This week will be noisy. There will be a GDP revision if applicable, ADP employment, PCE index, Payrolls and ISM manufacturing data. The Fed’s Bostic will also eat a mic on Thursday morning.
That noted, the anti-USD trades (which is basically everything not named USD at this point) are rising again as USD takes a pullback to test support. There could be some volatility with all the news on tap. But if USD loses support and the SMA 200 it will have sprung a bull trap of some kind to match the bear trap reversal that started the rally.
As a gold stock bull in waiting, I have already stated that if the miners continue upward and if they do so with a broad array of other markets, I can’t see how I will not be selling to take profits if they rise high enough. GDX does have that open gap way up there at 40, after all.
A scenario that makes sense to me is the original anti-USD scenario, where USD continues its daily chart downtrend and the broad global rally takes its final leg up. Then when USD holds support within its longer-term bull market it’s time to sell, including gold stocks, which are not unique. I can envision that a real BUY for a longer-term bull run in counter-cyclical gold miners might take place after that next global downturn. It’s one theory among others but as long as things stay on the track they are on it’s the theory I am operating to. If the theory jumps the track then I will operate to the RAISE CASH theory.
As for gold stocks, let’s back out all of that noise and again review the daily chart of GDX. Today it is breaking through resistance #1 after holding the original downside target of a higher low to March. As long as this rally is in play I’ll view the 22.72 gap as something that may fill later when the whole anti-USD global rally rolls over. Speaking of gaps, the one at 40 represents the best reasonable upside target if the broad rally continues. We’ve had that on watch for many months and the higher low to the March low – if it holds – is why.
Humorously, the Death Cross is acting as it usually does and coaxing a positive reaction opposite to its supposed implication. If GDX can get through that moving average convergence the next clear resistance is smack dab at 33. After that comes 36 and finally, 40 and a gap fill. Again, that assumes the rally clears a noisy week intact and gainfully progressing. The resistance at 33 would be a key higher high point if it can take that out. I think that could be the trigger for 40.
But in the meantime, there is a lot of work to do and any of the resistance levels, including the moving average convergence, is capable of capping the rally if this is a minor as opposed to major rally leg. Either way though, considering the counter-cyclical gold stock sector is rising with cyclical items far and wide, I am going to view whatever high GDX (or HUI) makes as a “sell” unless that dynamic changes.
It could be fun ride, but I will have allegiance to nothing if the rally hits sell points and the miners are still just another passenger on the anti-USD bull train. I want to reaffirm that ahead of time. Those points could theoretically come at any time, but I believe the prospects of a rise to 40 are as doable as not at this point unless USD re-bulls short-term and wrecks everything.