GOLD MINERS INDEX SHOWS NEW LEADERSHIP -- NEWMONT AND SILVER WHEATON NEAR MAJOR UPSIDE BREAKOUTS -- MINERS BULLISH PERCENT INDEX ON BUY SIGNAL -- ENERGY BPI IS CLOSE TO ONE -- MOVING AVERAGE SUPPORT HAS HELD SO FAR FOR THE EFA AND NYSE INDEXES

GOLD MINERS INDEX HITS THREE-MONTH HIGH ... Three Thursdays ago (April 8), I wrote about the upturn in the price of gold and gold stocks. At the time, gold was breaking through a bullish "neckine" in a head and shoulders bottom while the Gold Miners Index was breaking through its March high. On Tuesday, I showed the Gold ETF (GLD) reaching a new 2010 high after a successful retest of its neckline. Today I'm going to focus on mining stocks which are starting to emerge as new market leaders. Chart 1 shows the Market Vectors Gold Miners ETF (GDX) trading at the highest level since January. This week's upside breakout has also taken place on rising volume which is another positive sign. So is the fact that the GDX/SPX relative strength ratio (below chart) is rising above its 2010 down trendline. That shows new leadership. The reasons for the latest upturn in gold assets are twofold. One is simply the fact that commodity prices have been lagging behind stocks and are starting to play catchup. Another is that gold plays a dual role as an alternate currency and is attracting some money coming out of Europe. [Gold is trading at a record high against the Euro, the British Pound, and the Swiss Franc]. The second point is illustrated by the fact that gold rose earlier in the week (when Greek debt was downgraded to junk) while most other commodities fell.

Chart 1

NEWMONT MINING NEARS MAJOR UPSIDE BREAKOUT... My April 8 message identified Newmont Mining as as upside leader within the GDX. The fact that NEM is the third biggest holding in the GDX (10%) also gives it the benefit of size. And it has a very strong chart pattern. Chart 2 shows Newmont on the verge of reaching a new 52 week (over 56) today. More importantly, the gold leader has risen above a resistance line drawn over its 2006-2008 highs (see circle). Its relative strength line (below chart) also appears to turning up after lagging behind the rest of the market over the last year. That's a bullish sign not only for NEM but for the rest of the mining group (and gold itself). Chart 3 shows the point & figure chart for Newmont (using a $2.00 box size). The stock's most recent buy signal occurred at 50 last November. New p&f buy signals would take place at 58 and 62. [A buy signal occurs when an X column rises above a previous X column].

Chart 2

Chart 3

SILVER WHEATON TESTS 2008 HIGH... Another precious metal leader that I showed on April 8 is Silver Wheaton. And it remains so. Chart 4 shows the silver stock moving up to challenge its early 2008 top just above $19. The SLW/GDX ratio (above chart) shows that SLW has been a leader in the mining index. The rising SLW/SPX ratio (below chart) shows that SLW has been a market leader as well. In fact, its relative strength line is on the verge of a new record high versus the S&P 500. Part of its leadership comes from the fact that silver prices are also rising. Chart 5 shows its point & figure chart (using a $1.00 box size). The stock has been in a p&f uptrend since last September's buy signal at 12 and more recently at 18. A close at 20 or higher would be another p&f breakout.

Chart 4

Chart 5

GOLD MINERS BULLISH PERCENT INDEX GIVES P&F BUY SIGNAL... My early April message also showed the Gold Miners Bullish Percent Index (BPGDM) moving back above 50 which meant that more than half of its 32 stocks were in point & figure uptrends. The BP line has risen above 60, but is well below overbought territory in the high 80s. That means that it still has room to rise. Chart 7 shows the point & figure version of the BPGDM having just given a p&f buy signal at 62.

Chart 6

Chart 7

BPNYA BACK IN UPTREND -- ENERGY IS CLOSE ... Bullish percent indexes measure the percent of stocks in an index that are in point & figure uptrends. They tell us a lot about the strength of a group or the market as a whole. Chart 8 shows the NYSE Buliish Percent Index (BPNYA) having just exceeded a previous X column at 78 which puts it back in an uptrend. The only caveat to that recent buy signal is that the index is in traditionally overbought territory over 80. [Several group BPIs are in "very" overbought territory over 90 including consumer discretionary (95%), industrials (93%), and consumer staples (90%)]. One commodity group that I've written favorably about in recent messages (in addition to precious metals) is energy. Chart 9 shows the Energy BPI (BPENER) on the verge of a new buy signal at 70. That reading also makes energy one of the cheapest market sectors. That fits into my recent claim that energy represents one of the best values in the market. [It's also worth noting that energy stocks usually start to show market leadership in the late stages of a market rally. In fact, energy is usually the last to peak]. Chart 10 shows the Energy SPDR (XLE) having just completed a "triple top breakout" on its point & figure chart.

Chart 8

Chart 9

Chart 10

MOVING AVERAGES HAVE HELD IN THE EFA AND NYA... During Tuesday's market selloff, I showed EAFE iShares bearing down on its 200-day moving average and warned that was an important test. The good news is that the (red) 200-day line has held (so far). The green Fibonacci lines also show yesterday's upside reversal starting at the 50% retracement point of the February/April rally which is another positive sign. Another encouraging sign is the ability of the NYSE Composite Index (Chart 12) to bounce off chart support along its January peak and its (blue) 50-day average. The NYA needs to stay above both lines to keep its spring uptrend intact.

Chart 11

Chart 12