“Two other variables that also spelled trouble for the Gold & Silver mining index were: 1) The rally retraced 61.8% of the prior decline. This usually is a strong Fibonacci resistance level. And 2) The Relative Momentum Index for XAU was peaking at the same time,” according to See It Market.
Stock fundamentals like cost deflation across the mining industry, share valuations below long-term average and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens.
SEE MORE: Can Gold and Silver ETFs go Their Separate Ways?
Investors bet against gold miners with bearish options like the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST), the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST) and ProShares UltraShort Gold Miners (NYSEArca: GDXS). The Direxion options take the -300% exposure to large miners and junior miners, respectively, while the ProShares option take the -200% exposure to large miners and junior miners, respectively.
“The steeper the rising wedge, the faster the decline. Patience is a virtue in trading – and precious metals will likely need some time before finding their footing,” adds See It Market.