The Market Vectors Gold Miners ETF (NYSEARCA:GDX) has soared in the last few months. The ETF traded as low as $12.40 in January 2016 only to climb to a high today of $23.06. This is a whopping 86% in less than 3 months. While many investors are jumping on board the gold miners there is a dead-on signal they are a short here.
It is one of the simplest chart comparisons out there. All you need to do is compare the SPDR Gold Trust (ETF) (NYSEARCA:GLD) to the $GDX chart. You will clearly see that recently gold ($GLD) has not taken out the recent highs while $GDX has soared to new highs. What does this mean? It means that the gold miners ($GDX) are being squeezed. In other words, a lot of the upside is short covering. Short covering will not last. In fact, a possible doji today on the daily chart of $GDX may spell the top. Note the charts below to understand fully. However, the bottom line is that the $GDX will likely pull back below $20 in the coming weeks. That is an over 10% drop.