The good part about danger point areas is, price action does not need to go far to confirm or negate the trade.
We’re at that point now with precious metals and more specifically, the junior mining sector, GDXJ.
A brief search for YouTube “gold higher”, turns up the list below.
The amount of bullish biased videos is easy to find. Everybody’s doing it.
Who wants to hear that a favorite investment or market is heading lower?
Getting to the chart of GDXJ and what’s wrong; it’s obvious.
There’s a huge non-confirmation.
The gold tracking fund, GLD is back at or near all time highs and yet GDXJ (the junior sector), is down -58.8%.
There is no way to paint this in a positive light. Down nearly 60% is massive.
One way to look at it is, the junior sector does not believe gold (and silver) prices can be sustained at current levels.
Or, if they are sustained, there must be something else at work that would prevent them form obtaining a substantial profit.
Either way, the last report on the sector stepped through the current price action. We’re at the danger point for GDXJ.
A move higher in the coming week will put a dent in (or negate) the bearish scenario and a move lower will help to confirm.
Charts by StockCharts