Technical Update: Gold Miners

After a volatile last several weeks here is the current situation in the gold miners ETF (GDX):

 

GDX (Daily)

gdx_daily_9-14-2016

The August correction in the gold miners have given way to a volatile trading range defined by roughly $25 on the downside and $28.75 on the upside. There a few interesting observations to make:

  • It’s no accident that the recent low ($25.17) corresponds to the largest volume-by-price bar of 2016.
  • Short interest in GDX increased by nearly 8 million shares in the last week to a total of 54.5 million shares (~14% of total float).
  • Treasury yields (bottom) and gold/gold miners have historically had reasonably strong negative correlation (top), with the recent upside breakout in yields it will be interesting to see how this relationship evolves if we do finally enter into a ‘rising rate environment.’

I would not be surprised to see this trading range ($25-$28) continue for another 1-2 weeks and to see volatility dissipate a bit before we get a decisive resolution closer to the end of September.

 

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