Powerful Divergence in Gold Miners

From the mind of Davis Ramsey:

It should come as little surprise that I’m very bullish going forward on gold, silver, and related equities so I’ve taken the time to share one more piece of evidence in support of this view.

This shows the positive divergence back at the GDX 2008 lows – the blue trendline shows that GDX found the low in late October and went on to make a higher low in late November. In contrast, BPGDM made a low in October then went on to make a lower low in November which was not confirmed by GDX. As you can see, this pivotal event led to significant gains.

This is what the picture looks like today. GDX saw a panic low in mid-May which is equivalent to the October 2008 low – we’ve seen a short rally and GDX has, so far, made a higher low in late July. BPGDM was at 10% at the mid-May lows and today reads 7% – a lower low that has not been confirmed by GDX. The setup today is virtually identical to the late 2008 lows.

Another positive sign that the mining sector is likely making a significant turn is the emergence of relative strength leaders like AG (I own AG EXK HL NGD as stated here and on twitter). As you can see, AG only began showing leadership since the mid-May lows – it closely followed GDX down from the late February high – so this is a very recent development and one I hope to see replicated in other individual mining stocks.

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