Case Study in Capitulation (GDXJ)


GDXJ has lost almost 83% since its $55 high two years ago.


Two months of sideways price movement on declining volume. Note large volume mid-April as gold sold off $200 in two days. Note second new low on lower volume in mid-May. Now, see third new low on similar volume.

GDXJ 2 day

gdxj sm

After the opening hour, see the extremely tight trading range. Who is selling vs. who is buying.  Forced selling/capitulation into strong hands?

Time will tell, but I smell the beginning of the end of this massacre. When there is no hope that is the time to step in. I am using the GDXJ as a proxy for small mining companies.  This is the time to look for exhausted selling. The market will go up not because there are new buyers but because the sellers are exhausted/already having panicked.



two day GDXJ

Gold Notes: June 22 GDX Volume

NO ONE knows where prices will ultimately go. We just seek clues of market participant behavior.   Negative sentiment, commercial hedger buying in gold while small specs go short, strong physical demand, do not necessarily denote an immediate bottom. But the structure of the markets are changing at the margin.


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