Monday, July 28, 2014

New theory about gold & miner charts

Some charts, observations, then another possible explanatory narrative:

For some reason, GDX is back above its short EMA today. Looks good, dunno why.

By the way, I've also included an EMA(24) in these charts, since that provided secondary support through July, and secondary resistance back in April and May.

GDXJ seems equally healthy. And yeah, the EMA(24) doesn't apply to the past few days here, unless you count Friday's reversal of Thursday's low as an important fakeout.

I consider silver to be central to everything, since it's not led me astray these past few months - it seems to be good at pointing out the lies in the GLD and GDXJ charts.

But silver looks like crap. Sorry, it does. See those last three candles in the chart, all hanging together in a cluster under the EMA? I call that formation "the hanging booger".

Now here's the interesting bit:

Normally I don't give a crap about horizontal support and resistance lines. But, while GLD is in a downtrend below both the EMA(9) and the EMA(24), it still seems to be acting as if $124 is important support. Which it was in April and May.

And here's the thing.

While GLD is right back own to its April-May support right now, GDX is 10% above and GDXJ is 20% above.

Why should that be?

I'm thinking maybe GDX and GDXJ are looking stronger than GLD simply because people are assuming that the $1280-$1290 gold price will never be broken to the downside again. After all, if "the low is in", you'll be accumulating miners, not dumping them; so the additional downward price pressure of expectation of future dooooom won't be there.

Which might still mean miners do no more than stay horizontal until gold decides to make its next move.

So I guess if gold breaks below $1280, the juniors could have a long way to drop. But if gold breaks back above say $1330, that's the hint of a coming higher high and miners could move upward rather quick again.

I'm still agnostic for now, like I said: I'm going to wait to see what happens, I'm not interested in trying to bottom-tick the miners when it carries the potential for large overnight losses. I can ride the wave when it comes, if it comes.


  1. Gold bugs buying/chasing the miners just because 'tis the season', like there is some rule that it must go up.

    1. Well it *is* between Indian monsoon wedding season and Diwali. And India *does* buy a lot of the world's gold. And when the miners *do* go up you make a hell of a lot more money than you do on SPY.

      And the *last* time the seasonality failed, there was also a monsoon failure....

    2. Plus in all honesty I can't see why anyone could seriously believe the bottom in gold isn't in. And miners should follow future expectations for the gold price, not today's price.