Referring to the November 28 update:
The GDX Move, it’s Implications and More Thoughts
We noted…
The conviction here is quite positive. This move could still have some upward real estate to it as traders jump aboard the sector and try to MOMO it. Breakout traders often get punished in the short-term, and thus where ever the move stops in the short-term, there could then be some grind and/or volatility. But as it stands now, such volatility would be an opportunity to buy, as close to the neckline and SMA 200 as possible.
The pullback is in progress, as breakout MOMOs get punished and gold gets a big ‘all time highs!’ pump in the media and the predictable reversal upon said pump.
GDX will look for support at the neckline, which is the breakout point. That was our long watched 30 (+/-) area. That could very well hold, and non-positioned would-be bulls might consider some positioning at that level. But also be aware of the lower gaps.
If, for example, USD were to take a big bounce to its daily SMA 50, as speculated as a possibility (though not a decided probability in my opinion) in this morning’s USD video update and broader markets get cracked harder, GDX could drop to fill one or both of the downside gaps. In that event, the breakout above the neckline by GDX would be considered a scout for the future, much like gold’s poke to an all-time high is such a scout. It would still be a positive. But such a temporary failure could clean out the Bug-o-Sphere in a healthy way.
But for now, we watch to see if GDX can hold at or above the neckline/SMA 200, which is also a quite distinct possibility. It is clear support that the machines and everyone else sees, after all.
Personally, I am hedged (ref. trade log) against a continuing correction with the goal of not getting puked out of my favored miners and keeping my pulse rate normal. GDX’s RSI is already turning back from an overbought level. A test of the neckline would reset RSI nicely. From there we’ll evaluate. Trying to birth a real bull market is not easy.
As a final thought, realize that the above is based on the assumption of a continuing broad seasonal rally (after this correction, whether mini or something a little more maxi). If the future expected market liquidation arrives sooner rather than later, all bets are off, just as they would be out in 2024 if/when said bear arrives. The Gold/Silver ratio would help indicate that by rising impulsively. Today it is bouncing hard but has so far halted at its 200 day moving average. If it and USD rise hard together, caution should be increased.
