Gold is in a bit of a swoon today and the Gold Bugs Index (HUI index) which is tracked by the GDX, is swooning with it of course.
I want you to look at a chart of the GDX. Look at a daily chart. What you see is that we’ve come off a FAILED breakout. That means that there was an attempt to make a new high today that failed. And now GDX is down 1.65% for the day. That was after being UP 2.99% earlier today!
Now to see what COULD happen this time around too, take a look at the daily chart for GDX on 6-21-2010 and you will see a similar topping formation with a failure to make a new high. The market could not even break out back then and the high volatility retest (the swing in the market that day was big compared to the prior days) and the failure to make a new high sealed the fate on a pullback, which ended on July 28th, 2010.
We could see the same pattern again.
What to do? Consider taking profits here on GDX and re-entering part of your position once the market has pulled back a bit. How much you sell and how much you hold is a matter you will have to decide for yourself. Check out the Passive Shorting™ page on the SunAndStorm.com site to learn more about getting out and getting back in.
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Enjoy your day.
P.S. The GLD chart for the gold ETF looks the same as the GDX chart.
Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.