Short gold miners

As I said I firmly believe in the super mega uptrend for gold, which in my opinion will continue for years as long as the world is trapped in this crazy financial mess. Understandably gold has been in a very severe correction for 3-4 years but I truly sense that we have likely seen its bottom around the level of $1000.Since the start of the year, gold has shown a very strong upward move and has for first time in years broken out its downtrend line. This is an important signal that it may have reached its bottom and may start to resume its next leg up move. But the past few weeks of bullish rebound was a bit too fast too soon and as I said, it has been in a parabolic move. This kind of move will always lead towards a sharp correction short term. I think we are likely seeing a start of this correction the passing Friday.


Gold mining stocks are usually a leading indicator for gold. Needless to say, they are also in a parabolic move. GDX has been above its 50 day MA by almost 20% and all the technical indicators are pointing to an extreme overbought status. As you can see below, the current move is very similar to what we saw last October when it was quite overbought as well. When it is going higher highs almost everyday, its MACD is starting to move down, a classic negative divergence suggesting the trend is going to change.  The Friday's "opened high but closed low" price action was a typical topping behavior, suggesting GDX has done it exhaustive buying by the last herd. This is probably the last push for GDX to go down. In the very short term, I believe GDX will move down towards its 50 DMA around $16.50 from its current high around $19.70. I think a 15-20% correction is likely. I couldn't help but bought some GDX puts as a short-term trade.