GDX Update

I have been asked about GDX Gold Miners) several times and whether it is showing any positive divergences in to weakness.

I figured I'd just update GDX all around.

 This is a 5-day chart (each bar=5-days) of GDX. You can see a H&S top, if you put a cumulative volume indicator like the one I use (the code is V+V1 in a cumulative indicator) you can see volume isn't perfect, but does a pretty good job of confirming the price pattern, especially on the right side from the decline of the head to the right shoulder.

The implied price pattern target is around $15, about the level of the 2008 lows.

 This is the Trend Channel on the decline of the right shoulder, it has held the trend perfectly without a single stop out, but notice the increased ROC on the downside recently as well as the 4-day ATR rising significantly, that's a change in character, changes in character lead to changes in trend, that can be good or bad, as in a bounce or an increased rate of decline.

 On a daily chart we do have a recent gap and a large volume spike that looks like short term capitulation, the market has been relentless about filling gaps since HFTs have become more dominant so I wouldn't be surprised to see a gap fill and that is probably about the right size move for the bounce that I would expect for a "W" bottom in the market.

 The 2-day 3C chart of the H&S pattern is typical, we see strong accumulation of the 2008 lows with a leading positive divergence on a multi-day chart and almost immediate distribution of those shares in to higher prices. The decline has been in line (3C/Price trend confirmation) at the green arrow.

 On a 60 min chart you can see some accumulation around the neckline of the H&S or support and distribution in to the right shoulder and 3C is in line since on the downtrend, there seems to be a possible 3C divergence, but this is a 60 min chart so 3C lags a bit and take s a little time to catch up so I looked at faster timeframes.

 The 30 min chart shows no divergence and it would be more defined here if there was one so I don't think we have any positive divergence, at least not that strong.

 Even the 5 min chart is in line with price action.

 At the 3 min chart there's a possible longer term relative divergence

Zoomed in on the 3 min chart and it is acting as you'd expect, we have a head fake/false breakout at the yellow arrow/box with 3C leading negative on the breakout confirming a head fake move and in line since.

I personally would not trade this even if I think the probability of a gap fill is strong unless we had a more decisive positive divergence to point to, it may still come, there's time, but it's not there yet.

So the probabilities of a gap fill in my view are not the same as a high probability/low risk trade, at least as of the information we have right now. We can check it later to see if anything has changed.