Gold just came back above $1,200 with vengeance and mining stocks shot up erasing several days of previous declines in just a few hours. Have we just seen a major bottom, and should one reverse their short position and go long?

In our opinion, short positions are still justified from the risk to reward point of view.

Today is silver’s triangle-vertex-based reversal and the analogous reversal for mining stocks is at hand. Consequently, seeing a corrective upswing here is not surprising. Of course, it doesn’t mean that it was worth exiting the short positions and/or going long. Given multiple strong bearish signals it seems much better to stay short as any corrective upswing can be reversed in a matter of hours or minutes.

Surely, it might seem to be a good idea to exit the short position, cash in the profits and go long, but when would one re-enter the short position? $0.10 higher in case of silver? $0.30 higher? What if silver opens $0.70 lower tomorrow? This is precisely the time in the precious metals market when things like that could happen - especially given the critical breakout in the gold to silver ratio.

Consequently, while today’s price swings may appear bullish, they don’t change the outlook and thus we are not changing our positions.

As always, we’ll keep you - our subscribers - informed.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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