Thursday, October 01, 2015

Gold Miners: Imminent Breakout?

I can't think of a reason why gold miners would be particularly attractive at the moment except that with the coming storm gold would be an excellent hedge against any further volatility or inflation. Please be mindful that whispers of QE4 have already begun despite calls in the Federal Reserve that interest rate increases are still on for this year (possibly). Ladbrookes, the British bookies, have odds put at mid-2016 and given their recent track record I'm probably going to side with them.
GDX appears to be currently in a large downward channel that started back in November and looks set to begin the third wave up (of a larger five way down pattern). Point-and-figure charts have the high at around $18.30 which is the upper resistance line of my channel. This third leg up appears coincident with a bullish declining wedge that we've noticed developing since about mid-August. I've tried to show what the wedge might look like but it appears to a pattern that may continue into the middle of October. Wedges have an odd way of unexpectadly breaking up or down so there's no way of really saying when this might happen.
My recent "sell/short" signal issued about a week ago was incorrect and I should have ignored the recent cross-over on the full stochastics(14) as I now realize that combined with the bullish declining wedge the recent mid-range cross-over is probably just a small reprieve before breaking out. I expect the signal line to go horizontal in the near-term. Gold miners look like an excellent medium term long/buy.