A Rally Or A Bull Market?

Although the financial media conflates the two, there is a difference between a rally and a bull market.

A rally implies a rebound after or a reprieve from weakness. A bull market is higher highs and higher lows for a period of at least a few years.

Gold’s strength in the 2000s was not a rally, as many have deemed it, but a bull market. Gold’s rebound in 2016 was a rally.

Nevermind the Gold pundits who insist Gold is in an invisible or stealth bull market or even a correction. A market that pops for seven months then doesn’t make a new high for almost two and a half years is not a bull market.  

Despite the recent recovery, precious metals are not in a bull market yet. Let’s use the gold stocks to exhibit this.  

Below we plot GDX with its 400-day moving average and some important breadth indicators.

The 400-day moving average provided resistance for GDX in 2012, 2014, 2015, several times in 2018 and at present. It’s holding GDX for now.

The breadth indicators don’t signal a bull market either.

The GDX advance-decline line remains well below its 200-day moving average and is carrying some negative divergences. The percentage of stocks trading above the HUI (a very similar index to GDX) has been below 60% for over two years. The bullish percentage index (another breadth indicator) has remained below 50% for essentially the past five years (aside from most of 2016).

(Click on image to enlarge)

We see the same issue with GDXJ and its 400-day moving average. It served as resistance in 2014, support in early 2017 but again resistance several times in 2018 as well as at present.

(Click on image to enlarge)

The percentage of stocks in our 55-stock junior basket has remained below 50% for nearly two years. Another leading indicator (miners versus Gold) is not showing a bull trend for GDXJ.

These things could obviously change at somepoint.

If GDX and GDXJ explode above their 400-day moving averages then the recent rally would be turning into a bull market.

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