A quick write up of my weekly thoughts, Watching the Gold and Silver mining sector action this week and i continue to see a large discount between the miners of quality i.e Kirkland lake or Northern Star versus the explorers / developers stories in the sector. All the money seems to be very concentrated into select names and the rest are forgotten, sinking to the bottom of an endless abyss. Waiting for the tide to change, a few charts to help navigate, a signal for a possible rotation. Though i do not believe it is soon, something for you to keep a outlook for in the lighthouse.
Gold/Silver ratio at 89. Peaked with the mining index in 2011 at near 30. As Gold continues to outperform in a long term channel, a bearish overall sign. We could see 110 top before this is all over and momentum swings back in Silver’s fvaour. For now, nothing showing any long term momentum change.
GDX/GDXJ ratio is breaking to the upside, favouring the senior miners versus the juniors, another bearish sign. The 2011 trend line has held true and GDX/GDXJ once peaked at .35 is now .75 today. In a bull market, you tend to see the juniors out pacing the seniors. Not happening. In 2016 ratio got to .85 and down to .57, and we saw pigs flying. Since then, we are back to the GDX being the driver of the ratio.
GDXJ and Silver mirror image on the chart. So to see where the miners are going, look at where Silver is heading.
CRB and Silver share a fated path, and on the other side is the all mighty USD. I personally think the USD has legs to go higher, but alot of policies can change my thinking. For now, the trend is up in the longer term.
USD decade chart is a the same as the Gold/Silver ratio.
TIPS / TLT have broken out and Gold may follow in the short term, i view this as more a safe haven play versus a new trend change. Thus money will not float into every junior miner rather the best of the best as has been occurring.
I will finish off by saying, short term Silver looks very bullish. Below from Sentiment Trader, shows COT nearly back to zero, which historically means we get a rally at some point in the next few weeks or months ahead. This will be a good trading opportunity for the sector, but if it leads to more than a short term spike and a new bull market, we will have to wait and see.
Seasonally speaking, Silver/Gold ratio bottoms in June and rallies into August. So we could see a bounce soon from oversold levels in the sector.
Gold Miners Bullish index – $BPGDM Sector oversold ahead of seasonal lows, making the set up prime for a bounce at some point.
Keeping it simple today, outside the short term nature of a potential bounce, i am not convinced of any long term bottom being in place yet. Rather i am looking to ‘trade the trade’ then buy and hold. Until i see the above key indicators changing, and they very well could, i am keeping alot of powder dry. Thank you for reading and good luck.