I don’t know how many have noticed that the GDXJ, the junior precious metals stock index, has been holding up better than the big caps for the last month or so. This is a very positive event taking place right now. What this ratio is saying is that when money starts flowing into the more speculative small cap stocks the whole precious metals sector, as a whole, will start to benefit. You can see on the chart below the juniors started to outperform the big caps in the middle of December and have not let up yet. I believe this is a very positive situation taking place right before our very eyes. The big H&S top that was made last year is why the precious metals stocks, as a whole, have been trading so weak until the middle of December. There is time to be in the precious metals stocks and a time to let them correct. With the GDXJ:GDX ratio getting stronger that is another reason I’ve been becoming more bullish on the whole precious metals complex. Sometimes these clues don’t present themselves until the last minute but when they do its time to act. Note the positive divergence on the RSI and the MACD.

GDXJ:GDX daily line chart showing the small caps outperforming the big caps, a positive sign going forward.

Lets take a quick look at the GDXJ:GLD and see what the small caps are doing compared to gold. On the chart below it looks like the GDXJ is trying to put in a bottom to the price of gold. If this ratio really starts to rise that would be a very powerful sign. It would mean its time for the small caps to start playing catch up and start outperforming gold, which when all the stars are alined just right for the juniors, that is when the big money will be made.

GDXJ:GLD daily look showing the juniors are trying to put in a bottom to gold which would be a very positive sign.

Just a quick update on NEM. It broke out of an inverse H&S pattern 3 days ago and today we had a nice backtest to the neckline. This stock is showing why I’m becoming more bullish on the precious metals sectors. The big caps will lead the way on the front end of the rally.

NEM daily H&S breakout and backtest.

This weekend I’m going to fine tune a list of precious metals stocks that I think will have a good move when this next upleg begins. I’m seeing signs that this might be happening now. If any of our subscribers have any stocks that you have been following for sometime and think they might be a good candidate for the list just post them at the forum and I’ll take a look at them. They can be juniors or big caps. To all a good weekend…Rambus

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I just wanted to post this chart of HL as its been a very tough year for holders of this stock. This stock is a good example of why one doesn’t become married to a position. There were many many signs along this one year decline that a trader could have gotten out, probably with a loss but it at least it frees up capital to be used in something better.

HL daily downtrend channel.

Yesterday SLV broke above the neckline of a potential inverse H&S pattern. I showed the downtrend rail that it needed to break before it could really start it’s move up. Today we backtested the neckline and presently trying to break the downtrend rail. This is a low risk setup right here for a few points to the upside. Use the neckline as your line in the sand to place your sell/stop.The H&S measures to about 32.75 but the neckline from the previous H&S consolidation pattern comes in alittle lower around 31 or so.

SLV daily H&S breakout and backtest to neckline. Cracking down sloping rail.

It’s been somewhat frustrating in here as I’ve been looking for a strong dollar to put pressure on the stock markets and the precious metals complex but so far its had very little affect. Maybe there is subtle change taking place that is not quite evident yet. Time will tell.

UUP daily H&S breakout and backtest completed. Five point breakout sequence.

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