Gold Miners ETF Poised For A Breakout Versus Equities: Cappelleri

Summary

• GDX, the gold miners ETF, has underperformed versus the S&P 500 over the past few months, but that relationship may be about to turn, says Frank Cappelleri, CMT, chief market.
• GDX has not broken out yet. But since the low in gold in August 2018, it has outperformed gold by 20%. Gold will outperform if it continues to go higher.
• Aggressive traders may want to buy GDX and sell SPDRs now in anticipation of a bigger drawdown. A more conservative play is to wait to see a bearish pattern play.

The gold miners ETF, $GDX, has been outperforming gold and is poised for a similar breakout, Frank Cappelleri, CMT, chief market technician at Nomura Instinet, told Real Vision’s Technical Trader.

He said that while GDX has underperformed drastically over the last couple of months versus the S&P 500, he expects that to change.

“Looking at the S&P 500, we know it's extended, we know it's overbought,” he said. “We’re still waiting for some signs of deterioration before getting actually bearish on it, but [we realize] that that may end up happening relatively soon.”

Cappelleri is bullish on GDX, noting that although it has not broken out yet, it has outperformed gold by 20% since the low in gold in August 2018. He thinks if gold continues to go higher – which he expects it to do – GDX will continue to outperform.

He says investors can play this scenario one of two ways. “The more aggressive play is to want to stay in front of this move by buying GDX and selling SPDRs now in anticipation of a bigger drawdown,” he said. “If you're more conservative, like me, and want to see some evidence first of the S&P rolling over or maybe have a 1% decline and see a bearish pattern play out and wait for that, I think that's fine, too.”

Either way, Cappelleri thinks we should expect to see some reversal over the next few weeks to months.

Analyst’s 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.

This is pretty obvious, but we should probably say it anyway so that there is absolutely no confusion... The material in REAL VISION GROUP video programs and publications (collectively referred to as "RV RELEASES") is provided for informational purposes only and is NOT investment advice. The information in RV RELEASES has been obtained from sources believed to be reliable, but Real Vision and its contributors, distributors and/or publishers, licensors, and their respective employees, contractors, agents, suppliers and vendors(collectively,"Affiliated Parties") make no representation or warranty as to the accuracy, timeliness or completeness of the content in RV RELEASES. Any data included in RV RELEASES are illustrative only and not for investment purposes. Any opinion or recommendation expressed in RV RELEASES is subject to change without notice. RV Releases do not recommend, explicitly nor implicitly, nor suggest or recommend any investment strategy. Real Vision Group and its Affiliated Parties disclaim all liability for any loss that may arise(whether direct, indirect, consequential, incidental, punitive or otherwise) from any use of the information in RV RELEASES. Real Vision Group and its Affiliated Parties do not have regard to any individual’s, group of individuals’ or entity’s specific investment objectives, financial situation or circumstances. RV Releases do not express any opinion on the future value of any security, currency or other investment instrument. You should seek expert financial and other advice regarding the appropriateness of the material discussed or recommended in RV RELEASES and should note that investment values may fall, you may receive back less than originally invested and past performance is not necessarily reflective of future performance.Well that was pretty intense! We hope you got all of that - now stop reading the small print and go and enjoy Real Vision.