Just a quick update before signing off for the weekend. The precious metals market declined once again today, and the GDXJ briefly moved below its 2021 low. The invalidation of the breakdown might (doesn’t have to) trigger some sort of counter-trend upswing, which is unlikely to be significant.

Then again, if the GDXJ manages to close the week $36.73, we’ll have a breakdown in daily closing terms, which will be bearish.

Interestingly, GDXJ’s lowest weekly close of 2021 was $37.64, and since the GDXJ ETF is currently trading at $36.93, the odds are that we’ll have a breakdown in weekly terms, even if we don’t see a breakdown in daily closing price terms.

So, unless we see a daily / weekly close at or above $37.64, the implications of today’s session, won’t be very bullish.

All in all, I think that no adjustments in our profitable short positions are necessary at this time. The medium-term outlook for the precious metals sector remains clearly bearish.

I just received a question, and based on it, it seems that re-stating what I wrote in today’s regular analysis might be useful. Here’s the question:

“As you know, I am a huge fan. Clearly, you’re probably celebrating your success. Your predictions have transformed into being an amazing call. Although with us getting close to the 35GDXJ target, I half expect you to put out a trade alert saying let’s cover our shorts. Or are you going to try and seek out every last penny?

Thank you for your guidance”

Thank you for your kind words, I greatly appreciate them! However, please note that while I expect the short-term decline to continue until the GDXJ ETF reaches its target area at about $32 - $34, I wrote about closing the trade (without additional confirmation from me) when the GDXJ reaches $34.63. In other words, I’m giving a quite sizable range above the target “just in case”. I’m not seeking to squeeze every last penny out of the trade, as that can be risky.

This could change, but the odds are that I will not be sending a confirmation message if the trade is closed based on this target being reached, due to my travel schedule next week. To further clarify, I’m quoting the entire administrative information from today’s regular analysis:

“

I – PR – will be traveling next week, which means that the analyses will take a slightly different shape next week.

The regular analyses will include only the fundamental parts of the analyses, and while the technical details will not be posted regularly, I will be still monitoring the markets for most days, and I’ll send you intraday Alerts, if the situation requires it (in particular, if some extra changes are required in the trading or investment positions).

To be precise, the target levels presented in the “Trading capital” part below summary are “binding”, which means that if the price touches a given level, the trade should be executed (in my opinion that is; it’s your capital, and you can do whatever you want with it) without waiting for my additional confirmation. I’m usually sending them for additional clarification, anyway, but this likely won’t be the case next week. In other words, if you haven’t placed an exit order on your trades, and you’d like to apply the above suggestion, it might be a good idea to place those exit orders right away.

By “most days” I mean that I know that there will be two days when I’ll have no access to any internet / electronics whatsoever, but I don’t know which days that will be. So, conservatively, I’ll provide you with a game-plan for the next week below. This way, my intraday comments are not that important as you’re up-to-date in advance, and if it’s necessary for me to provide you with an intraday update and I have the ability to do so, let’s treat it as an “extra value” that is not necessary (you’ll already be up-to-date because of the below details), but welcome. And the gameplan is really an answer to the following question:

What to do next, if the exit levels are reached, and the market then moves significantly?

Basically, there could be three scenarios in this case:

1. If – after reaching the exit levels – then price moves back up significantly, then it would be a good idea to re-enter the short position in the GDXJ at $35.94 (at 300% of the size of the regular position – so the same size of the position that we have right now).

2. If – after reaching the exit levels – then price moves lower significantly (in other words, it doesn’t bottom, but keeps falling), then I think it would be a good idea to re-enter the short position in the GDXJ at $31.47.

3. If – after reaching the exit levels – the GDXJ price moves back-and-forth and/or doesn’t move to any of the prices in previous points, then I think no additional action would be necessary.

The first scenario is positive (we gain more by re-entering short positions at higher prices), and the second scenario is negative (we gain less by re-entering short positions at lower prices). The third scenario is neutral.

The most likely outcome in my view is that the GDXJ ETF price will either not manage to get to the $34.63 target next week, or that it will manage to do so, and then it will rebound just a little or trade sideways (third scenario).

After all, let’s keep in mind that mining stocks tend to show strength before gold does, and things are not as volatile as they were in early 2020. This means that the short-term bottom is likely to be rather normal, meaning a situation where miners first show strength by declining just a little while gold declines more, then perhaps rally somewhat while gold doesn’t decline or declines just a little. And it takes time for the above to take place.

Consequently, the most likely outcome in my view, is that next week, the profits on the short position in the junior mining stocks will simply grow, while we keep the positions intact.

So, all in all, you’re already equipped with the strategy for the next week, and the odds are that it won’t be necessary to take action, anyway.

“

And to clarify even further, here’s the summary of my trading/investment opinions:

Trading capital (supplementary part of the portfolio; our opinion): Full speculative short positions (300% of the full position) in junior mining stocks are justified from the risk to reward point of view with the following binding exit profit-take price levels:

Mining stocks (price levels for the GDXJ ETF): binding profit-take exit price: $34.63; stop-loss: none (the volatility is too big to justify a stop-loss order in case of this particular trade)

Alternatively, if one seeks leverage, we’re providing the binding profit-take levels for the JDST (2x leveraged) and GDXD (3x leveraged – which is not suggested for most traders/investors due to the significant leverage). The binding profit-take level for the JDST: $14.98; stop-loss for the JDST: none (the volatility is too big to justify a SL order in case of this particular trade); binding profit-take level for the GDXD: $25.48; stop-loss for the GDXD: none (the volatility is too big to justify a SL order in case of this particular trade).

For-your-information targets (our opinion; we continue to think that mining stocks are the preferred way of taking advantage of the upcoming price move, but if for whatever reason one wants / has to use silver or gold for this trade, we are providing the details anyway.):

Silver futures downside profit-take exit price: $19.12

SLV profit-take exit price: $17.72

ZSL profit-take exit price: $38.28

Gold futures downside profit-take exit price: $1,683

HGD.TO – alternative (Canadian) inverse 2x leveraged gold stocks ETF – the upside profit-take exit price: $11.79

HZD.TO – alternative (Canadian) inverse 2x leveraged silver ETF – the upside profit-take exit price: $29.48

Long-term capital (core part of the portfolio; our opinion): No positions (in other words: cash

Insurance capital (core part of the portfolio; our opinion): Full position

Thank you, and have a great weekend.

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