Junior Gold Miner ETF

The 'mechanical' short GDXJ triggered last week when it popped to the green line (x=45.02) is tempting, but I'll suggest spectating instead, since Comex Gold's chart is less appealing as a bear play, even a short-lived one.  The shorting signal means this vehicle is likely to fall back to at least p=42.79 before it can attempt a push past the pattern's point 'C' high at 47.25.  For now, we should pay close attention to abcd corrections on the lesser charts, since they will be warning of a relapse if their respective downside 'd' targets are exceeded. ______ UPDATE (Jul 12): Buyers have blown through May 20's peak at 47.25, but price action has been less bullish in gold futures, which are still on a 'mechanical' sell signal. Time will resolve this odd discrepancy, probably in bulls' favor, but I'll wait for it to happen before hazarding a forecast you can bank on. 

If you're wondering when the miners are going to take off, this week's chart offers a sodden dose of reality. Notice first that GDXJ is currently trading about where it was in 2013. Lows a few years later near $15 followed the cliff dive from 2011's exhilarating precipice at 180. Who could have imagined that, 10 years later, mining shares would still be scuddling lazily along, tormenting investors more or less in proportion to the limit of their patience?  Yes, this ETF could take flight at any time, like a bat from hell. And it will -- just not on our time. If there is anything to console us in the meantime, it is the ease with which this vehicle's gratuitous swings can be traded. Now, for instance, you can stay short down to 38.32, or do covered writes until then, and then reverse your position when the target is reached. That would be 2.60 below the so-far retracement low off May's 47.25 peak. Don't sweat the details.

GDXJ has failed to get loft since triggering a mechanical buy more than a week ago. We are not supposed to feel comfortable when this type of trade is signaled, since it usually implies that the vehicle's C-D leg has been reversed precipitously. That is true here, with a dip below the green line that came close enough to the 'C' low to make us anxious. My immediate outlook for bullion is bullish, however, and GDXJ should follow gold higher if the latter continues to rally as expected. It will not be out of the  woods, though, until such time as it exceeds the 45.51 'external' high recorded on June 6.  

GDXJ fell hard to end the week, but the selling brought it down to the green line (x-42.20) to signal an enticing 'mechanical' buying opportunity. This will require care and tactical knowledge, since the low may be yet to come.  If it occurs from beneath Friday's 41.89 bottom, the implied bounce might not quite reach p=44.52, where partial profit-taking would be necessary. Odds of an eventual move up to D=49.15 are still favorable, but it could take the futures 4-6 days to regain its footing after getting pounded for the last three weeks.

The easy, decisive pop through p on the first attempt implies not only that D=49.15 will be reached, but that last week's pullback to the red line offered an attractive opportunity to get long mechanically. Even so, further accumulation and a running start may be needed to supply the requisite thrust, so we should be prepared for more backing and filling between 43 and and 45 before GDXJ leaves the launching pad.  There has been almost no mention of this vehicle in the chat room lately, but I will provide tradable guidance if it is requested. _______ UPDATE (June 7, 12:27 p.m.):  Today's vicious plunge triggered a 'mechanical' buy signal when it touched the green line (x=42.20). This Hidden Pivot level is tied to the 49.15 target given above. However, there are no guarantees that the implied bounce from between here and C=39.88 will get any farther than p=44.52.

Although last week's high at 47.25 fell well shy of the 49.02 Hidden Pivot target I'd identified, the chart shows more promise and potential than that of gold itself. GDXJ became a theoretical 'mechanical' buy when it touched the red line (p=44.52) Thursday on the way down, but I'd suggest waiting for the correction to hit x=42.20 before attempting to bottom-fish. FYI, the stop-loss for the red-line 'mechanical' buy that has already triggered would be at 42.97, but I am not recommending this trade because I expect this junior-miner proxy to trade lower.

Bulls will face a crucial test at 49.02, the Hidden Pivot midpoint resistance shown in the chart. It is congruent with my outlook for gold and silver futures, which although sunny is not limitless. The target seems certain to be achieved, and your trading bias should therefore be aggressively bullish in the interim.  This means naked-shorting puts is okay, provided you understand the risks and your account can handle it.  Scalping against the trend would be warranted if p=49.02 is hit at the same time gold and silver futures reach their respective targets.

Rather than speculate on whether this vehicle will push above mid-April's 44.70 peak, I've drawn a chart that you can use to trade it knowledgeably. Friday's weakness triggered a theoretical sell signal with downside potential to as low as d=41.47. However, the pattern can be used to bottom-fish at any of the three levels yet to be achieved: p=42.92, p2=42.24 and d. In each case, you should get long with a reverse-pattern trigger that comes from the lesser intraday charts. There's a possibility the downtrend will turn from p=42.92 and go on to surpass the 44.26 high. That's why some call options acquired at p should be held for a possible swing for the fence.

You can use the 'locked' reverse pattern shown to evaluate the trend and find tradeable opportunities.  It has triggered two winning 'mechanical' shorts already, but I doubt that a third blip up to the green line would deliver. That implies GDXJ will surpass C=44.70 if it exceeds the green line; or alternatively, fall to at least p2=38.00 if it takes out the red line first. Even If sellers win this round, it will still be possible to bottom-fish at either p2 of D=35.77, so stay tuned.