Miners are extremely overbought. The longer something rallies the more confident retail traders become and the more likely they are to chase price – afraid they are missing the move.

miners are extremely overbought

A professional trader thinks exactly the opposite. The longer something rallies the closer it is to a correction, and the more nervous a professional becomes. At the recent top GDX was stretched 51% above the 200 day moving average. That is the definition of dangerously overbought. This is not the time to chase. Wait for the Intermediate Cycle Low (ICL) in June.

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  1. Gary Post author

    I’d like to see the stock market deliver a true move down into a recognizable DCL and take the runaway move off the table. A dip at least to the 23% Fib is mandatory and 38% would be better.

    I hate runaway moves. They negate all my cycle counts.

  2. Anthonyo

    Bond guru Jeffrey Gundlach joins chorus calling for a ‘helicopter drop’ by the Yellen Fed

  3. novice

    Gary, who are those professionals? In my opinion, they are those who are using client’s money to chase the stock prices? They can move the stock price.. they will not be nervous because it is not their money..

    I agree with you on the danger of chasing, and yet if looking the price chart over the longer term (10 years), using GDX as example, this bounce looks like just a beginning ….

    S&P after the 2009 bottom, never looked back … could it happen to miners? they are so oversold over the years, I am wondering who are the new sellers? well, could be the short sellers..

    1. novice

      Many people completely missed out for 2009 S&P recovery, because they never believed the market would go higher without retracement.. but the market did go higher and higher…
      Patience sometimes is also a double edge sword under some circumstances..
      so I would not completely sell out my positions if certain markets were identified as a bull market..

    2. Gary Post author

      On the contrary the S&P had many corrections. Two really severe ones in 2010 & 2011.

      And yes this is just the beginning but don’t make the mistake of thinking that gold and miners will just go straight up.

    1. bill

      I like the way LABU is sitting on the hundred now, setting up for earnings….don’t jump the gun to soon this sucker could pop..

  4. J

    A reply to your biotech video -http://invst.ly/1lsgp, just my take on where IBB is and why, I know you dismiss TA but see how it plays out I guess, (it got me in and out of LABU a few times with 15%-30% gains, lately) Im flexible either way and don’t marry a side. and I think it may even throw over the trend to test the $307 area.

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