Early Signals Of What’s Coming In Juniors

Precious Metals have not broken out. Not yet.

Gold closed the week at $1790 and Silver at $18.32. They have yet to breach critical resistance levels at $1800 and $18.75. But the junior sector has broken out.  Both GDXJ (juniors ETF) and GOEX (explorers ETF) eclipsed seven-year resistance and made new daily and weekly highs. 

The senior miners have lagged in recent days. Capital is flowing downstream.

Anecdotally speaking, did you notice the moves in various individual juniors within the past two weeks?  Quality juniors and even some juniors devoid of quality and a mining-related purpose surged higher. I will spare you the names.

Some daily charts are showing that rhino-horn look. It’s the opposite of a fishing line look. Anyway, these types of moves are an early signal of what potentially lies ahead.

GDXJ and GOEX have joined GDX in blue sky territory with limited overhead resistance and measured upside targets that are significantly higher.

GOEX (explorers), GDXJ (juniors)

The last major breakout in the precious metals sector was in the second half of 2005.

Gold stocks broke out from eight-year resistance, while Gold and Silver surpassed technical resistance in place for 20 years.

During that breakout and furious move that followed, the parent index of GDXJ (MVIS) surged 120% in only six months.

MVIS Juniors Index

The most significant and most consistent moves in markets occur after major bottoms and after major breakouts.

The critical difference is a major breakout leads to a new multi-year high. Optimism is already present, but the breakout solidifies that optimism, leading to increased confidence and a new round of speculation. 

This sounds dangerous, but it isn’t unless the fundamentals shift and valuations are sky-high. The fundamentals of precious metals are strengthening, and valuations are hardly a concern.

With that said, the metals have not broken out yet, and the miners could experience a pullback to correct their overbought condition.

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Stock Tigress 11 months ago Member's comment

I want 120% increase in $GDXJ in 6 months - lol- push my calls up 600% to make up for my stupid loses in $SDC and $RVLV dog ipos.