Thursday, February 4, 2016

Gold, Silver, and Miners going higher?

As we noted, US stock indexes may be forming big topping patterns. Today, we'll look at whether gold and silver miners may be breaking out from a significant bottom.

The following chart is a daily chart of GDX (gold miners ETF):

GDX traded above $66 in 2011. By mid-2015, it was at $13. At the beginning of 2016, it seemed poised for another big decline as it formed a classic continuation H&S top. The breakdown on January 19 was decisive. But in the last 2 weeks GDX made a U-turn and has now closed decisively above the right shoulder high of the continuation H&S top. Now we have a false breakdown and a H&S top failure, which I learned from Peter L. Brandt is a separate pattern that can produce big moves. Of course every pattern can fail. And I expect much volatility in the weeks and months ahead. But if GDX builds a base above the $15 level and make sustained moves higher, then we may have a significant reversal in the precious metals and mining sector.

Please remember to stay patient. There will always be other trades.