[See qualifying note added at end]
Alert subscriber Michael has prompted me to look at something I have not looked at in years, quite frankly. I long ago simplified my TA indicators mainly to RSI and MACD because with so many of them out there it was too easy to a) see what you want to see and b) get confused in a sea of possibilities. Stockcharts.com’s John Murphy advises to keep it simple and take what you want to take from TA but not not over complicate. His charting is quite simple and easy to comprehend.
Here are the indicators available for charting through stockcharts.com. It’s way too many data points to factor and in my experience too much of it is hocus pocus, allowing people to over intellectualize and out think themselves.
But Mike made a point that the Money Flow Index (MFI) is showing a short-term positive divergence for GDX. It should be noted that similar items like On Balance Volume and Chaikin Money Flow, also volume based indicators, do not show a divergence to the recently bearish price action. But MFI shows a very short-term positive divergence to the declining price.
Here is GDX, sporting its short-term divergence. It’s just an FYI if you, like me, are interested in gaining exposure this week based on terrible sentiment, oversold conditions, contrary bullish gold and silver CoT and the bottoming seasonal (on average), despite the bad technicals.
I have shaded the MFI divergence. Note that there is no positive divergence on a weekly chart. So I consider this a minor positive against all those negative technical conditions in the sector. What the sector has going for it technically is oversold conditions and this little divergence. I don’t see much else. But I guess gold stock bulls can use a flicker of good technical news to go along with the other non-TA related conditions noted above that are positive.
Another note: This divergence does not appear on leading gold MINERS like GOLD, AEM, NEM, etc. (although it is evident on some smaller ones). But it does appear on some royalty plays like OR, FNV, WPM and to a degree, RGLD. Interesting. So that’s who’s driving the bus and these can be watched for leadership.
Michael, feel free to comment here (if you can get comments working for you) if you’d like to add anything to the above. And thank you for pinging me about this.
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I’m not Michael, but according to the Investopedia article the MFI would appear to have the advantage of incorporating volume in addition to the price data. However, the number of periods (14) over which the money flow is calculated seems to be arbitrary. Rather like the arbitrariness of the two periods used in MACD and the single period in RSI or in any of the moving averages.
Yes, those periods are arbitrarily set by stockcharts.com. I keep them to see what a majority sees.
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