Good Monday morning all. If you’re like me, you never own enough of an investment when it soars higher and you always own too much of an investment when it crashes lower. This is absolutely the case with mining stocks today…specifically the 600% gains in NUGT (3 x mining ETF) over just the last 3 months. This kind of move is the very definition of “parabolic”.
This morning, lets make sure that we play the move higher in precious metals and mining stocks as intelligently as possible. We know that NUGT can swing 20% or more in a single day (its up another 6% in pre-market this morning), and these kinds of swings give us the opportunity to take excellent short term profits or buy more as the price declines.
Fundamentally, you know my thoughts on PM’s and mining stocks. We have just entered what, in my opinion, will be the single most explosive bull market in the history of gold/silver. I know…it’s a bold claim…but its also the exact same prediction that I have been making for years (and I was very wrong from 2012-2015). At the same time, VRA Subscribers have booked more than 3000% in net profits over the years in my mining stock recommendations…gains that I believe will be dwarfed by the gains we will book over the next 2-3 years.
Gold is real money. Gold cannot be printed. Politicians cannot make and break promises with gold. The smart money is ALL over gold and silver…central banks have been snapping up every ounce possible, as PM’s were artificially manipulated lower over these many years.
But the biggie? As we continue to watch the two biggest bubbles in all of history burst (fiat currencies and sovereign debt), there will be one primary winner…precious metals. In my view, this is exactly why PM’s have been on this historic 3 month run (the single best run in history)…they are speaking to us, loud and clear. PM’s are telling us that a) inflation is on the way…massive levels of currency inflation are bubbling up globally, and b) central banks have lost control of the “system”….and once interest rates begin to move higher, there will be no stopping them.
CURRENT VRA TECHNICALS – PM’S AND MINERS
First, while I highly doubt that we will sell our mining stocks or PM’s at any point in the near future, timing is crucial for either lightning up or adding to your positions.
For example, if you are not happy with the size of your holdings in PM’s, buying today…after this historic 3 month run…could be a near term mistake…this move is heavily extended and due for a pullback in the next few trading sessions (GDX has jumped more than 10% in the last 2 days)
The VRA System shows GDX (mining ETF that underlies NUGT) has now reached an extended level. As you can see in this 10 year chart of GDX, we are bumping up against overhead resistance…from trading over the past 2 years.
The reason for showing you a 10 year chart?? I wanted to make sure you saw the volume expansion…particularly over the last 18 months. Folks…this kind of price expansion, when added to the explosion in buying pressure, tells us pretty much everything we need to know. This move is real…and its only just beginning.
As of Friday’s close, GDX was right at 90% overbought on my momentum indicators. While its likely that the move will continue higher for now, we should not be surprised by a pullback…one that lasts 2-3 trading sessions and could take 10% off of the share price of GDX. And yes, a 10% correction in GDX would cause a 30% correction in NUGT.
But here’s the problem with trying to be too cute with our timing…by the time the correction takes place, GDX could ramp another 10% higher first…taking NUGT up another 30%.
My point? As always, I am a huge fan of dollar cost averaging. Using pullbacks as an opportunity to buy more, and yes, even taking some short term profits as prices get too extended.
SHORT TERM KEY TO WATCH
Gold trades inversely to the US Dollar and this most powerful trend will continue for the foreseeable future (until Chinese Yuan PM trading kicks in…it has already started with their new exchange) The USD has been incredibly weak of late, as this chart makes clear.
As you can see, the USD is right back to some incredibly oversold levels…a snapback rally is likely at some point this week as well. If you’re looking to time some of your purchases, keep an eye on the USD.
As always, I will provide as much guidance as possible. We are now in nosebleed territory with precious metals. Traders love to shake people out of their positions with these short term sell-offs…just make sure you are prepared either way.
Again, ideally we want to add any new positions on pullbacks.
Keep this thought in mind. The investing public BARELY owns PM’s or mining stocks. Many consider these to be investing relics (as my small sample twitter poll revealed over the weekend). Once the public jumps in, this move higher will take our breath away.
Until next time, thanks again for reading…make it a good week