GDXJ is a gold stock related ETF. The great thing about ETFs is that we don’t have to worry about any single company fundamentals. All we need is a very good understanding, where gold stocks are in their bullish or bearish phases. Recently the story was that investors were dumping gold related assets, to jump onto the Bitcoin Mania bandwagon. Of course the Bitcoin bandwagon has now crashed and is burning in a huge electronic fire. No sooner that this bearish news about gold came out, GDXJ stopped falling and has now started to soar again. GDXJ reacting the opposite way of bearish news, is a very bullish sign in itself.
You won’t find those indicators in your trading tool box, but smart contrarians look for those signs all the time. I see this action during many “ABC” corrections.
During last weeks Bitcoins carnage, and a $9000 price crash, gold stocks kept right on trucking along. I have dropped my degree levels down to Minor degree again, which means a bullish phase is still coming. Any “C” wave bull market, could send this gold stock related ETF to new record highs.
Any bullish phase ends when many bulls are present, like they were back in mid 2016. I called for a correction at that time, which ended up being about 18 months long. Long drawn corrections are necessary to wash out all those emotional investors, that have no clue about longer term cyclical investing. They panic anytime the market goes against them, forcing them out just before the biggest bullish phase starts to move. I can’t give any specific “buy” or “Sell” instructions, but I can only relay my bullish or bearish mood at any given time.
The Gold/GDXJ ratio is still relatively cheap as it’s at 37.85:1 at the time of this posting. This has compressed a bit from a recent base of 40:1. My extreme expensive Gold/GDXJ ratio is 10:1, so we have a long way to go, before this gold market becomes expensive again.
SIL has a different bearish phase, that other ETFs didn’t have. SIL just finished a bigger and longer correction, but has now synchronized in time with other turnings. From the 2016 bottom SIL produced a stunning move, which can only happen in a very short time span. The SIL bandwagon also had to crash, producing a bearish phase. Bearish moves in a bull market are necessary to get rid of all those freeloaders, that think they can just jump on at anytime they want. Emotional investors will always get burnt when they chase a bull market, or when they try to take their entire positions all at once.
Contrarians do not do any panic buying or selling, as they were buying during the entire 2015 decline, with GTC orders. Everybody hated gold stocks at that time, but look what happened shortly after. The majority always gets in at a top, and in the case of SIL they left a 360% gain on the table. I believe SIL can break to a new record high again, as this second bullish phase starts to kick in. At a minimum, SIL would have to completely retrace that mid 2016 peak of $54. This is so close to a Fibonacci 55 number, where a 61% (1.618) move above $55 will get us close to the $89 price range. SIL would end up just below a major double top.
The thing with anything silver related, is that during its entire life, it contained wild and crazy zigzag moves. These zigzags fit best as diagonal waves. A single zigzag bull market fits very well into any diagonal related run.
The recent Gold/Sil ratio is sitting at about 39.66:1 which is still very decent from my perspective. When the Gold/Sil ratio starts getting closer to 20:1, then we may have to look at the bigger bullish phase again.
Due to the fact that commodities are all leveraged, Elliott Waves don’t always act the same. Fear is the main fundamental that drive commodity prices up or down, not supply and demand numbers. Fear of missing out, fear of gluts and fears of shortages, is the real driver of prices. Hope and greed don’t have very much time to set up between mini panic attacks, while in the stock markets, it could take years for hope and greed to set in.