A couple of interesting things here. As noted in the last update, gold stocks remain in the consolidation handle that began to form after the big blast upward. There is a gap down there above 18.50 that could fill if the SMA 50 were to be tested. But it does not necessarily need to fill because that gap propelled GDX above the SMA 50 and it did it with volume conviction and could well be a breakaway gap. MACD, RSI, AROON and ADX/DI all look good.
Let’s check out the 60 min. view. As the stock market craters, the gold stocks have been making a series of consolidations on top of each other. I had my eye on the upper gap yesterday and thought it could fill. Sure enough, today it is filling.
I don’t love the look of the patterns above, but I do like the strength the miners are showing in the face of market pressure all around. If gold will eventually benefit relative to other assets from a lurch to risk ‘off’ the miners would one day leverage that into out performance. We can carry two thoughts together at once; 1) A macro market turning negative and counter-cyclical would be very positive for the gold sector and 2) Things happen in their own time, not in the time that our brains make their logical deductions. In other words, it’s a process, not a daily event.
Let’s add a 3rd… thinking about charts like the Gold/Oil ratio we’ve been reviewing lately, let’s realize that the complete wipe out of gold stocks in Q4 2008 was deserved. I remember touts at the time crying foul, but the sector was bloated by over valuation. This time? Err, not so much.
So the gold stocks could be pressured by the broad market, but I don’t see a cataclysm having to do with broad market bearishness. The worst thing that could happen to the gold stocks on the big picture is, in my opinion, that the market stages a miracle rally that negates this bear phase.
These are just my impressions per the information at hand. We’ll develop the story as usual, going forward.