It sure feels risky when you put on an opposite-sided traded after an equity moves way into overextended territory. In all reality the prices that people feel are running like a freight train in one direction statistically carry awful odds of being maintained without correction. When you have a confluences of chart patterns, diverging momentum, diverging moneyflow, and historical resistance levels these are actually the safest times to enter an opposite trade but it never “feels” that way.

It seems like a long time ago now but back at the end of May I was pushing hard to encourage buying the dip to anything in the $22s GDX because we were pulling back to supportive MAs (for the first time after an impulsive move) and S/R levels with really solid moneyflow….it was clear people were buying the pullback. But I don’t think I heard anyone else on this forum agree with me. Even the most bullish of you said we haven’t consolidated long enough and even one of you (who will remain unnamed) said the evening before the swing low that he was selling on any further weakness the next morning because he was unwilling give up hard earned gains since Jan-Feb. Yep, the next day was the swing low. Emotionally we end up selling into weakness when we cant take the pain any longer. Others of you were selling partial positions within days of this swing low while I was loading up. Now I sell into strength the day after Brexit, have scaled into short positions and have become the resident idiot 😉 Consider this chart and think about which entries and exits are truly this riskiest, setting your emotions aside.

GDX

and here’s a GDXJ-based illustration of the type of correction that I think could be in play. Not a trend changer whatsoever but who wants to give up those kinds of gains???? Also, do you guys remember how many folks back in January 2015 swore that the bottom was in????? Turns out they weren’t even close….it was a corrective move.

GDXJ