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 within the context of a potentially completed corrective phase from 31s. The primary expectation did not play out, as minor price discovery higher developed to 28.38s into Tuesday’s auction. Buyers trapped as selling interest emerged there, driving price lower to 26.91s, testing key demand, ahead of Friday’s close, settling at 26.97s.
07-11 October 2019:
This week’s auction saw minor pullback in Monday’s trade to 27.46s, as last week’s late buyers failed to hold the auction. Buy excess developed there before buying interest emerged, 27.61s-27.67s, into Monday’s close. Price discovery higher ensued, achieving the weekly stopping point high, 28.38s, where buying interest emerged, 28.22s-28.38s, into Tuesday’s close. Tuesday’s late buyers failed to hold the auction as minor retracement lower developed in Wednesday’s trade to 28.36s.
Wednesday’s late buyers failed to hold the auction as price discovery lower ensued early in Thursday’s trade, achieving a stopping point, 27.52s. Buying interest emerged, 27.52s-27.65s, driving price higher to 28.16s, testing key supply overhead. Buying interest emerged, 28.13s-28.04s, into Thursday’s close. Thursday’s late buyers failed to hold the auction as aggressive price discovery lower ensued, achieving the weekly stopping point low, 26.91s, forming an unsecured low. Buying interest emerged, 26.90s-27.08s, ahead of Friday’s close, settling at 26.97s.
This week’s auction saw minor price discovery higher to 28.38s before selling interest drove price lower to 26.91s, testing the key demand area while forming an unsecured low. Within the larger context, the corrective phase from 31s may continue should 26.51s fail as support.
Looking ahead, the focus into next week’s auction will center upon market response to this week’s unsecured low, 26.91s. Buy-side failure at this support would target key demand clusters below, 26.80s-26.50s/25s-24.50s, respectively. Alternatively, sell-side failure to drive price lower from this support would target the key supply clusters overhead, 29s-29.50s/30.30s-30.96s, respectively. From a structural perspective, the highest probability path near-term is sell-side. Within this near-term context, the intermediate term (3-6 month) bias is neutral between 26.51s and 30.96s.
It is worth noting that sentiment, based on the S&P Gold Miners Sector Bullish Percent Index, continues to decline this week following the bullish sentiment trend from lows made from Autumn 2018. Stocks more broadly, as viewed via the NYSE, are now exhibiting a minor decline in bullish sentiment. Asymmetric opportunity develops when the market exhibits extreme bullish or bearish sentiment with structural confirmation. Caution remains warranted as market structure and sentiment are divergent and within a “neutral” zone implying a neutral bias.
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.