Bats and Lepers in the Gold Miners

My rule of thumb for the last two years has been: Treat Gold Miners ($GDX) Like They Have Leprosy. Outside of the bearish Bat on the chart below there really has not been any reason to own them. That may be ending now that it has retraced lower to a 127% Fibonacci extension of the Bat, but 138.2% or 161.8% would be more typical. Bounce here or not, they still have leprosy. All the Simple Moving Averages (SMA)

gdx

are overhead and moving lower with a Moving Average Convergence Divergence indicator (MACD) that is moving down and a Relative Strength Index (RSI) in bearish territory. Pieces keep falling off. Don’t be like Mother Theresa, hell bent on helping the lepers, because there does not seem to be any change coming soon. The key lies in the yellow metal itself. The ratio chart of the Miners to Gold ($GC_F, $GLD) shows a steady decline since November 2010. Most importantly this shows no signs or turning around other than

gdx-gold

the RSI being technically oversold. The Miners have been falling relative to the price of Gold. But Gold has been moving in a neutral range over this timeframe. Unfortunately that is the bad news. Or maybe the good news. Either way it is worth watching as a catalyst for the Miners. With Gold approaching the bottom

gold

of the zone a move lower through support at 1550 could be disastrous for the Miners. But if everyone is expecting that has it already been discounted, built into the price? Keep watching as it seems a move in the Miners is coming. One way or the other.

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