Briefly: We are changing the size of our speculative short position in gold, silver, and mining stocks from 250% to 50%. In other words, we are significantly decreasing the exposure, but keeping the short position open.
The HUI Index just rallied back above its 50-day moving average and as we explained in today’s regular Gold & Silver Trading Alert, this might be an important issue for the very short term. The intraday reversal is a bullish sign on its own and especially when on the same day a given market invalidates a breakdown. And the HUI Index just invalidated two of them:
- Tiny decline below the rising support line based on the November 2018 and the January 2019 lows
- The 50-day moving average.
Gold and silver have also erased their early declines and mining stocks are leading the way up. This is a rather classic bullish combination.
There are still about 2.5 hours before the end of the session, so there is still time to act based on the above. But should we?
The HUI Index is above its yesterday’s high and the same goes for the XAU Index - the strength seems to be confirmed.
None of the above changes any of the strong medium-term factors that we featured in the recent Alerts. However, it does make a short-term bounce likely.
What might be the upside? More or less a repeat of today’s intraday move - about a $0.50 for the GDX and about 5 index points in the HUI. Why? Because that’s where we have the near-term resistance in the form of the lower border of the price gap. This would provide us with the possible upside targets of about $22.41 and 172.5, respectively. The market may want to close the gap and in this case the targets would be at $23.01 and 175.42, respectively. The market could move to their previous highs as well, but this seems less likely at the moment.
The very short-term traders might want to exit their short positions or even enter long ones in order to aim to catch the above moves. It’s a risky business, because that would be a clear play against the main trend that’s confirmed by multiple strong signals.
That’s why we will not close our positions, but adjust them. The outlook is bearish in general, but it seems quite likely that we will quickly get better prices to once again increase the size of the trade.
Let’s keep in mind that silver tends to outperform gold right before the final part of a given upswing, so that’s one of the things that we will be looking for as a confirmation sign to get back on the short side of the market with bigger capital. For now, we are decreasing the exposure, simply because the short-term picture is - at this time - not extremely bearish, but just “bearish with a bullish very-short-term note”.
As always, we will keep you - our subscribers - informed.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
