Back to the GDX daily chart for some micromanagement of the gold stock correction. With GDX nesting on the SMA 200 yesterday and per the trade log, I released my hedge (DUST) on the miners yesterday. A typical gold stock correction will test our very souls, which could also take the form of a test of the March low. But I was not willing to chance losing the hedge’s profit while holding it against a sector with positive risk/reward.
Yesterday’s hint and today’s potential (it’s a long day) follow through come during what will be a noisy week, with June CPI on Wednesday and earnings season lifting off. But going by the daily chart here is what I see (while tuning out all other considerations like economic data, Fed jawbones, media and even the macro fundamentals, for now).
- SMA 200 was hit, bounced, hit again and that qualifies as a solid test from which the next rally could manifest.
- The sub-28 gap, which could have been a ‘breakaway gap’ is still open (I’d have preferred it closed).
- The intermediate uptrend from Q4, 2022 is fully intact above the March low.
- There was a small positive divergence to the new lows made in June, by RSI.
- MACD, while negative, is triggering up again.
- Overall, as it stands now that is an impressive looking correction from the May high. Almost too perfect looking, which is why I mind the gap.
- With so much of the correction already behind us (assuming it would remain normal at a higher low to March) I want to be careful about hedging, but also careful about adding too many positions too soon. I’ll hold what I have unless something gets off the hook of the current plan.
- Which leads me to another point. If the gold miners do rally and it comes with inflation trades and other items going anti-USD, the miners, while bullish, would be nothing special. Remember, the ultimate big picture goal, one on which I have no particular timing, is for a real bull market amid deflationary pressure as the counter-cyclical sector sports its unique aspects. The post-bubble contraction playbook per Bob Hoye, that never seems to arrive. Squirrel find nut? Some day he has to.
