GDX Model

[Pascal]

The GDX Model is now within its cash protection area (below the oversold level.)
We already knew since 9:50 that a price bounce that does not attract buyers while the model is close to its Oversold level does not bode well for the rest of the day.

We can also see that even though gold crossed over the 1400 level, buyers are not coming in.

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We could still bounce from here. This will depend on gold itself.

Do not hesitate to sell if price deteriorates and money does not come in, or even if money comes out but price does not deteriorate.

[Pascal]

Because the Buy signal that triggered at the last minute of trading did not allow reasonable time to place a trade, we will restart the GDX Model in a Cash Oversold level, but with the MF above the Buy Oversold level.

In other words, we will be in a non-confirmed buy mode at the open. The buy signal will be confirmed if the MF stays over the OS level enough to trigger a confirmed Buy signal.


Pascal

[Pascal]

As can be seen below, the GDX MF is about to close above the 0 level.
I pointed with pink arrows the past occurrences when this happened.
Many were close to temporary tops, mostly because gold reversed down at these points (Except on March 14, when gold continued slightly higher.)

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Even though some gold miners are attracting good money, the gold Futures' LEV pattern still looks weak and I would not advise building long positions on the miners at this point, unless buyers come to buy gold.



Pascal

18211

[Billy]

It seems the GDX market was calming down and waiting for something to happen here, while large players were mostly accumulating coming near the GDX 0% level.

Note that GG is now the largest component of GDX and it will report earnings today before the open. An opening gap and reaction to GG's report will very likely be the catalyst for a big move (up or down) out of GDX 's triangle.
The potential target within the next 2 weeks is about a $6 move.
Billy

18212

[Billy]

Well, GG's report was received negatively but premarket activity shows that money flowing out of GG is already plowing back into the 4 other big PM stocks, ABX,NEM, AUY and SLW (who have already all reported) leaving GDX slightly up. It will be very interesting to monitor GDX MF from this neutral position.
Will the true final catalyst be tomorrow's job report as clearly FOMC, ECB and GG were not enough?

Billy

[Billy]

GDX seems wanting to stay stubbornly sandwiched in the triangle today, heading toward a range day between R1 (30.13) and S1 (29.16).
There is very strong support at Yearly S2 (28.94) so beware of any fake out/shake out move below S1 (29.16).
This will also be true tomorrow.
Billy

18213

[Billy]

According to this link, GG has the largest market cap, but ABX is still the most heavily weighted stock in the GDX index ETF.
http://screencast.com/t/eKGwTbDMQu

Pascal, could you please remind us how do you exactly weight the PM MF?
Is it related to market cap or to the official GDX index weighting?

Billy

[Pascal]

According to this link, GG has the largest market cap, but ABX is still the most heavily weighted stock in the GDX index ETF.
http://screencast.com/t/eKGwTbDMQu

Pascal, could you please remind us how do you exactly weight the PM MF?
Is it related to market cap or to the official GDX index weighting?

Billy

It is capital weighted.


Pascal

[Billy]

GDX broke above the triangle on strong money flow. The GDX model long position entered at 28.36 is now well protected by a nearby -0.02% MF porosity level where a cover and short would be initiated.

The chart below represents a smaller triangle than the one presented yesterday and allows to draw a short term target (maybe even today if we keep seeing a strong uptrend day) to $31 by projecting the triangle height from today’s low. This would be the first step to the 2-week target of $36 from the bigger triangle presented yesterday. Projected targets are just projections in case of a favorable scenario but are not fail-safe forecasts!
Billy

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[Pascal]

The GDX MF is now in a very quiet situation that matches the gold non-accumulation pattern.
The fact that cheap gold prices have not attracted much money is very annoying for the sustainability of the long GDX position.

It maybe means that either professional actors on the gold futures have given up on the mechanism of price discovery through the official gold paper market. The other possibility is that they genuinely believe that we are in a sustained slowly growing economy which will see the Fed tighten interest rates later this year while Congress will cut spending.

In any case, the low activity makes the gold market very vulnerable to a price "push-down."



Pascal

18287

[Pascal]

It is interesting to see that gold is attracting some money now.

I believe that investors just realized that central banks are there for a continued interest rates push down through monetization. Even though the PM prices have been pushed down, investors are now very aware that China is buying "whatever available" and that the Fed will have difficulties to disconnect the almost perfect long-term correlation between the price of gold and the available supply of money.

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On a related note, The GDX RT model is close to entering the overbought level.
If we close above the 1% MF level, the GDX Model will start its day-trading analysis and advise of the probable PM direction depending on the opening gaps and the MF direction of the first twenty minutes of trading.

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Pascal