In this article, we examine the significant weekly order flow and market structure developments driving GDX price action.
As noted in last week’s GDX Weekly, the highest probability path for this week was for price discovery higher. The primary expectation did play out as buy excess formed early week before price discovery higher developed and a buy-side breakout ensued mid-week above last week’s resistance. The breakout held as price discovery higher continued to 29.30s ahead of Friday’s close, settling at 29.22s.
21-24 January 2020:
This week’s auction saw minor price discovery lower early in Tuesday’s auction in a sell-side breakdown attempt below last week’s upper cluster, 28.90s-28.35s. Sellers trapped, 28.26s, amidst a buy excess that drove price higher back into prior balance. Price discovery higher ensued to 28.97s where buying interest emerged, 28.90s-28.96s, into Tuesday’s close. Tuesday’s late buyers failed to hold the auction as balance developed, 28.99s-28.65s, through Wednesday’s trade as the market churned at last week’s key resistance. Buying interest emerged again, 28.82s-28.85s, into Wednesday’s close.
Price discovery higher developed early in Thursday’s trade, achieving a stopping point, 29.10s. Buyers trapped there, driving price lower to 28.59s, testing the breakout area. Buy excess developed there as sellers trapped, 28.71s-28.74s, into Thursday’s close. A minor probe lower to 28.61s early in Friday’s trade saw sellers trap and price discovery higher resume as the breakout held. Price discovery higher developed, achieving the weekly stopping point high, 29.30s, ahead of Friday’s close, settling at 29.22s.
This week’s auction saw a failed sell-side breakdown below last week’s key support, 28.30s, before price discovery higher developed to 29.30s. Within the larger context, balance development continues, 31s-25.98s, following 2019’s rally.
Looking ahead, the focus into next week will center upon market response to this week’s unsecured high, 29.30s. Unsecured highs lack excess (rejection) usually indicating the trend has yet to terminate. The market continues to seek resistance in a process called price discovery. Sell-side failure to drive price lower from this resistance would target the key supply cluster overhead, 30.25s-30.95s. Alternatively, buy-side failure at this cluster would target key demand clusters below, 28s-27.67s/26.50s-25.98s, respectively. From a structural perspective, the highest probability path near-term is buy-side barring failure of 28.60s as support. Within this near-term context, the intermediate term (3-6 month) bias is neutral between 25.98s and 30.96s.
It is worth noting that breadth, based on the S&P Gold Miners Sector Bullish Percent Index, has stalled near bullish extreme at/near the breadth highs made in August-September 2019. Stocks more broadly, as viewed via the NYSE, exhibit rising bullish breadth. Asymmetric opportunity develops when the market exhibits extreme bullish or bearish breadth with structural confirmation. Caution remains warranted as market structure is neutral while breadth is remains extreme bullish.
The market structure, order flow, and sentiment posture will provide the empirical evidence needed to observe where asymmetric opportunity resides.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.