11/5/2020 9:00am EST - Trading Lab Morning Email
At the risk of being wrong, I'm going to go out on a limb and declare that the 3-month correction in the precious metals sector has concluded. Everything I see out there indicates to me that sentiment is sufficiently depressed and charts are locked and loaded, poised for a year end rally.
GDXJ (Weekly)
To put things into perspective, the GDXJ had a more than 200% rally from its March low to its early August peak. Since peaking at $65.95 on August 5th, the GDXJ has suffered a ~22% correction over a 3-month period - most of the recent consolidation/correction in the gold mining sector has been through time, in a messy and frustrating sideways-to-lower price pattern.
Honestly, one couldn't ask for a more natural bull market pattern - a 200%+ rally followed by a 22% correction that has served to reset charts across the sector while transforming investor sentiment from a bullish euphoria in early August to a despondent pessimism at last week's lows.
The stage is now set for a powerful year end rally in precious metals and mining shares.
Investors are so skeptical of gold today that even after this week's shitshow of a US election the Daily Sentiment Index (DSI) for gold was a paltry 27 as of yesterday's close.
The upside breakout level for GDXJ from the 3-month bull flag pattern is $60.00. With the Federal Reserve and J Pow on tap later this afternoon, followed by the monthly US jobs report tomorrow morning, we have additional catalysts (besides the US election drama/outcome) that could help gold and mining shares print powerful, bullish weekly closing candlesticks.
Disclosure: Author owns GDXJ shares at time of publishing and may choose to buy or sell at any time without notice.
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