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GDX broke down outside a bearish wedge this past week. It appears more likely this would be attributed to selling the old fashioned way: profit taking. Short positions remain exceptionally light on the top ten holdings that make up much of the GDX (short positions listed by company below).
Whatever can be said about quantitative easing, if any of that money has been allocated in order to keep the stock market afloat, it is difficult to determine how much of that money is actually making its way into gold equities. While GDX has clearly out-performed the S & P 500 over the past six months (even with this past week's sell-off), it is still lagging SPY over one year and twenty month (rally's length) periods (charts below).
This once again leaves in question precious metal equities' ability to maintain their strength in the event of an overall market sell-off. Many of the larger institutions don't seem to be onboard when it comes to investing in gold equities, and if that assumption is correct, it could be awhile before we see the GDX pull away from the markets. And it really won't be "pulling away" if the stocks making up the GDX can only manage to fall at a lesser rate than the markets in general, should we see a formidable correction in the markets.
It should be noted that there is still plenty of money flowing into the juniors, as can be evidenced by the Canadian Venture Exchange. It has gone almost straight up since the middle of July, so investors are still willing to spend money on gold stocks, they've just opted to invest in the opportunity for a home run, and many of the junior PM's have done exactly that: performed like Babe Ruth over the past few months.
Canadian Venture Exchange
