Gold sentiment is currently at super low levels, which would argue that we are at or near a bottom. The current technicals explain a different story as we try to state below.
We first want to look at the weekly charts on the GDX before going down to the Daily. After breaking down from a Megaphone top formation, the GDX continues to remain below the neckline. Unless price action can better last week's high around the 48.50 area, then the downtrend in the gold stocks will continue. The Weekly remains on a sell signal with a possible target in the 40 to 44 zone.
After looking the weekly charts we then want to move on to the Daily. In early March, the GDX broke its uptrend and the TRIX crossed over to the downside. Like the Weekly, the Daily also remains on a sell signal. If the GDX can break its downtrend, then it could be possible that the GDX has put in a short term bottom. This would be any close above the 48.50 zone Watch this closely next week to see if the trend line can be broken to the upside. We will also be looking for the TRIX to turn up for a bullish cross. We will not know if the Weekly charts have bottom for several weeks, but like we stated above, any close above the neckline could be a false breakdown and we could start to trend higher.
Daily GDX Renko:
We did get a buy signal this week on the Renko chart. This could be a false trigger. It is too early to tell. We still need confirmation from our other charts and indicators before we jump in to the gold stocks.
Daily Dow Jones Gold Mining Index:
The Dow Jones Gold Mining Index broke down from a bearish flag in early March. The index has completed a ABC down which measured to around the 104 level. The DJUSPM Index remains on a sell signal. Another development last month, was the Death Cross of the 50 and 200 ema's. For now, the risk remains to the downside.
The Bullish Percent also remains on a sell signal. This indicator gave an early warning that something was wrong with the gold stocks. The indicator is within a range where we typically see bottoms occur.
We still remain on a sell signal for gold but we did break the down trend last week. We are close to a crossover on the TRIX and very close to a possible change in trend. Lets see how this next week turns out for the yellow metal.
Silver also remains on a sell signal but could be close to a change in trend. Still to early to tell. So far silver has been acting stronger than gold.
US Dollar Index:
We then want to take a look at the United States Dollar. The U.S. Dollar's price action shown above is not indicative of bearish price action. The U.S. Dollar has been consolidating between 78 and 81.50 over the last several months. Unless the 78 zone is breached on the downside, the US Dollar looks like it wants to trade higher for the time being. We have a short term target at 81.50 and a longer term target of around 87. If the US Dollar index breaks the 78 then those targets will be null and void.
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XAU / SPX Ratio:
The above chart is the XAU to SPX Ratio. We are getting into an area where we have seen the gold stocks bottom in the past, but this doesn't necessarily mean that it will. We use this indicator as a secondary indicator and do not trade off of it. Basically what this indicator states, is that the gold stocks have been underforming the general market for 6 months. This is just another pause, like the others in this on going bull market in gold.
Over the last several weeks, the technical damage has been done on the gold stocks. The overall trend is still down but we are getting into areas where the gold stocks are becoming very cheap. That also doesn't mean that they cannot get cheaper. If the GDX can get back above the neckline around 48.50 and close above it on a weekly basis, then a bottom could possibly have been formed.
Next week we plan to add some additional charts to our weekly update, so please stay tuned.