Mining ETFs: Headed For Their Next Slide?

I’m not only describing the above due to its educational value but because we actually saw a “buy signal” from the MACD, which was quite likely really a sell signal.

I recently added that the MACD indicator is far from a light switch. While false buy signals often precede material drawdowns, the reversals don’t occur overnight. As a result, it’s perfectly normal for the GDXJ ETF to trade sideways or slightly higher for a few days before moving lower. This is what we saw last week.

And yesterday, we saw the 4%+ daily slide, which means that everyone who shorted the market based on the MACD’s “buy” signal is already profitable.

Once again – please remember to check whether a given technique or indicator actually worked for your favorite market before applying it and entering a trade.

Another market that appears to confirm the bearish narrative is silver.

Chart, histogramDescription automatically generated

Silver moved lower in a more visible manner, which might be surprising to some investors (especially those that went long based on the “silver short squeeze” movement almost two months ago), but it’s not surprising to me. If history repeats itself to a considerable degree, then it’s not odd to see the same kind of performance that we saw in the similar stage of a given price move.

In this case, I already discussed the self-similarity present in the silver market, and I marked similar patterns with red rectangles. The current situation seems similar to early March 2020, when silver was just starting a major decline while being between its 50- and 200-day moving average. Let’s keep in mind that gold actually moved to a new high in early March, and silver was very far from doing so. Back then, silver underperformed, so it’s no wonder that it’s underperforming right now. While the silver shortage was the topic of the day for many days about two months ago, it seems that more bearish headlines will soon be more popular.

Please note that a move below ~$24 in silver will imply that everyone who bought in late January or February, when silver was particularly popular is already in the red. As silver then moves even lower, those investors will most likely feel significant emotional pressure to sell – and some will, most likely making the decline bigger and sharper.

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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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