Could this finally be the start of a lasting run in gold equities? The GDX has been quietly rallying for the last six days:
Source: Stockcharts.com
Note the much higher volume on advances with volume shrinking on declines = bullish action.
What’s even more encouraging is the relative performance of the GDXJ vs. GDX (see below), junior miners vs. majors. It tends to show a similar relationship as the Russell 2000 Index vs. S&P 500 -- smaller-caps outperforming larger-caps is generally bullish, indicating “risk-on” mode.
Granted a few days does not make a meaningful rally. But we know these stocks are beyond washed out so any kind of positive move is constructive, indicating at least the chance a solid bottom has been established and even investor appetite is picking up for these extremely-depressed stocks.
What does this mean for gold bullion? Typically when the junior miners outperform their senior brethren, it’s been decent as a timely indicator for gold. (Not much history given the inception date for the GDXJ is November 2009).
Source: Stockcharts.com
The chart above shows gold in the upper inset and GDXJ vs. GDX with its 100-day MA in the lower inset. When the GDXJ:GDX line has crossed up through its 100-day MA, it has tended to be a fairly good buy signal for gold.
In addition, looking at the weekly chart of GDXJ:GDX, there are more than a few bullish items evident.
Source: Stockcharts.com
Note a bullish Golden Cross (50-dma moving up through the 200-dma) is very close to occurring. Also, you can see the GDXJ:GDX is oversold. Referring to the MACD, it has spent over a year trending up, creating a bullish divergence.
Finally, the GDXJ vs. GDX has registered not one but two weekly Tom DeMark Combo 13 signals, typically indicating bottoms.
Source: Bloomberg
All in all, I remain bullish on gold bullion, and I'm getting increasingly less negative on gold equities. Stay tuned.
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