This Week's Technical SnapShotGDX Weekly Time Frame
On the above weekly chart, Gold Stocks remain in an overall downtrend. As you can see on the chart, the GDX continues to have trouble at the resistance zone. Longer term support remains down at the 40 level with continued resistance at the neckline. With 7 touches on trendline, this remains a formidable resistance area.
Note: The weekly TRIX indicator remains on a sell signal but is close to crossing over to a buy. Until the GDX breaks out above the 48 level, we would not be aggressively buying anything while we remain in "no-mans-land".
GDX Daily Time Frame
After looking at the weekly charts, we move onto the lower daily time frame. The GDX hit the 48 level twice and bounced right off showing there was a clear resistance level at the neckline. On the daily, we are currently trading within a range of 43-48. If the 43 support fails, then a retest of the lows in May will come in short order. Nothing on the daily chart gets me too excited about being aggressively long either. Caution and having a large cash position is still the best coarse of action in our opinion.
GDX 60 Minute Time Frame
We then want to move from the daily chart down to the 60 minute time frame. Currently, we are right in the middle between short-term support and resistance. You can see the red horizontal line that remains short term support. If that fails, a test of the lows will be right around the corner.
Weekly TSX Venture
In early June, we saw lots of newsletter writers calling for the bottom in the gold and silver sector. The Majors ($HUI, $XAU) might have very well bottomed in mid-May, but the junior market still looks like it wants to fall further. The Head and Shoulders topping formation continues to play out week by week. Both the short and longer term moving averages are still pointing straight down. Until we see some basing pattern and a positive cross of the moving averages, we would stay away from any junior that does not already have a deposit and lots of cash on hand to weather the storm.
This week, the CRB showed a text-book example of technical analysis. What was once resistance back in 2009 became support in November 2010. Three times the 290 area became support before breaking down in May of this year. In the past two weeks, the CRB had an oversold bounce right up into the 290 resistance level stopping it dead in its tracks.
Not much to say on the Daily GLD this week. We would not be overly bullish until the GLD can breakout above that blue resistance trendline. Until then, we remain in a consolidation. Look for the GLD to test out the lows of last month 1 more time. Should a breakdown occur, for any reason, then you can expect 140 or even 130 to get hit.
Like the Daily GLD, Silver remains in a correction below the blue resistance trendline. Currently we are bouncing between support and resistance -- and any failure of this support and the SLV could fall all the way back to the lower $20 dollar range.
US Dollar Index
The USD has been on fire for the last year. Unless something comes out of the ECB here soon to defend the EURO, our target on the USD remains 87-88. We expect a major top around that level. Should the dollar continue to rally, expect more pressure on commodities and gold to fall to lower levels.
- Weekly charts still remain on a sell.
- The GDX is currently in a trading range between 42.50 and 48.00. We remain neutral on the gold stocks until we get a daily close over 48.
- The GLD remains in a downtrend. Currently above major support of 150 and below its resistance of 159.
- The SLV remains in a downtrend. Currently above major support of 26 and below its resistance of 28.
- The USD dollar remains bullish.
Caution is still in order as the summer doldrums are still ahead of us. We would love to see gold and silver both break down and the equities hold up. This sort of positive divergence would give us the confidence that a long term bottom has developed.
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
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