Him and I are working on it lol. Here is what I have come to theorize so far.
Mining stocks have been heavily shorted for years now. They are easy targets because well, basically they are kind of crappy companies that are poorly ran and even in gold's hay day miners profit performance was lackluster so shorts have been having a field day with miners for years.
Every now and again shorts would get over-extended and this would show up in the chart as a pinch. A bit of a squeeze would ensure but ultimately the miner downtrend continued through the years.
With miners being heavily shorted this year's market start sparked something different. Many went into miners as a "hedge" which I think is silly as I have given my reasons before but anyway many did this. With miners already being pinched this caused pressure on shorts that were holding positions.
Then gold started to go up as well. This added to the desire to buy up miners. Up further they went.
Then gold stopped going up and has been trading sideways however the momentum from the before mentioned events caused momentum players to join in. Then all the FED yapping stuff fueled even more buying in miners but not gold.
Now we are at all out pumping phase for the miners. Shorts that were still in certainly felt the squeeze and have been dropping their short position, causing more of a run up in miners.
When I see a pinch and a W bottom usually the over-extended short position has been reduced back to a normal short position once the W completes. For miners this is a bit different because something or some group or something picked up the miners once they finished the W and were in that wedge. The miners were picked up and now a pumping campaign is on-going.
Once the pump gets absurd enough big money shorts will kick the crap out of miners again. It looks like right now they are waiting for the right spot to come back in. I am sure they will come back because the fundamentals of miners are still very crappy. Nothing at all changed with that.
To conclude, A chart pinch in mining stocks lead to a technical bounce which started short covering. Then a crappy market lead to "hedge" buying which also lead to more short covering. Then gold went up which lead to more miner buying and then lead to actual short squeezing. Then gold stops going up and the market stabilizes with oil. Then the W in mining charts completes and things start to level off and miners look to correct but then something/someone/s gets a hold of miners and begins a big pumping campaign and uses all the previous events as "reasons" to continue (as well as the FED and their goofiness) and turn the entire sector parabolic. This parabolic pump job will not sustain. Short squeezing is probably finished, the W has been completed and the inverse to the miners are now pinched (DUST/JDST). Equilibrium the other way will now have to happen to relieve the pinch of the inverse which will happen from shorts repositioning as well as dumping miners after the pumping phase as well as a crash from a parabolic rise.
That's my guess. Only thing for me I am trying to figure out is if the pumping campaign will have enough juice to get and keep GDX over $23 and if it does can they get it to $27. We'll cross that bridge and see soon enough.
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