Wednesday, August 18, 2010

Breakout for Gold mining stocks?

Is the GDX about to breakout like an angst-ridden teenager?

The chart below outlines my current consideration that the TA for the gold miners may be showing the infant stages of a break out. A 3 year weekly chart showing the ratio of GDX vs. Gold (GLD) gives a broad-based view. Note the gradual lessening of the 200 DMA, the flattening and soon-to-be rising 100 DMA, and today's close just above a flat-lined 50 DMA.

Included are 3 time series of the RSI (7, 14, 21), after a year long downward drift we see all 3 RSI's breaking out and moving just above the zero line.

Once in motion, barring a sudden market crash, this could signal the changing of the guard from bullion to the stocks. I have been bearish on the miners vs. gold for some time, and it would be panglossian of me to change that stance so quickly in this market environment, yet I cant fully discount the TA signals that have served me well the past 2 years when the metal was shown to be outperforming the stocks by a landslide.

I will be following this one closely week to week, there doesn't seem to be a rush as gold continues to behave well.

ps: recent update from Martin Armstrong, always worth the read, his insights are always thought-provoking


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