A few observations on GDX when viewing the previous big time rally (which was probably the first move of a bull market that began in 2016). Click the chart for the full and clear view.
- The Q1 2016 rally started from a false breakdown, a final puke and reversal and it erupted from a downtrend. It gapped up on volume and changed the trend (breakaway gap, which has not filled and does not need to fill any time soon).
- The current rally began from a support hold at the SMA 200 after a downturn easily foretold by the golden bullhorns of February (not to mention the “golden cross” of the moving averages, which is so often met with a negative short-term reaction as TAs and media tout it and people buy it). The change in the moving average trends to up looks much more solid and sustainable this time than the impulsive thing that went on in 2016).
- The vertical dotted lines are set at the points where daily MACD began rolling over. Thing 1 was a mushy consolidation/bull flag and Things 2-4 were sharp pullback bull flags. Currently GDX is building a Thing 1 on its first stop after the impulse. MACD is getting in position as well.
- If this rally follows the 2016 map even roughly there will be pullbacks, consolidations and big rallies upward (I hold some JDST for partial hedging but am not overly confident or committed due to the 2016 example of volatile spikes both ways). The 2016 rally lasted deep into the summer even though we’d begun noting the degrading fundamentals in mid-late spring. Silver had taken over leadership by then and the greater cyclical trades were revving up. What followed were years of consolidation for gold stocks and time spent building the base for the new launch.
- The pullbacks will be opportunities to increase positions if the fundamentals stay in line as they did not do in 2016. Sure, day traders and chart jockeys could play the technicals but the 2016 top was well deserved and GDX turned down after sporting bearish RSI & MACD divergences and quickly took back most of the gains.
- Let’s not see that happen this time and perhaps we can get a significant higher high to the 2016 high out of this move (considering that the rally started in 2018 from a higher low to 2016).
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