Although the downtrend's stall at 40.24 suggests the midpoint support might hold, my bias is bearish due to a silver chart that suggests bullion's correction has further to go. That implies sellers will breach p, headed to at least p2=38.00, or possibly to d=35.77. That is as bad as I could see, as the chart suggests, although it is not theoretically the worst case, which would be 31.27 (on the daily chart, use reverse a=43.89 on 4/13/23). The good news is that the associated p at 37.99 would offer another potential turnaround spot where we could attempt to bottom-fish aggressively with risk under very tight control. There is also the possibility that p=40,24 will hold and the GDXJ, along with gold and silver futures, will break out to new highs. For that to happen after so fleeting a shallow a correction would be very bullish.
We're using a 48.55 rally target while acknowledging that this correction could come down to as low as 35.77 first (weekly chart, a=39,82 on 12/22/23). More weakness would trigger a somewhat risky 'mechanical' buy at 39.51, predicated on a stop-loss at 36.49. I am not recommending the trade if it ripens this week, however, since the pullback would be too steep to offer goods odds for a durable reversal, even if it winds up delivering a one-level pop. Please note that a further fall to x=34.98, however unlikely and regardless of how soon it occurs, would set up a 'mechanical' buy that we should not pass up.
If the beating that gold and silver futures took in the last half of Friday's session was unnerving, we should still be reassured by the robust look of GDXJ's weekly chart. There are a few reasons to expect the bull cycle begun in September 2022 to achieve the 48.55 target. For one, the impulse leg, although balky at times, ultimately exceeded a key external peak at 42.19 recorded in June 2022. Also, even though the C-D leg stalled at p=39.51 for more than a month, the running start it got after pulling back nearly to 'C' spring-loaded a powerful blast that impaled both p and p2 while also exceeding the pattern's 'B' high. Taken together, these factors should leave no doubt concerning whether 48.55 will be reached. Plan accordingly, and don't get spooked by a hard pullback if it comes. That would be a buying opportunity, and the pattern itself provides ample means to do so with risk under tight control.
Like bullion futures, this ETF for gold explorers ended the week in a place that should produce a corrective retracement. If it surprises by shredding the reverse pattern's d target at 42.10, our focus would shift to a conventional pattern that promises a further run-up to 48.55. This is the first time I've mentioned the target, but the pattern from which it is derived is strictly kosher, with a second-wind thrust to B=43.89 (4/14/23) that turned A-B too gnarly to be widely observed. That will always be a plus for us. Here's the chart, which, like May Silver's, delivered a quite encouraging thrust through a midpoint Hidden Pivot at p=39.51.
The steep rally since early March has alleviated the stinginess of the overall pattern, which remains bullish nonetheless. It projects to at least 42.10 and should be considered reliable for trading purposes. That is notwithstanding mid-February's dip into deep water in the weeks that followed the triggering in January of a 'mechanical' buy at the green line. My hunch is that GDXJ will ultimately push past 42.10, breaking free of a consolidation zone that will have persisted for two years.
Last week's peak missed the 37.15 target of the pattern shown by 27 cents. This is but a minor concern at the moment, but the shortfall is sufficient to suggest bulls were either a little tired or less than true believers. Regardless, because it took more than four months for the pattern to play out, GDXJ is due for a breather of perhaps 8–12 days. If it lurches higher within the next few days, however, and closes above D=38.15 for two consecutive days, that would imply bulls are again ready to rumble,
Although the impulse leg in the conventional pattern shown was not very powerful, it was persistent enough that I'll give the bearish interpretation of this chart the benefit of the doubt. That means that GDXJ is on a 'mechanical'-short signal triggered on first contact with the green line. That implies that GDXJ is more likely to fall to p=33.73 than continue its ascent toward C=39.82. Regardless, I doubt that sellers will be able to push it down to D=27.63. _______ UPDATE (Mar 20, 5:52 p.m.): Use the 42.10 target of this large reverse pattern as a minimum upside projection for now. _______ UPDATE (Mar 21, 10:46 a.m.): I've flagged the 38.15 target of this reverse pattern on the weekly chart as a significant impediment and potential rally-stopper. It's worth shorting for a scalp, but my gut feeling is that it will give way, allowing further progress to the 42.10 target noted above.
It's hard to be cautious after last week's steep, powerful rally, but we should take heed nonetheless that GDXJ would trigger a 'mechanical' short at x=36.77. I am not suggesting this, since the set-up, with a weak but lengthy impulse leg, is hardly ideal. But we should monitor price action closely after it's hit, since that's why we use charts in the first place -- i.e., to stay objectively on top of the trend no matter what we might think.
Although my immediate outlook for gold futures is bullish, Friday's thrust in this vehicle looks like a fake. It would have gotten more boost if it had occurred from just beneath October's 30.46 bottom, and that is where I expect DaBoyz eventually to engineer an authentic turnaround. More immediately, GDXJ would become an appealing 'mechanical' short at either the red or green line. We'll pass up the opportunity but use these benchmarks nevertheless to gauge trend strength. _______ UPDATE (Mar 5, 6:35 p.m.): The bullish reversal from last Wednesday's low turned decisive with today's pop through an 'external peak at 35.25 recorded more than a month ago. It is still more bullish because the low failed to come down to p2=30.68.
By now, we've come to expect little of rallies in this vehicle, and so last week's so-far modest bounce off a secondary Hidden Pivot at 30.68 is unlikely to arouse much interest. It could run all the way up to the green line (x=36.77) and still be nothing more than a promising short. Thereafter, or perhaps before then, look for GDXJ to turn south, bound for the 27.63 target. The good news is that the pattern is a pretty one likely to produce a targeted low we can trust.
