Markets trapped in relentless bear markets make many attempts to change their fortunes, and the charts are littered with false breakouts and shamed bulls. But when bearishness is the norm, especially after what appears to be yet another breakdown on the charts, a real reversal can develop. That is what looks to have happened last October.
On a weekly chart, the failed support break and intraweek reversal are clear (see Chart 1). Of course, in hindsight everything is clear, but as I wrote here in November, gold scored a short-term turnaround that could send it back to its 200-day moving average (see Getting Technical, “Gold: It’s Time to Buy,” November, 19, 2014).

Chart 1


At the time, gold rebounded from its four-and-a-half-year low and a short-term indicator suggested that real buying — and demand — had finally returned. I cited the follow-through day indicator, which was developed for the stock market, and the trend has been higher since then.
A follow-through day looks for a surge in price and volume approximately a week into a rally attempt. It filters out any surges created by bottom fishers looking to scalp cheap prices at new lows. The assumption is that real buying comes back shortly thereafter.
As of last week, gold closed above its 200-day average. And the SPDR Gold Trust has punched through a short-term declining trendline drawn from March of last year (see Chart 2).

Chart 2

SPDR Gold Trust

Price and volume continue to surge suggesting growing investor interest, and all of this is taking place as the dollar continues to rally itself. Since gold is priced in dollars, there is usually an inverse relationship between the two. Therefore, when both move higher together we can only surmise that there are more than currency factors at work. Indeed, gold priced in euros scored a convincing breakout in December.
Gold stocks are also on the move — and how. The Market Vectors Gold Miners ETF, up 24% in the young new year, scored a breakout of its own earlier this month (see Chart 3). Its twin lows of early November and mid-December formed the base of a “double bottom” or “W” pattern, so named for its resemblance to that letter. Chart watchers look for rising technicals as the pattern develops, and indeed it had rising momentum and positive cumulative volume.  

Chart 3

Market Vectors Gold Miners ETF

The ETF broke out in mid-January by rising above the middle peak of the “W.” It pulled back to “test” that move — giving Johnny-come-latelies one more chance to buy — and quickly resumed its upward march. This is a solid short-term breakout but it should not be confused with a new bull market. There are many technical hurdles ahead, but it is safe to say that with the evidence in hand the bear market is over.
It is interesting to note that silver — both the metal and the miners — also sports upside breaks from double-bottom patterns. Silver is up more than 13% over the past three weeks compared to roughly 10% for gold.
And long-term charts also show rising technicals to suggest there is more than just a reaction to the news of the day happening here. For example, the Global X Silver Miners ETF sports rising momentum and a breakout through a price ceiling that can be traced back to major turning points in 2013 and 2014 (see Chart 4).

Chart 4

Global X Silver Miners ETF

Platinum also sports similar characteristics. Investors can track it via the ETFS Physical Platinum Shares ETF. It is worth noting that all three major precious metals exhibit these patterns. And gold mining stocks have also broken out versus the metal for another good sign. Unfortunately, we cannot say the same for silver mining stocks against silver, but that relationship is knocking on the door.
The bottom line is that the technicals tell us that metals and miners are back despite the fundamentals and the sentiment surrounding them. Despite this year’s big rally, it’s not too late to give them a look.
Michael Kahn, a longtime columnist for, comments on technical analysis at A former Chief Technical Analyst for BridgeNews and former director for the Market Technicians Association, Kahn has written three books about technical analysis.