First potential short setup on our radar ($GDX)

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Although we are not yet at the point of making a bearish call on the market, one ETF that is showing considerable relative weakness is Market Vectors Gold Miners ETF (GDX). Over the past month, as the broad market has rallied, GDX has entered a clear downtrend. If the market provides us with a sell signal sometime soon, GDX could provide an excellent shorting opportunity on a bounce into resistance. Although we are not yet looking to take on short exposure, it’s always good to be prepared for a shift in market conditions:

GDX weekly


Overall, yesterday was a difficult day on Wall Street. We saw distribution across the board. We now have four distribution days in the past twenty sessions on the Nasdaq and six on the S&P. The market is now close to providing us with a sell signal. It is still too early to suggest that we should be exiting the market entirely, but another distribution day in the next two sessions would be a big cause of concern. Leadership stocks are still holding up well and the number of stocks closing lower by 4% or more has been well below extreme readings. Further, we are still well within the trading range on all of the major indices. However, things can change quickly. The next several sessions should provide an important gauge as to the health of the market. If we see another distribution day in the next two sessions, things could deteriorate quickly.

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