When I ran my nightly scans on Tuesday, the bullish list was littered with gold ETFs as well as gold mining stocks and gold mining ETFs. In all there were eight stocks and ETFs that are gold-related and that was out of 24 total names on the bullish list.
When I started looking at the charts for the eight names, I came to the conclusion that the chart for gold looks better than the charts for the miners and the associated ETFs. Rather than showing all eight charts, I will show you the chart for the SPDR Gold Trust (NYSEArca: GLD) to represent gold and the chart for the Market Vectors Gold Miners (NYSEArca: GDX) to represent the miners.
First, looking at the daily chart for the GDX, we see that the ETF has rallied sharply over the last few months. In fact it gained over 70% from the mid-January low to the mid-March high. We also see that the daily stochastic readings and the 10-day RSI are hovering around or above the midway point on the chart.
Turning our attention to the GLD, we see that it only rallied 22% from its mid-December low to the mid-March high and the oscillators for the GLD are much lower than what we saw with the GDX. In fact, the daily stochastic readings were recently in oversold territory and made a bullish crossover in the last couple of days.
Shifting to the weekly charts for both the GLD and GDX, we see that the GDX is hovering right around its 104-week moving average and hasn’t yet crossed above the downward-sloped trendline that connects the highs from the last three years and the weekly oscillators are in or near overbought territory.
On the other hand, the GLD has been above its 104-week moving average for two months now and it has moved above the downward-sloped trendline that had connected the highs from the last three years. The oscillators are high, but not as high as what we see on the GDX.
Given how sharply the GDX rose in two months compared to how much the GLD rose during its three-month rally and the fact that the GLD has moved above much of the possible resistance points where the GDX still has some to get past, I like the GLD better than the GDX.
One item of note that makes me a little cautious toward both gold and the miners is the sentiment toward gold. In the most recent commitment of traders report from Friday, large speculators are holding a net long position of 178,831 contracts and that is the biggest net long position since January 2015.
In November, large speculators were net long less than 15,000 contracts and that was the smallest net long position on gold in several years. When you see such a dramatic shift in the sentiment, my experience tells me to proceed with caution.
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