They Don't Back Up Like They Used To

An interesting thing happened after a plethora of rallies virtually across the board in the precious and non-precious mining complex to close out summer trading--They did not give much back. 

Even the most ardent mining bull would have to admit that they have been beyond frustrating to buy-and-hold for any meaningful period of time beyond a day or two, if that at times, since cooling off in the summer 2016. And before that early-2016/August 2016 rally, most miners were mired in multi-year deep, unforgiving bear markets.

And that brings us to the present, where we need to closely evaluate whether the current rally in gold, silver, their miners, as well as steels and non-precious, industrial miners (e.g. zinc, and the likes of CLF TECK) are actually now beginning a new leg higher of a fresh bull market. This is an issue we have discussed quite a bit in recent blog posts, where all we can do is stay on top of the daily chart and look for clues of that new bull run.

Simply put, the early stages of a new bull run in almost any asset class will feature price becoming and then stubbornly remaining overbought with little in the way of giveback for a significant period of time. Moreover, even the most bullish of the bulls, gun-shy from years of being wrong, will constantly expect a sharp pullback at any given moment which, this time around, fails to materialize.

We may indeed have seen such a phenomenon in the gold and silver markets yesterday, alongside their miners. And when we look at the XME (ETF for metals and miners, both precious and non-precious, and some steels, too) we see an initial lack of giveback by price, too, after the August rally. 

So why not bet the ranch and go "all-in' right now for all things miners? The reason why we should not do that (if ever) is that we are far from out of the woods of those multi-year bear markets, despite some notable technical progress (e.g. XME and GDX now both have rising 200-day moving averages). Keeping those stop-losses in place and objectively interpreting the price action as it unfolds remains the sound risk strategy to obey. 

But we can still have opinions based on the action. And the materials/precious miners sure are making a strong case to resume the uptrend which likely began in early-2016.