Gold stocks, north or south?
We are already positioned on GLD, therefore, this special report takes a look at our other ETFs, which are GDX for our US traders and XGD.TO for our Canadian traders.
GDX - the daily chart clearly shows an inversed "head & shoulder" pattern in progress, whether it will end up that way is anyone's guess, and technical analysis is nothing more than an educated guess. To enter and exit the markets, we must follow our signals and set ups. Price and patterns are dynamic and subject to constant change.
XGD.TO - shows a similar bottoming formation.
Unfortunately, looking at the weekly time frame, something ominous is also developing, namely a head & shoulder top.
That head & shoulder top is also showing up in the $HUI...
and the $XAU...
For that, we must go back to
our "breakout model" again. This model shows precisely
the stand off between the bulls and the bears. If the head &
shoulder bottom wins, we should see a breakout soon after. If
the head & shoulder top wins, we should see a breakdown shortly
after. But if we look carefully at the breakout model again,
we can get a glimpse of the future based on the current performance.
After we had BO#3 in Nov, this ratio chart failed to reach a
new high because the top in May is lower than the top in Dec
2003. But the price of gold, the $HUI, and the $XAU all reached
new highs in May. What this ratio chart tells us is that despite
making new highs this year, gold stocks in general are under
performing gold, in relation to previous rallies. Take a look
also at the MACD and RSI, the top in May this year is considerably
lower than the tops in 2002 and 2003. This in itself is a bearish