Last week, mining stocks fell quite visibly, and this happened without significant help from the USD Index and the general stock market. Silver and gold were virtually flat week-over-week, as was the USD Index, and the general stock market (S&P 500) was up 0.51%. This means that gold and silver stocks should have closed the week relatively unchanged (as gold and silver did), or moved slightly higher (in the same way that other stocks do, as sometimes miners get ahead of themselves).
Instead, all the major proxies for mining stocks fell and closed the week at new daily and weekly lows of 2021. The HUI Index and GDX ETF fell about 3%, silver stocks (SIL ETF) fell 3.6% and the GDXJ ETF (proxy for junior miners) fell 3.83%, meaning our short position in the latter became even more profitable.
More importantly, it means that mining stocks continue to show weakness against gold, which tells us that the medium-term downtrend remains well intact. It also tells us that what I wrote earlier about the medium-term link between the general stock market and mining stocks was most likely correct. Namely, that miners can decline without a decline in other stocks. A decline in the latter (as I always expect to see sooner or later) will only exacerbate the volatility of the decline.
I believe that mining stocks should now decline deeply. The 3% decline we saw last week is probably just a small start to the whole slide.
Yes, the stochastic indicator is very oversold, but please note that the same was true in 2013 during the powerful post-head-and-shoulders slide. And that did not cause the decline to end or be reversed.