Special Update: Classic Selling Climax In Gold/Silver Mining Stocks!

Since the January 21st, 2015 reaction high, when gold and silver mining stocks were up about 20% year-to-date, losses in these same stocks have been historic. The average loss is probably more than 30% from the January 21st intra-day highs to this morning's intra-day lows. Here is a representative sampling:

Goldcorp (GG)                                  -28%

Junior Gold Miners ETF (GDXJ)    -33%

Philadelphia Gold/Silver Miners Index (XAU)   -22%

First Majestic Silver (AG)              -35%

Endeavour Silver (EXK)                -51%

Silver Miners ETF (SIL)                 -31%

While it's true that the underlying precious metals prices fell sharply during this period (Gold down 12%, Silver down 16%), the volatility in this sector is off-the-charts right now, especially over the last four trading days. Most Gold and Silver mining shares fell 5% per day, on average, over the last four days in a classic selling climax that ended at approximately 11:15 AM ET this morning. The V-shaped rally in gold and silver stocks after the intra-day lows were posted today was exceptional. By the end of the day today, one small silver stock (EXK) actually jumped 16% from its intra-day low. Most gold and silver stocks rebounded at least 5%, with the average closer to +8%.

In the interest of full disclosure, gold and silver mining shares now account for a 40% allocation of my assets under management. 75% of these positions were accumulated over the last four trading days. 

Was this morning's heavy selling in the gold and silver mining shares a classic selling climax? Yes, I think so! Underlying gold and silver prices were actually down on the day today, which strongly suggests that the extraordinary rebound of gold and silver mining shares in afternoon dealings was potentially a significant bullish tone change for this entire sector. My strong feeling is that this entire group is dramatically underweighted by fund managers, and that this sector is officially among the "most hated" again in terms of investors sentiment! Today's oversold bounce could easily represent the beginning of an extended advance lasting several quarters.

If today was a major low in gold and silver mining shares, how much upside can we expect over the near-term and intermediate-term horizons? If we define 60 days as "near term", then I think gold and silver mining shares could easily advance 50%, or more, on average. If we define 150 days as the intermediate term, then I think gold and silver mining shares could advance 100% or more from today's intra-day lows.

Daily chart buy signals were triggered by my computer trading system in the following gold and silver mining shares at today's NY close: AEM, AG, AXU, AU, AUY, CDE, EXK, FSM, GDX, GG, PAAS, PPP, RGLD, SIL, and XAU. And here are a few representative charts:

Gold Miner Shares ETF (GDX) Daily Chart with 3-Std Dev. Bollinger Bands

Silver Miner Shares ETF (SIL) Daily Chart with 3-Std Dev. Bollinger Bands

Philadelphia Gold/Silver Miners Index (XAU) Daily Chart with 3-Std Dev. Bollinger Bands