In short, I think that taking profits off the table, and closing our long positions right now is justified from the risk to reward point of view.
At the same time, I think that re-opening short positions in GDXJ (or buying inverse-trading ETFs such as JDST, if one seeks leverage) is also justified from the risk to reward point of view.
In my opinion a big (300% of the regular size of the positions) short position is justified. Of course, the final decision regarding any trades is up to you – it’s your capital, and you know best what kind of position you’re fine with.
Congratulations! It was not easy to gain on a long position during a sharp medium-term decline, but you managed to do it. This is yet another profitable trade in a row. And the biggest part of the move is – in my opinion of course – still ahead.
Why am I making the switch now? At the moment of writing these words, the GDXJ ETF is trading at $33.50, which is just $0.37 away from my previous binding profit-take level, and at the same time the gold hit its Dec. 2021 low. Plus, silver just materially outperformed gold, which might be an indication of a top. This indicates that even if this is not the final top, we’re probably very close to it.
Tomorrow, inflation numbers (core PCE) will be released, which might make the market think that the Fed will not be so dovish after all. And thus, the very recent rallies in PMs could be reversed. The thing is that those inflation numbers are going to be released one hour before the markets open in the U.S. Consequently, while futures traders might be able to easily get out of the market, if it seems that the trend reverses, it might not be that easy for those in GDXJ and leveraged ETFs, as they will not be trading (and the pre-market trading might not provide decent liquidity). Therefore, in my opinion, it seems justified to take profits off the table, and switch positions right now.
As always, I’ll keep you – my subscribers – informed. Congratulations once again!
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief