As a new month begins, the downtrendin the GDX and GDXJ should resume. When will a new buying opportunity finallypresent itself?
Let’s compare the behavior of the GDX ETFand the GDXJ ETF. Regarding the former, the GDX ETF reversed sharply afterreaching its 200-day moving average and a confluence of bearish indicatorssignaled a similar outcome. For context, I wrote on Oct. 25:
Smallbreakout mirrors what we witnessed during the senior miners’ downtrend in late2020/early 2021. Moreover, when the GDX ETF’s RSI (Relative Strength Index)approached 70 (overbought conditions) back then, the highs were in (or near)and sharp reversals followed.
Furthermore,after a sharp intraday reversal materialized on Oct. 22, the about-face issimilar to the major reversal that we witnessed in early August. On top ofthat, with the GDX ETF’s stochastic indicator also screaming overbought conditions, the senior miners are likely to movelower sooner rather than later.
In conclusion, mining stocks reprised their roleas ‘The Boy Who Cried Wolf.’ And after overzealous investors rushed to theirdefense last week, another false alarm led to another bout of disappointment.Moreover, with the technical and fundamental backdrops for gold, silver andmining stocks continuing to deteriorate, lower lows should materialize over themedium term. As a result, we may have to wait until 2022 before reliable buyingopportunities emerge once again.
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Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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