Corrections are a good thing. As we wrote last week, they pave the way for new buyers and new adopters of the trend. In turn, the trend strengthens. During the bull market of the 2000's, the corrections in gold stocks were mostly long, multi-month consolidations. 

The brief cyclical rebound from 2008 to 2011 was the lone exception. The market trended higher for more than two years, with minimal interruption to the trend. There were no long, multi-month consolidations. The current bull market in gold stocks remains in its early stages, and it would be foolish to assume it will play out exactly like 2008 to 2011, or exactly like 2000 to 2007. 

However, thus far, we see some similarities to the 2008-2009 rebound. A crash preceded both rebounds, and both rebounds (in GDX) exceeded 100% gains within a few months. What happened next may be able to guide us over the next few weeks to months. 

After GDX rebounded over 100% within two months, it corrected in January 2009, by 22% in only nine trading days. From that low, GDX rebounded 65% over the next four and a half months, or roughly 100% over the next 11 months.

From that initial peak, GDX endured five corrections, which had a median time of 15 days and a median loss of 22%. As of Friday, June 5, GDX had corrected for 11 days and was down 17% at its low. GDX is retesting its former seven-year resistance at $30-$31. 

Meanwhile, GDXJ is correcting after testing seven-year resistance for the first time.

GDX & GDXJ Daily Candles

Friday’s bullish reversal is encouraging, but it’s also possible this correction could last a little longer. GDX, which printed a low of $31.22, could test $30, or perhaps, even the 200-day moving average, which is nearly at $29 and rising. 

In early 2009, GDX was roughly 50% below the previous high, while now, GDX is only slightly below seven-year highs. There may be a bit more profit taking now, and that could cause the correction to last a bit longer than it did in January 2009.

Nevertheless, most gold and silver stocks are now materially cheaper than they were just two weeks ago. If the correction continues in price and time, then the next few weeks should be an opportune time to put your capital to work.