Gold is down ~$30/oz and the gold miners as represented by the GDX are taking a beating to the tune of nearly 7%. Investors are beginning to ask themselves some important questions such as, where is the next area of support and when will it be time to buy?
Given the multi-week consolidation which preceded today’s breakdown it’s unlikely that the sell-off will be limited to one trading session. Major breakdowns such as today typically lead to residual selling in subsequent days until the market is sufficiently oversold that it is due for a bounce.
I will be looking for some more downside into the $23s in GDX before putting the finger on the buy button:
Just as there was a negative momentum divergence at the August high, there is a positive momentum divergence with today’s breakdown to multi-month lows.
Previous support/resistance along with the rising 200-day simple moving average near $23 offers an attractive bounce zone from which a 5%+ snapback rally could begin over the next 2-3 days.
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