It seems like forever ago we set out on the correction with an objective and target of filling the ‘sub-28’ gap. Today GDX is a tick away from doing so (gap at 27.95, today’s price low 27.99).
Since then GDX has taken on the look of a H&S top with its neckline taken out. This was ID’d in an update on August 3rd. In the event that the H&S pattern carries the day we have to be aware of the ’22 area gap’, also noted in that update, as the pattern would target the 21 area.
Personally, I don’t know whether the original sub-28 gap target or the H&S target of 21 will carry the day. But I hope for one over the other. Considering the current hedged status I’d like to see a real wipe out of the hangers on and a take out of that lower gap. If you’ve been around the sector as long as I have you know how it goes. The corrections tend to end with a bang, or a thud, not a whimper.
When the bugs are sloganeering and lecturing the great unwashed masses of non-believers, it’s a sentiment danger signal. When the bugs are writhing in pain and blaming everyone but themselves, it’s a buy signal, generally speaking. I hope for max bug pain. Always have when looking to buy; at least since I learned my lesson about 21 years ago. It’s not a club you want to be running with at turning points, whether that means buying with them at highs or puking with them at lows.
Taking the picture further than this infernal sector, gold stocks often lead other markets on the way down and on the way up (e.g. Q4, 2008/Q1, 2009 & Q1/Q2, 2020). You can also throw Q1, 2016 in there as well.
Point being, let’s stay on watch for the wider macro to potentially follow the gold sector downward. If commodities and stocks crack too, then it’s game on, folks. A dangerous game if patience is not employed, but a potentially very rewarding game if we keep perspective.
I wait for the times when the macro gets in motion and the herds get on the run. If the gold sector holds after filling the sub-28 gap, then it could lead markets out of the correction. But if it goes for the lower gap I’d be cautious on everything not called cash in the near-term.
Article on $GDX making lows or highs in the August September time frame
I can do an update on that or maybe will include it in a public article since we were, or should have been well prepared ahead of time.