GDX Elliott Wave Technical Analysis – 26th August, 2016

Last analysis expected upwards movement towards a target at 36.21.

Price did move higher but fell 4.42 short of the target.

Summary: Classic technical analysis is very bearish today for GDX. A downwards trend is in place. This strongly favours the alternate monthly and alternate daily wave counts. A new low below 26.17 would indicate a much deeper correction should continue for a B wave, likely to end below 14.339. A new high above 31.79 would indicate an impulse upwards is continuing, target 35.15 and limit 36.34.

New updates to this analysis are in bold.

Although the wave counts are labelled “main” and “alternate”, the alternates are favoured. This is the order in which they were developed and not the order in which they are more likely.

MONTHLY ELLIOTT WAVE COUNT

GDX monthly 2016
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The whole wave down for cycle wave a subdivides well as a five wave impulse. However, GDX does not have adequate volume to produce typical looking Elliott wave structures. As always, this wave count comes with the strong caveat that this market is not sufficient in volume for a reliable Elliott wave analysis. It is a rough guide only. The direction expected from the Elliott wave count should be fairly reliable, but targets and invalidation points may not be.

Ratios within cycle wave a are: there is no Fibonacci ratio between primary waves 1 and 3, and primary wave 5 is 0.33 short of 0.236 the length of primary wave 3.

Ratios within primary wave 3 are: intermediate wave (3) is 3.48 short of 1.618 the length of intermediate wave (1), and intermediate wave (5) has no Fibonacci ratio to intermediate waves (3) or (1).

Ratios within intermediate wave (3) are: minor wave 3 has no Fibonacci ratio to minor wave 1, and minor wave 5 is just 0.02 longer than equality in length with minor wave 1.

Ratios within minor wave 3 are: minute wave iii is 0.38 longer than equality in length with minute wave i, and minute wave v has no Fibonacci ratio to either of minute waves i or iii.

Within primary wave 5, there are no adequate Fibonacci ratios between intermediate waves (1), (3) and (5).

The black channel is a best fit; this movement does not fit into an Elliott channel. The channel is breached very clearly and price has made a major new swing high above 17.04. A trend change was confirmed in February.

If analysis of downwards movement is correct that cycle wave a has subdivided as a five wave structure, then this tells us two things:

1. The bear market for GDX must be incomplete because a five may not be a corrective structure, so this must only be wave A.

2. Cycle wave b may not make a new high above the start of cycle wave a at 66.98.

Cycle wave b may be any one of 23 possible corrective structures. It may be a swift sharp zigzag, or it may be a sideways structure such as a flat, combination or triangle. It should last one to several years. It is possible that it is over. An alternate at the end of this analysis looks at this possibility.

The first movement up for cycle wave b must be a clear five wave structure for a trend of this magnitude. It looks like this completed at the Magee trend line where price found resistance and rebounded down. This line is now breached, providing further strong confidence that GDX is in a bull market for a longer term.

DAILY ELLIOTT WAVE COUNT

GDX daily 2016
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If primary wave A is subdividing as a five and is incomplete, then intermediate wave (4) must end here.

Intermediate wave (3) is shorter than intermediate wave (1). This limits intermediate wave (5) to no longer than equality in length with intermediate wave (3), so that the core Elliott wave rule stating a third wave may not be the shortest is met. This limit is at 36.34.

At 35.15 intermediate wave (5) would reach 0.618 the length of intermediate wave (1).

A new high above 31.79 would invalidate both alternates and provide strong confirmation of this first wave count.

ALTERNATE DAILY ELLIOTT WAVE COUNT

GDX daily 2016
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It is possible to see a 5-3-5 upwards complete. This may be a zigzag for primary wave A if cycle wave b is unfolding as a flat correction, or a zigzag labelled primary wave W if cycle wave b is unfolding as a double zigzag.

If cycle wave b is a flat correction, then within it primary wave B must retrace a minimum 0.9 length of primary wave A. This minimum requirement for a flat correction would be met at 14.339.

If cycle wave b is a double zigzag, then there is no minimum requirement for primary wave X within it; primary wave X needs to subdivide as a corrective structure. X waves within double zigzags are normally relatively brief and shallow.

A new low below 26.17 would invalidate the main wave count and provide some confirmation of this alternate.

ALTERNATE MONTHLY ELLIOTT WAVE COUNT

GDX monthly 2016
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It is possible that cycle wave b is now a complete zigzag. It may have ended just short of the 0.618 Fibonacci ratio and looks like a clear three wave structure on the monthly chart.

If cycle wave a is a five and cycle wave b is a three, then cycle wave c downwards must subdivide as a five. Within cycle wave c, no second wave correction may move beyond the start of its first wave above 31.79.

In trying to calculate a target for cycle wave c the 0.382 Fibonacci ratio yields a truncation and the 0.618 Fibonacci ratio yields a negative value. Cycle wave c may not exhibit a Fibonacci ratio to cycle wave a.

Cycle wave c would be very likely to make at least a slight new low below the end of cycle wave a at 12.40 to avoid a truncation.

TECHNICAL ANALYSIS

WEEKLY

GDX weekly 2016
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Price may find some support here about 25.10. However, price has moved strongly lower for the last two weeks to make an important new low below 27.45, and it has done so on increasing volume. Volume is supporting downwards movement. It is likely that price will continue lower.

The next strong area of support is about 21.75.

Overall, volume is declining as price has been moving higher since January. The rise in price is not supported well by volume. This favours a bearish outlook mid term for GDX.

ATR has been strong and increasing. Now it is levelling off, so some decline would be expected.

ADX is very extreme, well above 35, and is now declining. ADX is indicating the trend is most likely exhausted here for GDX but a trend change has not yet been indicated.

On Balance Volume is tightly constrained between the yellow support line and the purple resistance line. A breakout by OBV may indicate the next direction for price, short to mid term.

RSI is returning from overbought after exhibiting double negative divergence with price at the last high.

Overall, this analysis is very bearish for GDX at this time.

DAILY

GDX daily 2016
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It looks like GDX has had a trend change: It has made an important new low, volume offers some support to downwards movement, and ADX indicates a downwards trend.

ATR is now increasing again after some decline.

With ATR and ADX in agreement, it should be assumed that GDX is in a downwards trend at this time.

On Balance Volume is finding some support at the purple line. This is assisting to bounce up price. How price and OBV behave after this bounce will be indicative. If OBV breaks below the purple line it would be offering a strong bearish signal.

With price right at the lower edge of the Bollinger Bands today, this may also assist to bounce up price. During a trend GDX can remain at an extreme of its Bollinger Bands for several days running though.

RSI is not yet extreme. There is room for price to fall. A low may not be expected until RSI is extreme and then exhibits divergence with price.

Stochastics is extreme, but this oscillator may remain extreme for reasonable periods of time during a trending market. It does not yet exhibit any divergence with price to indicate weakness.

This analysis is published @ 01:38 a.m. EST.