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Last weekend, I shared a series of tweets outlining a potentially bullish posture being presented by Gold and Silver miners. Specifically, I cited gaps on the downside in each of the ETFs that likely needed to be filled before we head higher. As of yesterday, they have all been filled. I’m going to go through each of them and the key levels to watch to determine whether they are all going higher or lower next.
GDX bottomed out on July 19 at 32.87, right on trendline support in purple above.
32.87 also just happened to be the EXACT 76.4% retracement of the entire move up from 30.64 in March to the peak of 40.13 in May.
The low at 32.87 was accompanied by clear positive divergences in the RSI and both MACDs.
Such confluence of support is extremely powerful and suggests the bottom is in for gold miners.
Looking at resistance now: On Wednesday, GDX tested a powerful confluence of the 50-day, 100-day, and 200-day moving averages combined from 35.45 to 35.89. It failed.
GDX had also left a gap behind at 34.19 last week. It closed that gap yesterday, falling to 34.18. It could still drop a little further first, but if we break the previous high of 35.82, there are a couple of gaps on the chart to close on the upside at 36.73 and 39.34 next.
Alternatively, 32.87 must hold or we could be in for a far deeper dive.
GDXJ also closed its gap yesterday at 45.
On the downside, there is the green support line at ~42 dating back to former resistance beginning in February 2017, and it has been a pivotal level ever since.
42 also just happens to be the 50% retracement of the entire rally from 19.21 in March 2020 to the peak of 64.91 last August.
The ~43 support level represents a triple low on July 21, July 19, and March 30. It was also a positively divergent low on the RSI and both MACDs.
On the upside, GDXJ tested a confluence of trendline resistance at 46.60, broke it briefly, and fell back down. The first trendline in purple dates back to the low in May 2019. The second in yellow comes down from the peak last August.
Now that the gap is closed, GDXJ needs to break the Wednesday peak of 47.10. Above there, the next hurdles are the 50-day, 100-day, and 200-day moving averages. Through those and there is a gap to close at 53 left behind on June 16. There is another gap at 55.50 from June 2. Finally, there is the peak at 55.80 on June 1. But let’s take a baby step approach and focus on getting above 47.10 first.
A break below support at ~42 and 36 and possibly 30 are next.
SIL also closed its gap yesterday at 41.62. It could fall a little further first, but the resistance to break on the upside is the double top at 43.11-43.14 and the 200-day moving average at 43.30. A break of the latter would open up a move to 50 or higher.
Pivotal support is at ~38 based on numerous tests dating back to November 2020, January 2021, and March 2021.
The 450-day moving average is also at 38.20.
Guess what the 38.2% retracement of the rally of the March low of 15.62 to the August peak of 51.80 is? “38”. Below there and it could be a long way down.
Last but not least, SILJ also closed its gap yesterday at 14.09.
Support was confirmed at the 450-day MA at ~13 on July 19. Below there and things could get ugly fast.
The nearest resistance is the double top between 14.72-14.78. Above there awaits the 50, 100, and 200-day moving averages all converging between 15.28 to 15.64.
But just like the gap on the downside was a magnet for closure, there is also a gap to be closed on the upside at 16.67 from June 16. It’s only a matter of when that gap is closed too. The same goes for all of the mining ETFs.
In summary, we got the expected closure of the gaps on the downside across all of the ETFs today. The RSIs are back to or below the neutral 50 level, creating fuel for a further assault higher. The MACD Lines are trending higher from extreme lows in all cases. All have gaps to fill on the upside too. In order for this to happen sooner rather than later, we cannot break the key support levels provided here.
Bigger picture, I still see the rising risk of a disinflationary period coupled with a marked slowdown in the economy and a drop in stocks in the next few months or so. This would likely weigh on metals and miners in the short-term, much like in March 2020. However, anticipation of fiscal and monetary stimulus on steroids would soon send Gold, Silver, and the miners to new highs, imho.