Friday, November 7, 2014

Interesting start to the day for junior miners


All gold has done is move back, from -3SD, into the downward channel defined by the EMA(9) and the lower Bollinger band.

When you're in a downward channel between the EMA(9) and the lower Bollinger band, by definition it means your chart sucks.

And nevertheless, this happens this morning:

B2Gold is threatening to break above its EMA(9).

Flying Spaghetti Monster Mines is threatening to break above its EMA(9).

The woeful Kinross has actually already moved above its EMA(9).

Now before the goldbugs get all hoity-toity about these 20% upmoves from the lows, they should ge reminded that all that's happened so far this morning is the miners have taken back the share price collapses that followed gold's breakdown last Friday. They've done so despite only a 1% upmove in the price of gold.

Those share price collapses we saw over the past week were quite violent, and maybe the price moves were exacerbated by an especially dismal collapse of faith. And a sudden illiquidity as everyone moved to the sell side of the boat.

Or maybe it was a short frenzy, and the shorts will today decide to book profits and go home. For a while.

All I'm saying here is you don't buy junior miners in a downtrending gold market based on a Friday morning pre-10AM surge. At best this will give newsletter writers the opportunity to spend the weekend trying to figure out whether this was "The Bottom", or whether instead this is a golden opportunity to unload at 20% higher than the prices on Wednesday.

Which do you think they'll do?

Stay tuned to find out! Wow, this is one heck of a cliffhanger!

I suspect, btw, that the short position on junior miners was far larger than the total market cap of the junior miners, and someone did the math yesterday morning and decided to squeeze. Thus the incomprehensible buying spikes that we saw in the by-the-minute charts yesterday, around 1:30-2PM.

And I also still suspect that there's no way gold goes to $1050 by the end of this year. But a sudden fear of Goldman's pronouncement coming true was probably a big motivation for the past week's illiquid selling.

The problem with the above, though, is that a snapback in the short-term momentum will not necessarily cause any change in the medium-term momentum.

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