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GDX and Rates, Time for a Reversal?

On November 10th, after the election news had started to move markets, I was looking for a pullback in GDX (Gold And Miners - Big Election Day Moves, Then Reversals), a pullback to gap support. As we begin December, GDX is looking to have, so far, found support at the gap fill:

VanEck Vectors Gold Miners ETF Daily Chart
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There are several things I like on this daily chart (all charts courtesy of Stockcharts.com). There is an RSI(5) divergence forming, declining volume, and potentially a MACD buy cross. My take on this chart is that it’s a good place to look at getting long GDX with a reasonable stop-loss just below the gap support. In other words, breaking lower means I don’t want to be long and would exit quickly.

There are couple of other charts that look supportive to GDX here. First, the TNX (10-year yield) chart is almost a mirror image of GDX. As you can see on this daily chart, there is an RSI(5) divergence and a potential MACD sell cross. A pullback in TNX could see rates fall back to 1.875%, the 50% retracement of the move, which would also fill two large gaps that were left when TNX raced higher.

TNX Daily Chart
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The TNX monthly chart shows that price has stopped at a down trend line and just below the 100sma:

TNX Monthly Chart
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Finally, I think that gold is sitting a potential support zone. As you can see in this daily chart, gold is trading at the 50% retracement zone, in other words, half way between the December 2015 low and the July 2016 high. When I look at these set ups, I see a good place to have exposure to the mining sector, knowing that a break lower in gold or GDX will stop me out with limited downside risk.

 

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