GDX Weekly: Minor Price Discovery Lower Early Week Where Sellers Trapped Driving Price Higher Into Week's End

Summary

• Price discovery lower in Monday’s auction as last week’s key support failed before selling interest emerged, 27.89s-27.75s.
• Failed probe lower in Tuesday’s trade before price discovery higher into Wednesday’s trade as balance development unfolded into the week’s end.
• Bullish breadth remains stalled in bullish extreme area.
• This week’s auction saw a failed probe lower at key support with the larger balance development.

In this article, we examine the significant weekly order flow and market structure developments driving NYSEARCA:GDX price action.

As noted in last week’s GDX Weekly, the highest probability path for this week was for price discovery lower. The primary expectation did play out, albeit marginally, as price discovery lower developed early week to 27.68s as key support was tested. Sellers trapped, driving price higher to 28.86s into Wednesday’s trade as the breakdown failed. Balance developed, 28.86s-28.30s, ahead of Friday’s close, settling at 28.42s.

13-17 January 2020:

This week’s auction saw price discovery lower early in Monday’s auction as last week’s late buyers failed to hold the auction. Price discovery lower developed through last week’s key support, 28s, in Monday’s trade, achieving a stopping point, 27.76s, as selling interest emerged, 27.89s-27.76s, into Monday’s close. A minor probe lower developed early in Tuesday’s auction, achieving the weekly stopping point low, 27.68s. Price discovery higher then ensued as Monday’s late sellers failed to hold the auction. Price discovery higher developed in Tuesday’s trade to 28.31s where buying interest emerged into Tuesday’s close.

Tuesday’s late buyers held the auction as price discovery higher continued in Wednesday’s auction, achieving the weekly stopping point high, 28.87s. Minor sell excess developed there as buying interest emerged, 28.82s-28.70s, into Wednesday’s close. Wednesday’s late buyers failed to hold the auction as price discovery lower developed into Thursday’s trade, achieving a stopping point, 28.30s. Buy excess developed as buying interest emerged, 28.37s, as balance continued ahead of Friday’s close, settling at 28.42s.

This week’s auction saw a failed sell-side breakdown below last week’s support before price discovery higher developed to 28.87s. 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 key cluster, 28.97s-28.30s. Buy-side failure at this cluster would target key demand clusters below, 28s-27.67s/27.50s-27s, respectively. Alternatively, sell-side failure to drive price lower from this support would target the key supply clusters overhead, 29s-29.80s/30.25s-30.95s, respectively. From a structural perspective, the highest probability path near-term is buy-side. 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 becoming 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.