There is still the issue of GLD and its longer term trend. I haven't taken a close look at GLD for a while, but I need to do that as GLD was looking very much like it was hitting either an intermediate or primary top. Things in gold will be unpredictable in the near term as it may act as a flight to safety trade which it has before, but that would also suggest it may be moving against it's legacy arbitrage correlation.
In any case, GDX was the request...
When doing some back testing for the Miners Trading system (which I need to back test and maybe throw that back in the line up, I found two primary drivers of miners, one was currencies and the other energy. Assuming a miner's costs are fixed in that they know what the land lease or purchase will cost, the machinery, etc, the two wild cards are energy prices as mining is energy intensive and currencies. Gold is sold across the world in $USD so if the $USD vs the miner's local currency (depending on the country) sees a shift in the currency pair, the miners still can only sell gold at $USD prices, but they can be in a position in which the local currency costs them more in labor and the conversion between the $USD and the local currency may not be favorable. Just think about when you travel abroad, a strong dollar versus the local currency will buy you more in the local currency, a weak dollar will cost you more. It's sort of similar as their sale prices for gold are fixed at the $USD rate, but vs the country they are operating in, shifts in currency can severely effect not only what they make once the $USD is repatriated in to the local currency, but can also cause labor costs to rise relative to their profit potential, depending on what the $USD is worth compared to the local currency. Energy prices too are a wild card, although I would think larger mines hedge energy costs like airlines do. In any case, those two issues seem to be the wild cards that can help determine whether miners do well or poorly.
Long term the daily MoneyStream chart of GDX doesn't look good.
Near term GDX broke a significant support level so we have the volatility shakeout concept.
This is the 30 min chart with a positive divergence here.
The 15 min chart also has a current positive divergence, I also marked a head fake move at the yellow arrow, a slight breakout move before the downside reversal just as a tool for you. That particular run was showing distribution throughout the move up and was bound to fail.
The 5 min chart also shows a positive divergence, actually leading positive which is stronger and in a relative flat area where divergences occur most often.
The 2 min chart was positive from late last week and GDX has moved up a bit, but still within the range. This leading positive looks like GDX will break out above the range of the last 3 days.
There's a positive divergence yesterday on the 1 min chart and GDX moved up from there. Thus far the move is showing confirmation.
I would think GDX could see a quick move up and probably somewhat volatile/strong. I would consider a position in GDX here (long), but I would also have tight risk management on the trade with a stop below the recent range around the $45.90 area.
The hourly trend channel has held swing moves, I believe this would be more along the lines of a swing move and the stop there is at $46.19, which is close to my $45.90 stop mentioned. If GDX moves through the range, I would look to tighten that stop to a 30 min chart ASAP.
Here the 60 min TC holds the up swing and the down swing.
If you need a different stop, just email me.
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