The metals markets are all now hitting the downside retracement targets for support we have been speaking of since the market confirmed this pullback months ago. The market has positive divergences at the lows we are striking. The sentiment readings are at the levels when we struck the lows this past January. Anyone who is not a perma-bull has just about thrown in the towel. Most in the market are pointing to the exact same heads and shoulder break down and looking for the market to now drop to lower lows – which I warned you about months ago. The only type of rally people think is possible is a corrective bounce. I see people cursing out other analysts that told then to buy at much higher levels.
So, what do I say? It’s time to buy!!!
Am I going to be right this time? I am an analyst, not a prophet, so, that I cannot tell you. What I can tell you is that sentiment in this market is in the toilet, and that is usually when the market turns strongly in the opposite direction, leaving everyone behind. Moreover, we are now hitting the MAJOR support in the market. So, from a risk/reward perspective, now is the time to buy, and use a stop to limit any losses should we be wrong.
Remember, being in the market does not mean you are ALWAYS going to be right. Being in the market means that you look for points in time when you want to put your money to work when risk/reward dictates you have a better shot at making money and you have a low risk entry. So, if you are wrong, you do not lose a lot of money, and if you are right, you will maximize your profits when everyone else is out of the market.
I think we are at a point where blood is running in the streets, and as Baron Rothschild famously said, “the time to buy is when there is blood in the streets, even if it is your own.”
Take note that while gold and silver finally dropped to lower lows into our support regions, GDX has not dropped to a lower low. Some believe that when the miners show relative strength, this is a bottoming sign.
Again, we are now hitting the MAJOR supports in the market, and fear is abound, if not overwhelming. So, even though I recognize that we will not ALWAYS be right, as we are human, we have to realize when it is time to take a shot. But, it does not mean that we do so recklessly. It means we take a shot with risk management in place, so that losses, if we do break down, are very limited.
Think about it another way. IF we are right, you are buying at a time which represents the best risk/reward for doing so. If we are wrong, you take a small loss, and you get an opportunity to buy at even lower levels. As a long-term investor in this complex, I see no downside based upon those two potentials right now in this market. But, this is just my humble opinion.
As for me, I own every single stock I owned at the lows, have made a killing playing puts on the downside in GDX from 28.50, sold ALL the puts that have gone in the money, and remain hedged with out of money puts in January in the event I am wrong. In fact, my account went up on the break down on Wednesday, which told me I am too hedged, so I even sold a chunk of the out of money puts I owned. If you followed me, you own long term positions, have significantly increased your cash position in your account, and are now waiting for the market to make its decision, while we are at a point where the risk relative to the reward is well on your side. Enjoy the holiday!