Gold / Miners getting ready to shine, or?
Last week GLD (Gold) gained +1% and GDX (Gold Miners) +7.5%. So, is this the start of a move or just a bounce in a downtrend? Let’s examine both relationships charts and stand along charts of GLD & GDX.
GLD vs SPY
GDX vs SPY
Takeaways:
GLD price is now above the major Moving Averages (50d, 100d, 200d) compared to SPY, and GLD has been basing vs SPY over the last 6 months
GLD is now above its 200d MA in relation to SPY
GDX had a big week last week but is still in a downtrend vs SPY (< 200d MA)
GLD Gold ETF
Takeaways:
Price has started to turn corner and is now > 5d EMA (Exponential Moving Average)
However, price is firmly in a downtrend here, below 20d, 50d, 200d MA)
GDX Gold Miners
Takeaways:
Price above 20d MA, but it a deep downtrend below 50d MA and 200d MA.
What is Conclusion?
It is interesting to see GLD climb above those Moving Averages vs SPY and something to keep an eye on, but for now both SPY and GLD are both in downtrends and SPY is just going down faster then GLD… the problem with relationships charts is that both securities can be going down, one is just weaker than the other… and really the stand alone charts take priority.
For my system, I need to see price to at least take back the 50d MA for a swing trade and ultimately get above its 200d MA for proof the downtrend has ended. At the very least a break above the 20d MA is a starting point. We do not have any of these in GLD or GDX which is similar to many other areas of the market, patience & monitoring is best here.
In fact, none of the major sectors in the SPX are above the 50d MA. This is a sign of weakness, not strength. Eventually, this will change and new opportunities will sprout up, but we cannot force signals that are just not there… I am confident that there will be, whether its in Gold names or various other areas of the market but for now we have to act like a professional poker player and fold when we get a high card of an 8 or a pair of 2s.
Monitoring, staying fresh, and being ready to pounce when opportunities present themselves is actually the most important point of this article. And a positive spin here is with all the SPX sectors below their 50d MA, it will not be hard to spot strength when it emerges.
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