Have Gold And Silver Mining Shares Bottomed?

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Includes: DUST, GDX, GDXJ, GGGG, GLD, GLDX, JDST, JNUG, NUGT, PSAU, RING
by: James P. Montes

The Market Vectors Gold Miners ETF (GDX) has climbed 26% year to date, including nearly 14% this month to date. That compares to the gold-backed SPDR Gold Trust's (GLD) gain of around 10% year to date, including 6.3% this month.

The current price action seems to have discounted all the bad news regarding reserve losses, write downs and margin compression commented, Brien Lundin, Editor of Gold Newsletter.

When you take a look at the gold miners, they have recouped a third of what they lost last year, squeezing the shorts right out of the market. The fact of the matter is that gold and silver miners have actually outperformed the metals is a strong indicator of a potential capitulation in the sector.

In my last interview, I asked Sprott's Rick Rule if the mining shares sector has bottomed and he said:

"I think it is, but I can't say. Certainly what you described with regard to the juniors and the seniors is very hopeful. And it is hopeful for a couple of reasons. Bull markets, as we have discussed before, are born of bear markets and the extraordinary bear market pricing let some tepid buyers into the market. If we observe the year 2013 we see the following broad attributes the beginning of the first third of the year was catastrophic we had forced selling in the face of buyer exhaustion so the stock charts looked like the topographic maps of ski hills, just catastrophic falls from the upper left to the lower right. In the middle part of the year what we saw was buyer exhaustion still but seller exhaustion as well. So the stock charts went horizontal. We joked that they looked like the electrocardiogram of a corpse. At the end of the year what we saw was complete seller exhaustion, no sellers left with the better majors and the better juniors starting to get a bid. So we saw share price rises sometimes very dramatically. But on very low volumes. There wasn't really conviction buying, but there was no selling. This is absolutely consistent with the bear market bottoms that I have observed in the last four cycles that I have observed in my life."

Gold and Silver

The gold and silver markets have given a very powerful confirmation of the 1 to 3 month outlook for an initial bottom confirmed late December into late February. Major resistance shows up in the 1336 to 1347 area for the April futures contract. The silver major resistance shows up in the 22.10 to 22.37 levels basis the March contract.

The LIVE trading room at the Equity Management Academy recommended subscribers to cash in and take profits above 1300 gold and 21.94 for the March silver with some very substantial profits. The gold entry point was 1241 as published in Seeking Alpha. The silver was 19.10.

Traders should have exited all short positions in gold and silver in line with the short-term intermediate and long-term cyclical bottom confirmation recently completed.

In my last interview, I asked Rick Rule if he thought this was the beginning of a bigger trend developing and he commented:

"I do. But I think that this may be a head fake rally. In other words I think that we are going to see a very volatile market. With lots of ups and downs. But I think we're going to see higher highs and higher lows. And for those listeners of yours who are primarily traders I think about a range bound metal but with the range moving constantly higher. Don't be too excited about technical breakthroughs to the upside because there are plenty of things that could constrain us to the downside but think about a rising channel with higher highs and higher lows, but incredible volatility along the way."

The VC Price Momentum Indicator has been a very reliable timing tool as indicated in the documented trades we have published in the recent past and by the actual REAL trading results posted in the room. The results speak for themselves. This is the quality level of intelligence that I will continue to share with my viewers gratis. You be the judge. There are no excuses just the bottom line.

The market will provide us with another opportunity to get long again for those that missed the initial breakout. A close below 1322 would confirm a correction into the 1311 to 1297 areas is possible where it would offer traders/investors with another ideal buying opportunity to get long. Buy corrections and add to your long-term positions in silver as we approach the 21.44 to 21.02 levels. A close below 21.71 would confirm a possible test to the mid to low 21 area for March silver futures.

Let's take a look at the technical picture for next week and see what trading opportunities we can identify in the gold shares and mining sector.

GLD

The contract closed at 127.58. The market closing above the 9 day MA (121.88) is confirmation that the trend momentum is bullish. A close below the 9 MA would negate the weekly bullish short-term trend to neutral.

With the market closing above The VC Weekly Price Momentum Indicator of 127.27, it confirms that the price momentum is bullish. A close below the VC Weekly, would negate the bullish signal to neutral.

Cover short on corrections at the 126.47 to 125.36 and reverse to go long on a weekly reversal stop. If long, use the 125.36 as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 128.38 and 129.18 levels during the week.

GDX

The contract closed at 26.53. The market closing above the 9 day MA (22.91) is confirmation that the trend momentum is bullish. A close below the 9 MA would negate the weekly bullish short-term trend to neutral.

With the market closing above The VC Weekly Price Momentum Indicator of 26.31, it confirms that the price momentum is bullish. A close below the VC Weekly, would negate the bullish signal to neutral.

Cover short on corrections at the 25.78 to 25.02 and reverse to go long on a weekly reversal stop. If long, use the 25.02 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 27.07 and 27.60 levels during the week.

Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts. Trading derivatives financial instruments and precious metals involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AGOL, AGQ, DBS, DGL, DGLD, DGP, DGZ, DSLV, DZZ, GLD, GLDI, GLL, IAU, PHYS, SGOL, SIVR, SLV, SLVO, TBAR, UBG, UGL, UGLD, USLV, USV, ZSL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.