GDX and IWM Robots – July 26, 2011

[Billy]

Forum Clusters 110726.xlsx

GDX had a typical reversal day yesterday, gapping up into a strong resistance cluster and then heading lower for the rest of the day. It can almost be qualified as a “key” reversal day because the low of the day did undercut the previous day’s low by 2 cents. But such small undercuts have led to fast bounces more often than not in the past.
As Pascal warned in his GDX comment, the precious metals sector money flow is very near a short signal and today’s limit entry at 58.97 could be hit at the same time that a short signal is issued. It is advisable to pass on today’s entry which provides almost no ST/LT edges anyway. The first support cluster is also weak with a strength of 6 compared to the first resistance cluster strength of 20.
The precious metals mining stocks are ignoring the new high prices in gold. The diminishing correlation between GLD and GDX is also warning that something bad for gold stocks might increasingly be anticipated by large players.
If a short signal is issued by the close, the robot will exit its long position and enter a new short position at the open tomorrow.




IWM remains stuck in the middle of a 2-week trading range and found support at the weekly pivot (83.12) which is usually a positive signal on the first day of a week. Today is the last day of seasonal weakness before the bullish turn of the month bias that will start tomorrow. The first support cluster is extremely strong and should easily cushion any weakness today. Resistance is weak and an entry at 83.06 will allow latecomers to align themselves with the robot position entered at the same limit price.

Billy