Getting back into the swing of things, I thought I'd take a look at the weekly chart of GDX, the ETF that tracks the NYSE Arca Gold Miners Index, and provide some observations. So without further ado, let's dive in.
Prices then bumped around for a while, going absolutely nowhere from June 2013 to June 2014. Then, after a failed breakout attempt above $27.50, GDX fell off a cliff, dropping 40% to its ultimate low of $16.34 by November 2014. I've highlighted in blue this particular point in time as well. Notice anything different on the MACD? This time around, new price lows were not accompanied by new MACD lows. Additionally, note the powerful volume that occurred right at the bottom - this is a telltale sign that institutions were buyers at these levels. Stocks (and ETFs) require institutional support if they are going to move higher. Retail investors just don't pack the clout, especially in large cap companies, to really move the needle.
After the ultimate low last November, GDX has continued to gyrate around its 20 week moving average, but never straying too far. You can see how it's been trading into the corner of a wedge, with volume declining each step of the way. As of noon today, it's sitting very close to the bottom boundary so I expect a bit of a bounce soon. Nothing too crazy however, as the upper boundary should act as stout resistance.
So what's the point of all this? Stepping back and looking at the big picture, there's no doubt that the miners are still in a downtrend. The setup this time around, however, has a quite a different feel than other setups we've seen recently. As GDX approaches the corner of that wedge, with the MACD not confirming and volume withering away, we appear to be reaching an inflection point. There's going to be a powerful move soon, that much I'm sure of. The direction of the move, unfortunately, is not yet clear. Once that wedge is broken, either to the upside or to the downside, the move is going to start. If you're a trader, watch those green lines for your signal to establish a position. If you're a long-term investor, then at the very least you'll soon know if this nascent rally has legs.