Is This A Miner Bear Trap Into Jackson Hole?Thursday September 01, 2016 12:53
As, I pen this; Janet Yellen is giving her highly anticipated speech at Jackson Hole entitled "The Federal Reserve's Monetary Policy Toolkit".
As of this past Thursday, the GDX and the HUI have corrected roughly 17% testing their Brexit gaps as summer vacations near an end. This would be the second 17% correction if the gap holds. The other was in May. The market reaction to the speech today is key as the weekly up trend is in danger of breaking down and that could trigger a more severe correction.
Meanwhile, the GLD has not seen huge liquidation to accompany this late summer paper gold attack and the miners are becoming over sold heading into September which historically has been a very strong month for gold buying. With options in gold futures expiring yesterday, August 24th, along with many traders still on vacation during the thinnest market volume month in the past 20 years, the sector was ripe for chart painting this week.
If you are on the sidelines and have yet to jump into the sector I believe this is a nice opportunity to begin scaling into positions regardless of what Mrs. Yellen has to say. The surprises have been to the upside thus far but this is a very critical juncture in the new sector bull. The Brexit gaps are very significant, because they represent the global loss of faith in government, which could be a major catalyst for gold. Along the same lines, a Trump rise in the polls is significant as he represents the anti-politician and anti-system vote.
Taking all of this into consideration leads me to believe this could very well be a miner bear trap. The miners may still be in the late stages of a move towards my short-term targets of GDX 40-42 and HUI 350-375 by the end of Q3. However, if the weekly trend is broken below GDX 28 and HUI 250 on Friday, August 26th, then the short term bears waiting to initiate positions just may get their long awaited 25-30% correction as the long term bulls endure more short term pain.
David Erfle is a 52 year old self-taught mining sector investor. He stumbled upon the mining sector in 2003 as he was looking to invest into a growing sector of the market. After researching the gains made from the 2001 bottom in the tiny gold and silver sector he became fascinated with this niche market. So much so that in 2005 he decided to sell his home and invest the entire proceeds from the sale into junior mining companies. When his account had tripled by September, 2007, he decided to quit his job as the Telecommunications Equipment Buyer at UCLA and make investing in this sector his full time job. He personally survived two bear markets, witnessed incredible sector changes and had to alter his investment philosophy numerous times in order to adapt to changing market conditions."