While the market was tanking at the start of 2022, one commodity Ied huge gains…

Runaway inflation and the war in Ukraine helped propel the VanEck Gold Miners ETF (GDX) up 43% in less than three months.

But after peaking in late April, it’s been one-way traffic in the other direction…

GDX gave up all those profits in less than a month. And from there, GDX soon became stuck in a long-term downtrend.

However, when we checked out GDX just over a month ago (red arrow on the chart below), we were starting to see the first signs of gold’s downward slide petering out.

Recently, there’s been some positive moves…

A bounce could be in the cards. So today, we’ll discuss what’s in store for GDX…

Emerging Bullish Signs

The rally in GDX began when the 10-day moving average (MA – red line) broke above the 50-day MA (blue line) in February and accelerated higher.

That bullish pattern in the MAs coincided with the Relative Strength Index (RSI) breaking into the upper half of its range (above the green line).

Take a look at the chart…

VanEck Gold Miners ETF (GDX)

Source: eSignal

However, a different pattern in the RSI warned of a potential change in direction.

As GDX made higher highs (upper orange line), the RSI made lower highs (lower orange line). When buying momentum is steadily receding like this in the RSI, then eventually the stock price will roll over and follow it down too.

And that’s exactly what we saw…

The MAs crossed back the other way, confirming GDX’s downtrend. And the RSI bearishly remained in the lower half of its range throughout its long-term down move.

But something changed in early October…

The RSI tried multiple times to rise above resistance… and failed. Finally on October 5, the RSI had just broken up through resistance.

And in another emerging bullish sign, GDX’s stock price had just climbed above the 50-day MA.

Let’s take another look at the chart…

VanEck Gold Miners ETF (GDX)

Source: eSignal

Since then (after briefly dipping back below support), the RSI has again made a decisive move into its upper range.

And the 10-day MA has just bullishly crossed back above the 50-day MA – for the first time since early February.

So far, things look promising… But what can we expect from here?

Still Early Days

For this recent up move to gain traction, we’ll need to see the RSI stay in the upper half of its range. The longer it can stay there, then the bigger this emerging up move could become.

But as always, we’ll need to carefully monitor the RSI in case it tracks into overbought territory (upper grey dashed line).

When the RSI forms an inverse ‘V’ in this territory, it often precedes a pullback. I’ll also be watching our MAs…

Although the 10-day MA breaking above the 50-day MA is an encouraging sign, it’s still early days for GDX’s up move.

For a rally to really get going, we’ll next need to see the 10-day MA accelerate strongly above the 50-day MA.

So, let’s keep a close eye on GDX. The coming days should tell us whether this up move really has legs.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

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