I went over to the Indicator Charts page and fiddled around a little. I added 50 and 200 day moving averages to the GDX/Gold ratio and came up with a tolerance that should hold in order to keep alive a (thus far not yet preferred) prospect of a near-term positive view for gold stocks (the existing analysis has for a deeper A-B-C correction, after all).
The ratio is concerning in that it made a lower high before declining. But the (orange) 200 day average has been a historical support for the ratio and if it holds here, we could view the ratio as coiling in a prep for an upside breakout. Picture the SMA 200 as the lower triangle line to the red dotted one.
If it loses the SMA 200 and especially that previous low, the A-B-C and its lower targets (65, even 55, potentially) reasserts in a substantial way, in my opinion. Here’s daily GDX again. GDX probably always was going to tap the SMA 200 after not quite getting there last time. The chart above is one tool that may help determine whether or not lower potential would be in play.
BPGDM has tanked again and this to my eye favors not much deeper than the SMA 200 test scenario. The sector is oversold by this measure. Taking this at face value, the green line implies a bull market (higher highs and lows) and the recent price activity a pullback within that bull market.
However… if the correction were to be more major, like several of them were during the 2016-2024 phase, the green line could trend much lower and still be on its bull market signal. In other words, the original view of a significantly longer correction could be in play.
Bottom Line
Speaking as a hedge holder, I’m going to hang on to said hedge, and if things look a little tipsy, maybe increase it. Obviously, if GDX takes out ‘A’ to the downside, it’s probably tank city. We’re not there yet and there are elements to a bull view in play.
There could also be a rally off of the the GDX SMA 200 with BPGDM so oversold, but then another down leg later.
Just laying out some viable options. Watch silver, watch Silver/Gold and watch internals like the above, among other things (including nominal charts of the stocks, ETFs and indexes). Also consider that a tradable rally could come about that does not necessarily end the larger correction. I’ll try to refine things as best I can as we move forward.
