Bats And Lepers In The Gold Miners

My rule of thumb for the last two years has been: Treat Gold Miners (GDX) like they have leprosy. Outside of the bearish Bat on the chart below, there really has not been any reason to own them. That may be over now that it has retraced lower to a 127% Fibonacci extension of the Bat, but 138.2% or 161.8% would be more typical. Bounce here or not, they still have leprosy. All the Simple Moving Averages (SMA)


are overhead and moving lower with a Moving Average Convergence Divergence indicator (MACD) that is moving down, and a Relative Strength Index (RSI) in bearish territory. Pieces keep falling off. Don’t be like Mother Theresa, hell bent on helping the lepers, because there does not seem to be any change coming soon. The key lies in the yellow metal itself. The ratio chart of the Miners to Gold (GC_F, GLD) shows a steady decline since November 2010.

Most importantly this shows no signs or turning around other than the RSI being technically oversold. The Miners have been falling relative to the price of Gold, but Gold itself has been moving in a neutral range over this timeframe. Unfortunately, that is the bad news. Or maybe the good news. Either way it is worth watching as a catalyst for the Miners.

With Gold approaching the bottom of the zone, a move lower through support at 1550 could be disastrous for the Miners. But if everyone is expecting has it already been discounted, built into the price? Keep watching as it seems a move in the Miners is coming. One way or the other.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Original post