The general stock market moved visibly higher today (up by about 5%), and gold is also moving higher - it’s up by about $20 so far today. Why are we writing this? Because the above means that mining stocks should be moving higher today. Instead, they moved lower today. This is a sign pointing to the end of the upswing.

This also means that even if gold rallies much higher shortly, miners might not fully react to it, which creates a good risk to reward opportunity for entering short positions right away, without waiting for gold’s rally.

The general stock market is also relatively close to its 38.2% Fibonacci retracement level, which means that this rally in it might be very close to being over.

Consequently, we are opening speculative short positions in mining stocks. It seems that GDXJ has better profit potential than GDX as it’s been more vulnerable to declines also during the previous big decline. If we were to choose just one instrument to trade, it would be GDXJ or it’s leveraged counterpart (JDST). Naturally, leverage is not appropriate for everyone.

At the moment of writing these words, the GDX ETF is trading at $25.62, and the GDXJ ETF is trading at $32.35.

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

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Full speculative short positions (150% of the full position) in mining stocks (but not in gold nor silver) is justified from the risk to reward point of view with the following binding exit profit-take price levels:

Senior mining stocks (price levels for the GDX ETF): binding profit-take exit price: $17.22; stop-loss: none (the volatility is too big to justify a SL order in case of this particular trade); binding profit-take level for the DUST ETF: $5.98; stop-loss for the DUST ETF: none (the volatility is too big to justify a SL order in case of this particular trade)

Junior mining stocks (price levels for the GDXJ ETF): binding profit-take exit price: $20.22; stop-loss: none (the volatility is too big to justify a SL order in case of this particular trade); binding profit-take level for the JDST ETF: $5.29; stop-loss for the JDST ETF: none (the volatility is too big to justify a SL order in case of this particular trade)

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.

Sincerely,

Przemyslaw Radomski, CFA