I have two questions:
- [1] Although the SP Long Term Junior Indicator says "Hold Seniors" how do I interpret that? Does it mean “switch your holdings from juniors and buy seniors” or just “HOLD seniors,” as in, if you have seniors, don't buy or sell them, just continue holding them?
- [2] SP Gold Extreme #2 Indicator: The word “Extreme”–does this mean the HUI has reached an extreme position short-term, either top or bottom? If so, is it saying we've reached or are close to the end of a correction, in other words, that we should buy juniors?
The key issue that you need to keep in mind is the fact that we suggest dividing one's capital into long-term investments and short-term trading capital. The Long-term Junior Indicator is an indicator dedicated to long-term investments. We believe that this part of one's capital should be in the precious metals market at almost all times. However, we observed that juniors tend to lag seniors at some times and lap them at other times. Consequently, by switching from one asset class to the other, one can make money while remaining invested in the precious metals sector.
This is what the SP Long Term Junior Indicator is striving to help you with. The “switch from seniors to juniors” signal is seen when the indicator is below the lower dashed line and starts to move higher. Conversely, when the indicator is above the upper dashed line, and it starts to move lower, we see a "move from juniors to seniors" signal. Technically, this is what we saw, but the indicator moved lower very insignificantly and then continued its rally, so we don't view this signal as being truly in. That's why we continue to favor juniors over seniors for the time being. Another important thing to watch in order to time these switches is the general stock market, as it is particularly highly correlated with juniors. With a bullish picture for the stock market in the medium-term, we see juniors outperforming seniors.
Now, moving on to the "Extreme" indicators, you are correct that these signals mean an extreme position, either top or bottom. However, in the past year or so, almost all signals meant local bottoms. You are also correct to view the current signals as buy signals. Still, it's not about juniors because we view juniors as a long-term investment vehicle, not a short-term trading one. In other words, it's time to bet on higher precious metals prices from the long- and short-term point of view. While juniors are a good way to invest in the precious metals sector for the long run, we suggest using other means (gold, silver, senior mining stocks) for short-term trades.
You will find more information on our precious metals indicators, signal interpretation and indicator performance in the Charts section.
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