GOLD AND GOLD MINERS INDEX TURN UP -- NEWMONT AND SILVER WHEATEN ARE GDX LEADERS -- BARRICK GOLD IS BREAKING OUT -- GOLD MINERS BULLISH PERCENT INDEX SHOWS MOST GDX STOCKS HAVE TURNED UP

GLD COMPLETES H&S BOTTOM ... In last Thursday's message, I wrote a positive piece on commodity prices in general, and precious metals in particular (PRECIOUS METALS ARE TURNING UP). Part of my renewed optimism on the group was caused by the fact that silver had already turned higher (while platinum was hitting a new 52-week high). I also suggested that the Gold Trust Shares (GLD) appeared to be in the final stages of a "head and shoulders" bottom which would be completed by an upside penetration of its "neckline" drawn over the January/March highs. Chart 1 shows that bullish breakout taking place over the last two days. Right on cue, the Market Vectors Gold Miners Index (GDX) has cleared its March high and a four-month resistance line. The GDX/SPX ratio below Chart 2 is starting to turn up after falling throughout the first quarter. That suggests that precious metal stocks are starting to show both absolute and relative strength. That's a healthy combination.

Chart 1

Chart 2

NEWMONT AND SILVER WHEATON ARE GDX LEADERS... Although the Gold Miners ETF includes mainly gold stocks, it does include some silver shares. And with silver rallying faster than gold, it's no big surprise to see Silver Wheaton turning in one of the strongest performances. Chart 3 shows SLW in the process of testing its January high. Its RS line (below chart) has also turned up. Another positive sign for the GDX is the fact that Newmont Mining (one of its biggest holdings) has already reached a new 2010 high (Chart 4). Its relative strength ratio (below chart) is rising as well.

Chart 3

Chart 4

BARRICK GOLD NEARS BREAKOUT ... When analyzing industry charts, size matters. While Newmont is the third biggest holding in the GDX, the biggest stock is Barrick Gold. Chart 5 shows that stock trying to break through its March high near 41. Needless to say, an upside breakout by ABX (which appears likely) would be a big plus for the GDX. Charts 6 through 8 show three other gold breakouts in some of the larger gold stocks. They include Anglogold (Chart 6), Gold Fields (Chart 7) and Randgold Resources (Chart 8). AU and GFI have also climbed back over their 200-day averages.

Chart 5

Chart 6

Chart 7

Chart 8

GOLD MINERS BULLISH PERCENT INDEX TURNS UP ... More than 50% of the 32 stocks in the Gold Miners Index are now in p&f uptrends. That positive trend is shown by the Gold Miners Bullish Percent index ($BPGDM) shown in Chart 9. The sentiment indicator is used like all bullish percent indexes. Readings over 70 are overbought while drops below 30 are oversold. The last two times that oversold condition existed were the end of 2008 and during the first quarter of 2010. The late 2008 upturn signalled a major rally in gold shares. The latest upturn this year appears to be signaling an upturn in gold and silver shares as well. While the BPGDM is no longer oversold, it's generally a positive sign for a group when more than half of its stocks are in new uptrends.

Chart 9