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June 16, 2009 / Jeb

Dollar Finding Resistance, Gold Miners Looking For Support

The dollar is in a downtrend rallying from oversold condition while the GDX is in an uptrend correcting from the overbought conditions.

I saw this process would happen on June 3rd telling my subscribers not to take any new positions in gold mining positions as CNBC and Yahoo were all yelling how great gold was.  This is a natural process of profit taking and short covering in the market.

Being able to see the primary trend adding to positions on pullbacks for charts that are in uptrends and selling stocks short when they rally up to their moving averages is very profitable.

uup

Take a look at the dollar above.  Notice the three counter- trend rallies and how they failed.  Also, see how it attempted to rally at the 50 day twice and failed.  Right now I am looking at the 24.75 area and it rallying again to the 50 day and failing which could take another week approximately.

GDX

The Gold Miner Index has corrected several times and the 50 day for this chart is not the most accurate area for support as it broke it twice before in the uptrend since October.

However, you have the previous resistance that it broke out of which acts as support.  The 50 day moving average acts as support.  The trendline which connects the low acts as support.

In conclusion, GDX has a lot more support than UUP.  The dollar has a lot of resistance.  Buy GDX on weakness and sell UUP on strength.

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