Gold and mining stocks have crushed the performance of the S&P 500 so far this year, but both have actually been outperforming the market since October of 2018. That’s when the Federal Reserve reached a peak in its last tightening cycle. By January 2019 it began to talk about coming interest rate cuts and now we are where we are with rates at zero and unlimited QE. This action brought the stock market back alive after this year’s March crash, biggest beneficiary is gold, silver, and the mining stocks.
However, all three have been in a consolidation phase since the end of July. That consolidation phase now appears to be near an end. The stage is set for the next big rally. Take a look at the GDX gold stock ETF, which just a buy signal yesterday.
The daily stochastics for the GDX went below 20 last week to give an oversold signal. On Monday it crossed back above 20 to give a buy signal. This is the first buy signal.
A second buy signal, will happen after the GDX closes above $40 as that would represent a smash through the downtrend line and formally end the consolidation phase.
At the same time the GDX/SPX relative strength ratio broke through a downtrend line that had been in place since August, to tell us that gold stocks are now position to outperform the market going into the end of the year.
A lot of the big cap mining stocks had nice days yesterday. Take a look at NEM for instance, which just broke its downtrend resistance line yesterday. So it already gave both buy signals.
NEM jumped for a 3.01% gain yesterday and also broke the NEM/SPX relative strength downtrend line going back to May on the bottom of the chart!