During the past six weeks or so, we have periodically discussed my work's contention that both the technical and fundamental investment environment was ripening for a major upside reversal in the gold miners group relative to the larger S&P 500 SPY +0.48% and to the price behavior of bullion and on an absolute price basis.
During the past two weeks in particular, with the aid of much lower oil prices positively impacting mining costs, the technical setup in the Market Vectors Gold Miners ETF GDX +1.13% has improved significantly. In particular, let's notice that the GDX has hurdled and accelerated away from a confluence of upturning weighted trading moving averages, while those same MAs are about to bear down on the rising SPY price structure. This should be an impediment to upside continuation in the overall S&P 500/equity market, but not to the miners.
A separate relative strength chart indicates that the junior gold miners — Market Vectors Junior Gold Miners ETF GDXJ +0.24% — have outperformed the SPY since mid-May. In addition, based on the RSI of the GDXJ/SPY ratio, the miners have made a major low in relation to the SPY. This argues that in a down market the miners will hold up better than the overall S&P 500, while in an up market the miners climb faster and to a greater magnitude than the SPY. . .View Full Article