After rallying ~44% in 14 trading sessions the gold miners (GDX) are showing some signs of exhaustion:
GDX (Daily)
GDX printed a ‘shooting star’ candlestick following what could very well be an ‘exhaustion gap’. A few clues that today’s price action is indicative of exhaustion:
- Volume fell today for the first time in the last six sessions (falling demand)
- GDX sold off during the final hour of today’s session and closed near the low for the day
- A gap higher several % above the upper Bollinger Band is a sign that the buying has become emotional and price is especially vulnerable to a correction
Gold has also had an impressive run posting a ~15% rally since last December’s low at $1045.40/oz. Today gold briefly popped above the $1200 ‘psych level’ only to pull back late in the session. The last couple of times that gold was as extended as it was at today’s session high (March 2014 and January 2015) a big pullback was right around the corner:
Gold (Daily)
Gold is not only extended in terms of price & time, we are in the heart of some fairly substantial price memory (previous support & resistance) and a key Fibonacci retracement level.
Odds are that today saw short term peaks for both gold and gold mining shares. However, the sheer force and conviction of the recent upside action make me a buyer on pullbacks.