The Gold Miners ETF, GDX, has filled its first gap off of the overbought correction

Hearkening back to the video from a couple of weeks ago, we noted an overbought precious metals sector, as well as an intact bull market. So it’s a matter of short and longer-terms. Let’s look at the Gold Miners ETF (GDX, daily chart).

I am and have been longer-term bullish on gold stocks in general. The short-term correction is normal and would remain normal pending pullback levels noted on this chart of GDX. As long as certain parameters hold, it is technically indicated as a healthy cleaning of this sector, which needs to get its enthusiasm adjusted every so often.

GDX became overbought, took a hard day down, recovered (whipsawing me out of my short positions, I might add), took another hit on which I shorted again (hedging core holdings) and now here we are.

The upper gap is filled, but I’d expect a continued pullback to at least test support around 38.70, but more likely is a decline to fill the next gap, hit a 50% or 62% Fib retrace, and test the SMA 50 and SMA 200. I guess the lower gap can fill at 34.05, but to keep the situation intact it would have to promptly turn and tear ass upward again from there.

If the broad market continues under bearish pressure and develops into something really nasty, we cannot rule out the lower gaps shown at the lower left of the chart. That would leave the sector effectively broken in the intermediate-term. I don’t expect it, but you know, it’s the markets.

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