Balancing Out the Move in Gold

Back on September 15th we noted a potential scenario for gold and her miners in this blog post. 

The setup was not unlike equities in the summer 2009--A significant rally for months on end coming off a major bear market bottom, followed by a fairly obvious daily chart head and shoulders top. The quick washout, followed by a pivot to commence the next vicious leg higher amid a short squeeze was how equities negotiated that "top" back then, cementing the long-term change in character.

At a minimum, it has been correct for even the most steadfast gold bugs to back off the action throughout late-summer into autumn, as the price action simply could not gain traction into any one-off rallies. Moreover, there were plenty of trading sessions where the metals themselves outperformed the miners, typically more of a sign of risk aversion than thriving risk appetite in the precious complex. 

Currently, gold miners are losing multi-month support and breaking a bear channel (light blue lines, below on the GDX daily timeframe) lower. On its face, this would seem to be rather bearish.

But note the 200-day moving average (yellow line) is still rising and price is well above its winter bear market lows. Bulls are still very much in the game for a quick pivot higher into the holidays if they can defend that 200-day going forward. 

So while short-term the precious complex remains a tough proposition for longs, the ongoing scenario for a summer 2009 equities-type of a move is certainly in play.