The GDXJ:GDX ratio (Junior Miners/Senior Miners) frequently sends a very important message to the mining sector. This ratio has created a series of higher lows and lower highs over the past few years, which creates a narrowing pennant pattern.
The ratio is now testing the top of this pattern, which comes into play as resistance. If the ratio breaks above the top of the pennant pattern and the 2017/2018 highs, it would send a short-term bullish message to the hard-hit sector.
While this important ratio is testing a key breakout level in a long-term downtrend, gold and silver are doing the same.
The bottom line for the metals space: since the highs in 2011, gold, silver and the miners have struggled to break above falling resistance. Each is now testing a very important falling resistance level at the same time.
If these resistance lines are broken to the upside, they should attract buyers. Very important price tests are in play for these assets.
Disclosure: Long Gold for the past several months. The trailing stop is tight in case resistance holds here.
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