GDX, Gold Stock Potential Correction Review




Last month gold stocks started a run that has just started to correct a bit. Or is it going to move more than just a correction? Next week will be the big kicker for gold stocks, if this present rally is just another diagonal 4th wave rally.  Diagonal 4th wave counter rallies can come back up well into the price territory of wave two, but must “never” exceed it.  The 4th wave has just dipped into wave two last week, so it no longer works as an idealized impulse decline.

Some wave analysts may have switched over and started this bull market as a pure impulse wave, but I’m sure that in the long run, any impulse wave count will not work.  I recently posted an idealized or blueprint of a Primary degree “B” wave bull market, and it applies to all gold stock ETFs as well.

The Gold/Gdx ratio is just a bit over 52:1 which is up from the 84:1 extreme I measured at the bottom. It still is not on the extreme expensive side, but when the ratio expands, then this is a sign that gold stocks are getting cheaper when we use cash gold as money.

It would be fitting if GDX corrected back down to the $21 price level as that would make it a great Fibonacci price level. The GDX peak came in just below a Fibonacci $34, so a $21 price level would just about make it very close to a .618 (61%) correction. Since the EWP is a 60/40 type relationship, it makes no sense to use a bunch of other retracement levels that I have never found to work.