Let's dive right into charts and get started to see where the Gold and Silver Sector stand this week.
GDX Weekly Time Frame:
On the weekly chart above, the Gold Stocks still remain in an overall downtrend, but we could be seeing constructive bottoming action with this latest consolidation between 40-46. Several weeks ago, the GDX retested the 40 support zone on considerable less volume than the May lows. Our current target remains 46-47 in the short term where it is possible the neckline gives us trouble yet again. Any breakout above 48 is very bullish.
Note: The weekly TRIX indicator did cross over for a buy signal this week.
GDX Daily Time Frame:
After looking at the weekly charts, we now want to move onto the lower daily time frame. This week, the GDX broke its multi week down trend and we are currently headed for the neckline noted in the above chart. As you look at the chart you can see the neckline comes in at around 47. Until we break out above this level, it will continue to act as formidable resistance.
GDX 60 Minute Time Frame:
Let's now move from the daily chart down to the 60 minute time frame. We are currently within a trading range between 40 and 48. It is still possible that the GDX wants to go lower on a longer time frame, but for now the GDX is trending higher on the 60 minute. The blue trendline, in the above chart, has acted as support for the last week or so. If this trendline is broken, we could easily see a 1-3 day correction quite possibly retesting the red dashed trendline. Also, note that the MACD, the MACD histogram as well as the RSI are all sporting negative divergence. If for any reason the 40.50 support zone is broken I would recommend selling most, if not all, gold stock positions.
Weekly TSX Venture:
Nothing has changed in our view on the chart above. The Head and Shoulders topping formation continues to play out week by week. We are starting to see some basing as the shorter moving average has started to go horizontal. This chart will still need 4-8 more weeks before we can tell if a new trend is developing. For now, I recommend staying away from any junior that does not already have a deposit and lots of cash on hand to weather the storm.
This week I wanted to show our readers the complacency in the general markets. Over the last 3 years, every time the VIX(Market Volatility Index) has been within this range of 14-16, a several week to multi-month correction was close at hand. Now, it is possible that the VIX trades even lower and the markets break out to new multi-year highs as it did back in 2005-2007. The VIX routinely bounced around 10-14 during those years; but for now, I would argue it's best to go with the trend currently in place. I would recommend caution to anyone long in this market at this time.
The chart above pretty much says it all this week for Daily GLD. The current trend is slightly up but we are stuck below major resistance around 158. Until this zone is broken with wide price spread and conviction, this consolidation between 150 and 158 will remain. Any breakout above this resistance and I would become very bullish on Gold. For now, caution is still in order as the US dollar chart(below) looks as though it wants to breakout from a bull flag.
Like the Daily GLD, the current trend remains slightly up. We broke the downtrend in silver but the price action still seems very lackluster at this point. Also note, the 50 day ema has been acting as resistance which we currently closed at on Friday. I would suggest following the GLD chart and if the GLD breaks out then Silver will soon follow.
US Dollar Index:
The USD is currently in a short term correction within an uptrend. Unless the 81.50 level is broken, this uptrend will continue. As you can see in the chart it looks as though the US dollar is forming a bullish wedge or flag formation. Any breakout to the upside would be bullish so expect more pressure on commodities and gold.
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Today I wanted to conclude on the topic of "Dr. Copper". Copper is sometimes referred to as "Dr. Copper" because the metal is used in so many industrial applications and is essential for many different sectors of the economy. Due to this demand, price action is a good indicator of the state of the global economy. Over the past 5 years you can see there has been a direct correlation between copper and the general markets. The two charts are almost identical, but lately there has been a big divergence between the price of copper and the SP500. As for now, the correlation seems to be broken. Should it return, either copper will need to rise or the SP500 needs to fall. I believe it to be the latter.
- Weekly charts still remain on a sell.
- The GDX is currently in a trading range between 40.50 and 48. Slightly bullish on the gold stocks. With a close over 48 I would become very bullish.
- The GLD remains in a downtrend. Currently above major support of 150 and below its resistance of 158.
- The SLV remains in a downtrend. Currently above major support of 26 and below its resistance of 27.50.
- The USD dollar remains bullish.
- The SP500 could be close to some type of correction. VIX remains at super low levels
Until next week, so please stay tuned.