PRECIOUS METALS PROSPECTSThis week we again look at the technical situation in the Gold Sector. Let's get started and go right into the charts below.
GDX Weekly Time Frame:
We first want to look at the weekly charts on the GDX before going down to the Daily. After breaking down from a megaphone top formation, the GDX continues to remain below the neckline. Unless price action can close above the $48.50 area, the weekly charts will continue to remain on a sell signal. After breaking down from the 46 support on the Monday, the GDX did have a weekly reversal to close back inside its previous range. In order for us to get bullish on the longer term, we still need to close back inside the neckline.
GDX Daily Time Frame:
After looking the weekly charts, we then want to move on to the daily charts. Since early March, the GDX had been stuck within a downtrend. On Monday the gold stocks gaped lower breaking the 46 support level. All week the GDX rallied closing above the downtrend. Technically there are still significant headwinds that the gold stocks face (which we have shown in pink). The Daily charts are beginning to look more positive. We are cautiously optimistic that a potential reversal could be underway.
GDX 60 Minutes Time Frame:
We then want to move from the daily charts down to the 60 minute time frame. Here again, we show the downtrend that the gold stocks had been in since early March. In order for us to get really excited on the gold stocks, we still need to close above the 48.50 zone. This area would mean a close back inside the neckline on the weekly charts as well as short term technical levels. The GDX also needs to start showing some sign of strength vs. gold on the ratio indicator at the bottom.
Daily GDXJ / GDX Ratio:
Another note is that the Juniors continue to show positive relative strength vs the Majors. Usually, the Juniors will lead the Majors down in a more risk adverse environment. This could be an early indication that a trend reversal is right around the corner. The Ratio closed right at its downtrend on Friday. Watch this week to see if we get a bullish breakout to the upside. Additionally, we would like to see the moving averages have a bullish cross. However, this may take a couple weeks to occur.
Gold remains neutral at the moment. This next week we would like to see a decisive breakout above 163 in order for us to be bullish. A couple weeks ago we did see a cross on the TRIX.
Silver had been acting stronger than gold but this week started to underperform with a break down below the pink trend line. Silver remains on a sell signal. Any breakout above 31-32 and we would feel comfortable saying that the bottom is in.
US Dollar Index:
We then want to take a look at the United States Dollar. Our view on the U.S. Dollar's is currently neutral even though it has started to breakdown from its symmetrical triangle. We would like to see a decisive breakout on the Euro for us to become bears on the dollar.
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XAU / SPX Ratio:
The above chart is the XAU to SPX Ratio. We are getting into an area where we have seen the gold stocks bottom in the past, but this doesn't necessarily mean that it will. We use this indicator as a secondary indicator and do not trade off of it. What this indicator basically states is that the gold stocks have been under-performing the general market for quite some time now. This is just another pause in this on going bull market in gold.
AEM - Agnico Eagle:
We wanted to mention a gold stock that we are seeing very bullish technical action. For the past 2 years Agnico Eagle had been under-performing the rest of its peers falling from highs above 85 down to recent lows of 32. We believe that the bottom is in and that AEM could be bought on any retracement. We are not registered investment advisers, so please do your own due diligence. Full Disclosure: We are long AEM from when we highlighted it on our on website before the breakout last week.
Long term the Gold Stocks remain on a sell signal. Medium term we are neutral. Short term we are slightly bullish.
If the GDX can get back above the neckline around $48.50 and close above it on a weekly basis, then a bottom could possibly have been formed.
Dax Pallotta is the owner and proprietor of TheStockFox.com. For more information or to subscribe to our GDX Swing System please visit our website at http://thestockfox.com/automated-systems/gdx-automated-system.html
TheStockFox.com allows FREE ACCESS to our online portfolio with more than 10 years of trading experience in the gold and silver sector. Affordable membership options are available for our automated trading systems with recent gains in excess of 300% in just over 3 years. Join us to "Out Fox the Bull and the Bear"™
If you have any questions I would be more than happy to respond. Please contact us through our website at http://thestockfox.com/contact-us.html
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