I have written my last several pieces about the gold futures COT report and, since nothing has really changed on that front, I thought it might be worthwhile to look at GDX, the ETF basket of gold miners.
Below is the 60-minute GDX chart spanning 2 months, labeled with points 1 through 4, which I address:
Source: StockCharts.com, 2/7/20
Looking at the annotated chart above and using the red numbers for reference, this is my take on GDX:
1. The dashed green line highlights the weeklong RSI(10) negative divergence with price. GDX climbed higher before spiking to 29.66, all the while RSI trended lower, indicating that momentum was stalling.
2. GDX price formed a bearish wedge (blue lines), then broke out bullishly to 29.66 (classic first-way-wrong-way move), only to then fail and fall back into the wedge. GDX then broke lower out of the wedge and cleanly retested the broken uptrend line of the wedge from below, before then rolling over.
3. GDX next gapped below the larger (purple) uptrend line from December, bottoming at the horizontal support (orange line) just below 28.
4. Bouncing higher from support, GDX cleanly retested the broken uptrend line (purple) and has now reversed back to the 28 area (as I write).
So where does that leave us? The bull case is that the double bottom and horizontal support at 27.70 (point #3, orange line) holds and GDX works its way higher next week. On the bearish side is the breaking of the uptrend line (purple), which has been cleanly retested from below (point #4). Of course, a lot depends on what gold does next week. There is obviously a great deal of headline risk based on what news comes across the wire on the coronavirus and its effect on health and global trade. I will be watching closely, focusing on what I see on the price chart and trying to avoid seeing what I "think" should happen.
Questions and comments are always welcome: ttaschler@sprottglobal.com.
Tim Taschler, CMT
Sprott USA
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