With all of the attention given to gold and crude oil recently, it is now time to take a look at the gold miners.  There seems to be a lot of bullish sentiment toward the miners simply because they have exhibited slight outperformance over gold since January and also because a majority of their stocks are in uptrends along with the rest of the market.   Let's take a closer look at GDX and see what the charts say. 

The first chart of GDX below shows a number of factors that support the case that a short term top is in.  Every market or security normally has ebbs and flows between buyers and sellers.  This rhythm allows an analyst to project time frames in which a reversal is likely to occur.  When multiple time projections cluster together, that produces a high probability date for a turn.  Notice at the top of the chart how three different time projections point to April 12 as a possible turning point, which so far is right on the money.  These time projections were created measuring the duration of prior swings in the price action of GDX.  Anyone who would like a deeper explanation can send me an e-mail and I will be happy to explain it further.

Next in the same chart, notice how multiple resistance levels are coming into play in the 48.66 - 49.59 area.  This is an area where selling has picked up, turning the price lower.  The most important level in that group is 49.32 which is a 61.8% retracement of the December - February decline.  Finally, notice how choppy the 'rally' has been off of the February low.  Price has labored to move higher as the five waves (A-B-C-D-E) overlap each other.  This type of chop and churn is common during corrective phases. 

Next, let's take a look at GDX from another price pattern perspective.  You will notice in the chart of GDX below that I have plotted a momentum indicator (MACD) as an overlay on top of  volume.  This gives a very clear picture of the volume momentum or buying/selling power exerted by market participants.  The 'normal' volume bars are also plotted in the same window in light gray. 

One thing that has not been widely acknowledged by the gold share bulls is the obvious head and shoulders chart pattern that formed from September 2009 to January 2010, which is a very reliable reversal pattern.  Please bear with me as I explain the pattern for those who are interested.  It starts when price makes a new high for the move  - this formed the 'left shoulder' in October 2009.  Following that high, price corrected down to its late October 2009 low with a solid jump in volume momentum (the volume MACD).  This showed that profit takers were beginning to head for the exits in increasing numbers.  Selling pressure then eased, allowing price to push out to a new high - the 'head' - which was formed in December 2009.  Notice how on the push to the new high, volume momentum only reached the same level as the October 2009 correction.  This signaled that sellers were becoming a viable force in the battle for the direction of GDX.    Following the formation of the December high, another correction developed which pushed price down to its mid December low.  The October 2009 low and the December 2009 low can be connected which forms the 'neckline' of the pattern.  That is the line that, when crossed, gives a signal that the up move is essentially over.  Price then rallied one last time, falling short of the December 2009 high as buyers exhausted themselves, which formed the 'right shoulder'.  Notice how volume momentum (the MACD) was very weak on the push higher to form the right shoulder. 

The head and shoulders pattern uses price projections to compute downside targets.  In this case, measuring from the top of the head (55.40) to the neckline (43.25) gives a value of 12.15.  Now project 12.15 down from the 'break' of the neckline (46.85).  That gives a target price of 34.70. 

FInally, take a look at the developing volume pattern which is not good news for the bulls.  Notice how strong volume momentum (the MACD) was on the selloff into the February 5 low, and how anemic it was on the corrective push higher off of the February low as price chopped higher.  This is an indication that sellers are taking control of the action.

Beware of those that are saying now is the time to buy mining stocks.  As I outlined in earlier articles, gold and crude oil are ready for nice declines over the near term which will allow for better price entry when their up trends resume.  Gold miners are in that group as well.