Gold stocks did exactly what they needed to do yesterday – and exactly what the gold bulls were hoping for – in order to keep the potential for a strong move higher alive.
The VanEck Vectors Gold Miners Fund (GDX) recovered everything it lost on Tuesday, and then some. It closed above the downtrending resistance line on the chart. And it established another higher low – which keeps intact the uptrend that began in early July.
Here’s the updated chart…
If GDX can follow through today and close above last week’s high of $23.18, then we’ll have a decisive breakout on this chart. That should lead to an immediate run higher towards the next resistance line near $23.80.
On the other hand, if GDX turns lower today, then keep an eye on Tuesday’s low at $22.50. A close below that level would break the pattern of higher lows and eliminate the bullish setup on this chart.
For my money, I favor the upside here for the gold sector for one main reason…
The GDX/Gold ratio chart broke out to the upside yesterday as well. Here’s an updated look at it…
Remember, this chart compares the action in gold stocks to the action in the metal. The gold sector always does better when this chart is moving higher – meaning gold stocks are performing better than gold.
This chart has broken out to the upside of a three-month-long consolidating triangle pattern. There’s lots of energy to fuel a sustained move higher.
Of course, it looked like this chart had broken out to the upside last month. But that breakout turned into a “fakeout” and the gold sector remained in its choppy, tight trading range.
This time, the breakout is more likely to be for real.
The support and resistance lines of the triangle pattern have come much closer together. That lessens the chance for a false breakout this time around. And last month’s “fakeout” shook a lot of weak hands out of the gold stock trade. Those folks are likely to buy back in as the breakout accelerates – thereby pushing gold stock prices even higher.
Gold stocks did exactly what they needed to do yesterday. For today, they just need to close above the $23.18 level to shift the rally into second gear.
Best regards and good trading,
Jeff Clark
Reader Mailbag
Feedback has been pouring in all this week in response to last Friday’s Market Minute issue, “Perfecting the Option Trade…and the Option Newsletter.”
We appreciate the kind words. And remember, if you want to send me an email – whether about option trading, the action in the broad market, or a suggestion for the Market Minute or the Delta Report – you can do so right here.
Please let Jeff know that at least one Delta Report lifetime subscriber is laughing his @$$ off at Jeff's absolutely perfect reply to “Bob's” consternation over Jeff's work ethic. Absolutely hysterical!
– Jim
l guess Robert doesn't see the late-night posts and those sent at some ridiculous hour of the morning. You are working 24/7 to get us trades, and I'm sure I speak for the vast majority when I say that we really appreciate the sense of dedication and responsiveness. I have had several services over the years, and yours has been the only one that gives us great stock/option calls and frequent, timely updates on a real-time basis. Keep up the excellent work, the rest of us really appreciate what you do.
– Noel
Your analysis is always an informative start to my day. But, today's response to Grumpy Bob started my day with a good laugh! Thanks for both the laugh and your thoughtful 18 reports during the month.
– Don
Right on Jeff! Best regards, I've been following you for a number of years and sincerely appreciate your integrity.
– Bruce
Nice response to Robert in the mailbag. I'm not sure I could have responded so pleasantly, but some of us appreciate a work-life balance and hearing stories of your family. It makes us feel like we know you better. So, keep doing what you are doing. It gives folks like me something to strive for. Thanks for all you do!
– Edward
Thank you for putting your family first. It make me feel better knowing I’m with a man with integrity, that is not selfish – that when he puts others ahead of himself (his family) most likely means he will do that for his customers.
Keep up the good work. Take care of your family. Enjoy life.
– Jim
Your subscriber Robert that complains about you spending time with your children obviously has no concept of the importance of family. He sounds like a member of the self-centered – my generation.
In all of the years of my professional career, spent travelling the world, my biggest regret was not spending enough time with my children and grandchildren. I now have a great-grandson and will not repeat my earlier mistakes. Enjoy every minute you can with your family.
– Rodney
As a lifetime subscriber, I APPRECIATE when I hear you’re spending time with your wife and kids. I have two reasons for this. One, I believe that spending time re-energizes a person and helps them perform at their best. I also have a “selfish wife” who demands my undivided attention every now and again.
Second, I REALLY enjoy your classic essays. As much as I enjoy your up-to-the-second market commentary, your classic essays are timeless and thought-provoking.
Just thought I’d weigh in and come to your defense. Even though you did an amazing job of handling what he intended as harsh criticism, nobody likes their work ethic questioned or their family brought into the discussion.
Please keep up the great work and I’m looking forward to even MORE classic essays during the holiday season.
– Jesse
Good grief! At first I thought Bob was writing tongue in cheek. When I realized he was serious I couldn't believe it.
I've just been receiving Market Minute for a couple of weeks now, but have been benefitting tremendously from your insights. It's like a technical trading course for average Joes like me. You take the mystery out of the market.
I appreciate the way you have enabled me to think for myself when it comes to understanding trading. I guess some people expect you to hold their hand 24/7. I hope you don't stop with these mini-blogs. And, quite frankly, I have been amazed at how often you have been able to write these reports during the time of year most people are on vacation.
Don't pay no mind to people like Bob who expect you to be feeding them filet mignon for the price of a glass of water.
– Mark
I feel sorry for someone who thinks that they need to trade all day every day to be successful. I am the most profitable when I balance my life, trading 3 or 4 days a week and quitting for the day around 11:30 or 12. By following your market analysis and primarily selling puts, time is my friend. Every day I do nothing, I make money due to time decay. I make safe trades with a high probability of success and keep plenty of cash on hand. That leads to restful sleep and the ability to do more important things in life with family and friends.
I have followed you for many years now and I smile when you say you might not be able to post today because you are doing something with your family. It might do Robert well to take those days off…and chill out. Thanks for all you do.
– Bob