yet miners sold
off. Part of that could be tax loss selling in the miners which has created
additional weakness.
Investors and traders have a good setup in the miners. Downside support is
defined by the double bottom. A weekly close below that could be the stop out
point and would limit losses. Meanwhile, if the metals are destined to take
out their October highs then the miners should explode higher sooner rather
than later. After 2013 tax loss selling, GDXJ rebounded over 50% within two
months. We are working hard to prepare subscribers for this opportunity.
Good Luck!
