Tomorrow afternoon at 2pm EST the FOMC will issue its statement from its 2-day meeting followed by a press conference with Janet Yellen at 2:30pm EST. The Fed is expected to hike the Fed Funds Rate by a quarter point, however, it will be the hints buried in the details of the statement and clues given by Fed Chairman Powell in his press conference that will move markets.
Heading into tomorrow's Fed announcement the gold mining sector as represented by the GDX is in the midst of its lowest volatility period in history; it's not an exaggeration to say that the gold miners have gone no where for months. The ultra-low volatility has become more pronounced in the last month as the GDX has hugged its 50-day moving average, with each attempt to break-away from the 50-day SMA (both on the upside and the downside) quickly giving way to rapid mean reversion.
As the gold miners enter what could be a momentous trading session, the GDX is sitting right on its 50-day moving average literally equidistant between the next major support/resistance levels:
GDX (Daily)
As you can see I've carved out two different interpretations of the recent price action (one does not contradict the other). One would simply be a range-bound sideways channel with resistance near $23.00 and support near $22.00, while the other interpretation could be a rather extended bullish flag pattern beginning at the peak of the April rally.
Tomorrow sets up to be a critical trading session: With a decisive breakout above $23.00 gold bulls will have something to cheer about after one of the most lackluster periods I can recall in the sector, whereas, a breakdown below $22.00 will make the March/April bounce look to be of the bear market variety.
I can't recall a time in which so many indicators were in dead-neutral territory and the 200-day moving average was as flat as a pancake. What is it going to take to break free from this range? We might very well find out tomorrow...
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