Gold and precious metal shares are taking it on the chin on today's trading, as the price of gold is falling with on-and-off gyrational whims of traders who cannot decide if the Fed will or will not taper. This follows comments from the Dallas Fed President suggesting that the taper will begin in December. In my mind, any tapering in the short-term seems unlikely, considering the weakness I see in the economy. However, a growing dissident group within the FOMC for a pullback in QE seems to be growing.
That said, today's downside action looks more constructive than not. The sell off today takes the price of the Market Vectors Gold Miner ETF (GDX) back to the June 28 swing point, where 75 million shares traded hands. The likelihood that that many shares trade hands today remains remote. This suggests to me that the downside move today remains nothing more than a retest of the swing point, and could be suggestive of a bottoming process.
However for that to be true prospectively, the GDX's price needs to hold in or around the $24 price level. Of course, I cannot say for sure if the $24 price level will hold, but other measures I follow are also suggestive of a more positive trend. For starters, the RSI is showing a divergence relative to the price of the GDX. A divergence in the RSI, as compared to the price trend, can fore warn of a potential change in trend. The RSI has registered higher lows since bottoming around April 17. The same divergent behavior is also seen on the trend of the MACD. More so, the MACD turned positive for the first time since late 2012, also suggestive of a potential trend change. Lastly, the accumulation/distribution (A/D) has edged higher since early April, and turned positive in late June. The A/D trend and the break above the 0 demarcation suggests more buying pressure relative to supply.
Couch this technical analysis with my timing model results, and the suggestion is that gold/precious metal shares may be forming a bottom.
That said, today's downside action looks more constructive than not. The sell off today takes the price of the Market Vectors Gold Miner ETF (GDX) back to the June 28 swing point, where 75 million shares traded hands. The likelihood that that many shares trade hands today remains remote. This suggests to me that the downside move today remains nothing more than a retest of the swing point, and could be suggestive of a bottoming process.
However for that to be true prospectively, the GDX's price needs to hold in or around the $24 price level. Of course, I cannot say for sure if the $24 price level will hold, but other measures I follow are also suggestive of a more positive trend. For starters, the RSI is showing a divergence relative to the price of the GDX. A divergence in the RSI, as compared to the price trend, can fore warn of a potential change in trend. The RSI has registered higher lows since bottoming around April 17. The same divergent behavior is also seen on the trend of the MACD. More so, the MACD turned positive for the first time since late 2012, also suggestive of a potential trend change. Lastly, the accumulation/distribution (A/D) has edged higher since early April, and turned positive in late June. The A/D trend and the break above the 0 demarcation suggests more buying pressure relative to supply.
Couch this technical analysis with my timing model results, and the suggestion is that gold/precious metal shares may be forming a bottom.
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