Gold and silver have been explosive recently as the U.S. dollar slides and the Federal Reserve keeps interest rates low. The Market Vectors Gold Miners ETF pulled back between August 6-11, not a surprise given the pace of its rally. But the trend remained intact and now momentum followers may be active.
Last week’s retreat landed GDX back around the July 9 peaks, which briefly offered resistance before the ETF broke out to new seven-year highs.
The candlesticks on August 11 and 12 are also interesting. Both looked bearish on the surface because GDX closed at the lows. However the second day formed an inside bar. It’s similar (not exactly) to a morning star pattern, with short-term bearishness exhausting itself at a key support level.
Meanwhile, stochastics showed deeply oversold conditions at the same time.
GDX leaped yesterday. It tried to jump again this morning, but the bulls were too eager. Profit-takers drove it down early but they did no damage to the bullish trend. Now buyers are defending the 20-day simple moving average (SMA).
Finally, currency markets support the strength in precious metals, with the U.S. Dollar Index hitting a new two-year low today.
I think the dollar picture is bullish after yesterday's sharp reversals where both the index and numerous $ pairs reversed the thrust out of a triangle. Thrusts out of triangles are terminal to at least the base of its' formation. Trading over 93.99 the most recent high in 5 waves then correcting in 3 thereafter will provide more evidence that a major reversal in the dollar has occurred. The sentiment in the dollar is single digits which given the reversal may prove to be a bottom.
SamSzulc
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After that $217 drop last week, this isn't an etf to hold other than intra-day trading. But note the subtlety of this move, it traded 2 cents under it's support at 40.79 to 40.77 yesterday, this morning it nailed that support at 40.79 then reversed upward. Gold traded over $40 lower from yesterday and is still down about $18, still this etf is up, it should test a lower support level unless it's a harbinger of higher gold prices. Too volatile to successfully trade unless you are super nimble. For all we know the top is already in.
cmsinca
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I think you are right, and I think the dollar is about to take another leg down. Adding more to the effort.