GDX ETF - tag category postings

The GDX gold mining ETF still looks constructive.  Now I have to be honest with you and tell you that while the gold price has been behaving well and continues to look like it wants to soon do a breathtaking breakout above 1000, I have in the back of my mind had concern about the mining stocks and wonder really whether they will be able to continue to steam higher along with the gold price.

The reason why is that gold mining is different than the pure gold price.  Yes gold mining stocks will likely be very profitable with a rising gold price above 1000 but there is this stigma and overhang with the general stock market that seems to make the gold mining sector lag the gold price. To be honest it is really frustrating, but that is just the way the market works.

Will the gold miners break free from their co dependency on the general fearful stock market and start to lead the gold price higher in a massive breakout? I simply do not have the answer to that question.

So What can be said about the GDX Right Now ?

What I can say about the the GDX ETF right now is that it is confined within an up trending channel which still looks constructive to me.  The GDX bumped its head on the 44.23 level which was resistance back in late 2007.  Since then it has been consolidating within the channel.

I did not draw this on the chart above but there is another interpretation you can make that may not seem extremely obvious from first looks.  And that is that the GDX made a significant breakout from a large head and shoulders bottoming formation that started August of 2008 and completed in April May of 2009. So we did see a nice breakout from this large head and shoulders bottom formation and now during the last 4 or 5 weeks (the chart above is a weekly chart), we have come back down to test the neckline of this large head and shoulders bottoming formation.

A retest of the neckline of a head and shoulders pattern is about as common as motherhood and apple pie. It is supposed to happen and it very often does in my experience.

So now we find that the GDX is sitting very close to up trending channel support, and also sitting close to neckline support of the large head and shoulders bottom formation.

That combination is a pretty compelling case for eventual renewed price advance pretty soon. But it is absolutely CRUCIAL that we hold the channel support here and start building higher soon.

July and August may be slow and sloppy months, but then you have September the most favorable seasonal month for the gold market coming up.  So it could very well be that the real fireworks will start in the September time frame on both the GDX and the gold price.

One last thing.  You notice that the weekly MACD looks like it is in a bearish crossover stance. That is a concern.  But also keep in mind that the monthly MACD is in a bullish stance.  We are just going to have to see how much farther down they can take the GDX.  The weekly MACD could be giving a false signal.  But we will know the answer to that once we see if trendline support holds.

 
The GDX ETF (Gold Mining ETF) is at a crucial juncture right now. For the past 7 or 8 months the GDX has built what appears to be a very large head and shoulders bottom formation.  In late January you can see from the above chart that the price on the GDX was able to break out of the pattern (above the neckline) on high volume and a sign of strength.  The breakout is represented by the first closing green bar that is above the neckline in the chart above.

Since the breakout the GDX has had a somewhat modest rally which was going against a generally very negative broad market.  Now the broad market is breaking down again and it seems the GDX mining index is unable to buck the trend this time.

Today it pulled right back to the neckline support at 31.09.  This is a critical area.  Pullbacks to support like this and especially the neckline of a large pattern like this is key.  Ideally we want to see GDX hold support here and move sideways to slightly down.

Relative Strength RSI(14) has move to a reasonable 40 level right now.

Also key to note is that volume has contracted on this pullback to the neckline.

So again, we want to see GDX hold support here as a sign that the uptrend is still intact and we can start the next leg up.  Now what we want and what actually happens is a different matter.

Let us see how it holds up in the next few days.