Investors confront a plethora of ratios every day in the financial markets. Commodities traders and investors are likely familiar with the gold/silver ratio, the measurement of how many ounces of the white metal needed to purchase one ounce of bullion.
However, an overlooked ratio involving gold miners is pointing to further upside for a popular, high-flying exchange traded fund and merits immediate attention from investors.
The ratio comparing the New York Stock Exchange to the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) “has created a strong move up over the past few years, as the stock market has performed tons better than the miners ETF,” according to Chris Kimble of Kimble Charting Solutions.
Although GDXJ finished lower by nearly 3% on Tuesday, the ETF is still up more than 20% over the past three months, making it one of the top-performing non-leveraged ETFs over that period. Since the start of this month, GDXJ has added nearly $40 million in new assets. [Stock ETFs Attract Cash in July]
“The ratio may have created a head & shoulders topping pattern. Even if the pattern read is incorrect, the ratio does find itself at the bottom of a rising channel, as it test support. What takes place at this support line could be very important for miners and where they will be at the end of the year,” adds Kimble.