GDX, Gold Stock Bear Market Review

 

 

Not that much has changed with gold stocks as they are still much higher, from where gold presently sits.  Investors have been unloading shares at a horrendous rate. This is producing a very bearish mood which I look for when the opposite can happen.  Gold may still have a bit to fall as it may crack a new bear market low one more time.  At the 2016 bottom the Gold/Gdx Ratio hit an extreme  of about 85:1. This is the most extreme calculation I have run across, from which GDX exploded and roared until the August 2016 peak. I was expecting a correction at that time, and we sure got it. It is still heading south, but at anytime it can also start on a reversal.  Today the Gold/Gdx ratio sits a bit above 59:1, which I consider still very cheap when compared to gold.

 The exact retracement price level is impossible to calculate, but I use several based on the net move from the 2016 bottom to the July 2016 top.  We have several gaps open above present price levels as gaps do work like magnets drawing prices to close the gaps. There is always a 90% chance of any gap getting filled, but when they do fill it can take a long time.  

One thing that must not happen and that is that GDX crashes to a new record low, as that means we have been suckered yet again. Of course, all the other gold stock related assets must also do the same thing. Either the bearish phase was completed in early 2016 or it’s not as a sector does not move independently except for single stocks.  Even with strong stock market rallies, GDX has been indifferent to this most of the time, as GDX has been making small incremental moves.  

Longer term I’m very bullish, but it would be nice to see our low price for 2016.  

I also show a potential H&S pattern that has not fully formed, just yet. It makes no sense to show a H&S pattern after the fact, as then it is too late to do anything.  It is the bull market correction bottoms that offer the best places for reversal.