The Gold Mining Sector Could Reach All-Time Highs Next Year
The gold miners as represented by the GDX continue to consolidate within a relatively narrow range just below the largest volume-by-price bar of the year:
The correction of the last couple of months against the backdrop of a powerful rally during the first 7 months of the year has created a situation in which the falling 50-day moving average is on its way to converge with the rising 200-day moving average. The falling 50-day moving average also happens to line up with important support/resistance and the largest volume-by-price bar of 2016 near ~$26 (horizontal red line). Meanwhile the rising 200-day moving average is currently just above important support near $23 (horizontal green line). As the two most widely used moving averages continue to converge we can expect a resolution to the recent range to occur any day now.
Moreover, considering the trajectory and intensity of the rally from January through August there is a strong possibility that the January low in the gold miners marked a major long term bottom. If that is the case then the sector could be on the verge of embarking on the 3rd wave of a standard 5 wave Elliott Wave sequence:
The 3rd impulse wave of a rising 5-wave sequence is typically the longest wave of the 5-wave sequence. This means that if the gold miners are indeed in the midst of a rising 5-wave sequence then this next rally wave will result in all-time highs for the sector, surpassing the 2011 high.
I offer this possibility as food for thought but first GDX gets to breakout above resistance near $26 before we can get too excited about the beginning of a 3rd impulse wave of a rising 5-wave sequence.
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