There have only been a handful of times over the last 20+ years that sentiment in the metals has been this horrid. According to sentimentrader the median gain after this level of capitulation has been 43% over the next 2 months. Remember the further the rubber band gets stretched the harder and further it rebounds once the selling pressure is released. From today’s close a 43% rebound in GDX would be….$25.
The perma bears and trolls are falling all over themselves thinking I’m going to be wrong, but when this is all said and done I’m going to be correct again, and the contrarian trade is where the really big money will be made. The problem is that almost no one has the mental stamina to hang on through the drawdown if they mistime the entry. And one really doesn’t have to. You can just stop out for small losses as one tries to find the bottom and conserve capital. Once the bottom is in the gains should be large, easily recovering the small losses.
As I said a couple of days ago, we took a loss on our last trade. The SMT metal portfolio is back to break even, but we are in a very good position to make some stellar gains once the bottom is in and the next rally begins. So we’ll keep shooting until we do find the bottom, I think it’s going to end up being very profitable.