With gold prices up sharply this morning, let's have a look at the relative strength relationship between the Gold Miners ETF (GDX) and the S&P 500 Cash Index ETF (SPY). My pattern and ROC (rate of change) analysis of the relationship between the GDX and the SPY indicates strongly that the GDX has completed a corrective period versus the SPY and has turned up into an approaching period of relative outperformance. In a rising price scenario, the GDX should climb faster and more powerfully than the SPY, while in a weak overall market the GDX either will climb or hold up considerably better than the overall market. Newmont Mining (NEM) and Barrick Gold (ABX), with earnings this week, are the two leading components of the GDX.
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