This is just an index related to the gold mining industries. What was always odd was that this index never really created the “C” wave as deep as I would expect. Even a running pattern would have a longer “C” than what XGD shows. All the other ETFs sure don’t look like this, as they were all much, much lower. Back down in late 2013, news that insiders were buying was everywhere, that I was convinced that 2013 was a major bottom. What followed was a rally and then another 3 wave decline to a new record low, which I have as a “B” wave in Minor degree.
After the “B” wave bottom XGD soared and pushed up right into my wave 2 in Intermediate degree. This insane rally was a 4th wave rally, that pointed or confirmed my wave 2 top in 2012. Of course, that would break every impulse rule in the book, but it sure doesn’t break any diagonal rules that I know of.
One expanded pattern at the bottom gives us the big clue that this entire bullish phase is nothing but a big bear market rally! “ALL” bear market rallies completely retrace themselves back down to and below their point of origin. When it crosses to new lows, even just by pennies, then the bear market rally will get confirmed.
When we get close we, then we can see a huge H&S pattern being formed, and that would be extremely bullish from my perspective.
I have to do more back-checking to establish a few more Gold/XGD ratio extremes. Today the Gold/XGD ratio is sitting at 3.97:1, which means I need 3.97 gold ounces to buy one unit of the XGD index.
Don’t think that this is some freakish anomaly, because they do happen, especially in commodities.