Just a quick update as things are moving quite fast in the PMs.

Gold, silver, and mining stocks moved to new yearly highs in today’s trading, without any other major moves in the markets. So far, the session is only halfway completed, so quite a lot can still change. If we saw a decline in the second half of the session, the day would become a reversal, and it would be bearish. If we see the daily close in the GDX ETF at the current price levels, then… It will still not be bullish at this time (!).

Huge daily rallies on big volume (and it’s likely that today’s volume will prove to be big) in mining stocks (GDX) are what tends to take place at the end of a given short-term upswing or close to it. For example, we saw that on Nov. 10, 2021, Aug. 27, 2021, Jul. 29, 2021, and May 17, 2021.

Also, please note that zig-zag patterns are quite common form that corrections take place, at least in case of the mining stocks. Another way to call this pattern is an ABC pattern. The bottom that we saw in mid-December could have been the start of the A rally, then we saw the B decline in early January, and what we see now could be the C rally, and perhaps the final part thereof.

Still, most importantly, please keep in mind the examples when the big daily rallies on strong volume were good shorting, not buying opportunities. It’s rather unlikely that right now – AFTER the daily rally – we are at a favorable moment to go long or to close the short positions. It seems much more likely that we are in a situation where short positions are much more justified from the risk to reward point of view.

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

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief