As the summer doldrums set in, we've seen quite a bit of back and forth in the various capital markets, with prices not moving far from where they were just 2-months prior. However, last week was important for the Gold Miners (GDX) we believe, for a very simple, yet elegant weekly "key reversal" higher has formed. Moreover, this pattern occurred from the 60-week moving average, which in the past has provided reasonable resistance and support. However, the 14-week stochastic has yet to turn up in confirmation; but we would expect it to do so from roughly neutral levels - which would posit that GDX will trade from its current $38.64 level upwards towards $45-to-$57.50.
As an aside from this chart, we'll further note that the daily Gold Miners/S&P 500 Ratio (GDX/SPY) is forming a rather bullish pennant pattern, which if comes to fruition would suggest that GDX will outperform SPY by roughly 2-to1 in the months and year ahead.
Thus, given the mixture, we are clearly constructive on the Gold Miners, and would certainly consider being long at current levels. Our risk point would be a bit more than -10% lower to $34.
Good luck and good trading,
Richard
