GDX and Rates, Time for a Reversal?
On November 10th, after the election news had started to move markets, I was looking for a pullback in GDX (Gold And Miners - Big Election Day Moves, Then Reversals), a pullback to gap support. As we begin December, GDX is looking to have, so far, found support at the gap fill:
There are several things I like on this daily chart (all charts courtesy of Stockcharts.com). There is an RSI(5) divergence forming, declining volume, and potentially a MACD buy cross. My take on this chart is that it’s a good place to look at getting long GDX with a reasonable stop-loss just below the gap support. In other words, breaking lower means I don’t want to be long and would exit quickly.
There are couple of other charts that look supportive to GDX here. First, the TNX (10-year yield) chart is almost a mirror image of GDX. As you can see on this daily chart, there is an RSI(5) divergence and a potential MACD sell cross. A pullback in TNX could see rates fall back to 1.875%, the 50% retracement of the move, which would also fill two large gaps that were left when TNX raced higher.
The TNX monthly chart shows that price has stopped at a down trend line and just below the 100sma:
Finally, I think that gold is sitting a potential support zone. As you can see in this daily chart, gold is trading at the 50% retracement zone, in other words, half way between the December 2015 low and the July 2016 high. When I look at these set ups, I see a good place to have exposure to the mining sector, knowing that a break lower in gold or GDX will stop me out with limited downside risk.
Dec 1, 2016
Disclaimer: Mr. Taschler has been involved with the financial industry for over 30 years. In 1986-1988, Mr. Taschler was a market maker (floor trader) at the Chicago Board of Options Exchange (CBOE), where he traded through the ’87 stock market crash. He has been involved in both private equity as well as public markets. Mr. Taschler is well versed in commodities, stocks, futures, options and bonds.
Mr. Taschler’s career has allowed him the opportunity to live and work in Europe, the Middle East and Asia. He is a Chartered Market Technician (CMT) and member of the Market Technicians Association (MTA) and the American Association of Professional Technical Analysts (AAPTA). He graduated from the University of Dayton in 1979 with a B.A. in English.