VRA Update: The Stars Are Lining up Perfectly for Precious Metals and Miners

VRA Update: The Stars Are Lining up Perfectly for Precious Metals and Miners.

Aug 10, 2017

Good Thursday morning all. First this morning, a couple of important VRA reminders...for both our LT Subscribers and especially our newbies. My investing style is hyper aggressive...if you're looking for safe, mutual fund type returns, I am probably not your guy. I have one primary goal...to make my members wealthy. In order to do this, we must crush Mr. Market. Because, he certainly enjoys doing the same to us. 

As a rule, I never recommend more than 10 stocks at a time. I believe in building a diversified portfolio, but not overly so. It's hard to make huge returns if you own a portfolio of 50 stocks. I am from the Peter Lynch school of investing. I buy a stock...or an asset...and I continue to dollar cost average into it as long as the story continues to hold up. I believe that without a good management team, the company...regardless of the quality of their product or potential...has very, very little chance of succeeding, long term. 

My VRA Trading & Investing System combines fundamental and technical analysis. Roughly 70% fundamental and 30% technical. I study global trends and macroeconomics and long term cycle analysis. Please make sure and login to your VRA Members Site to ensure that you are positioned properly. 

Today, something most significant looks to be occurring. As we've been covering, the global reflation trade is picking up serious steam. Many/most of the most important base metals...used in manufacturing and construction all over the world...are soaring in price. We're now seeing 2 year to all-time highs in the prices of copper, aluminum, lead and zinc, to name just a few. These highly inflationary advances come at a time when global stock markets are soaring as well. Make no mistake about it, global growth is back. It will be followed by global inflation. 

Now, as of this morning, gold, silver and GDX (mining ETF) look very much like they are ready to go on a serious tear. The stars looks to be perfectly aligned. As I write, gold is up another $10/oz to $1289, a more than two month high. Silver has been ramping even further higher, as its doing again this morning, with a last price here of $17.16, +1.8%. GDX is showing gains of 1.3% this am, approaching the all-important $23/share.

From a technical point of view, here's the most important event occurring this am. For the first time in months, gold, silver and GDX are each trading above their highly important 200 day moving averages (dma). Combined with the fundamental reasons that I love precious metals and the miners, should these technical breakouts hold up, a flood of buying will begin to pour into this asset class. 

In yesterdays update I shared the cup and handle formation for gold. Here it is again. I repeat, this is a highly bullish technical formation. Here's what we want to see next; a move through $1300/oz...on heavy volume...followed by a move through the 52 week high of $1360/oz. Then the floodgates open. 

This morning, lets also take a look at the cup and handle formation in GDX (below). Frankly, this chart looks even better than the chart of gold. And remember, the miners move 3-5 x faster than the underlying commodity. 

Now, here's what we want to see happen next...and folks, what I'm about to say here is super important. GDX must break through the $23 level and it must hold over its 200 dma, currently sitting at $22.57. I also want to see the breakout occur on heavy volume, preferably back to back days of 100 million shares traded. These are our bogeys...they are most important. Should these events "not" take place, it will constitute a technical breakdown. Or should I say, another technical breakdown. Precious metals and miners went through a BRUTAL bear market of 3.5 years, from 2012 to late 2015. Following the lows of 2015, the move higher has been semi-consistent, but spotty and frankly, boring. 

This has resulted in the cup and handle formation we see today...a coiled spring of significant proportion. Just one event is left...the breakouts I've detailed in this update. Gold through $1300/oz and GDX through $23...on heavy volumes. All of the corroborating evidence that I see...both fundamental and technical...says that this breakout should occur now.

Until next time, thanks again for reading...

Kip