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Traders Rush Into Collapsing Gold Miners

Jason Goepfert
2016-10-05
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A curious thing happened in ETF land on Tuesday. One of the day's biggest losers, the VanEck Vectors Gold Miners ETF (GDX) also saw one of the largest inflows of assets. Only SPY took in more money on Tuesday.

20161005_gdx_chart

How is this possible? It could be either traders making a big bet on a rebound, or short sellers jumping on the bandwagon and looking for more of a decline ahead. That's the thing with ETFs - we never know if new share creation is because of demand or supply, but generally it's the former.

Regardless of the reason, let's look for any other time in the history of GDX that it suffered a 5% or greater loss on the day, but saw its assets rise by 1% or more.

20161005_gdx

It wasn't a pretty picture going forward as most of the instances occurred during bear markets. But even the two that occurred when GDX was embarking on a new uptrend, in 2009, saw some heavy selling pressure at some point in the next couple of weeks. It's a minor warning sign for those looking for the miners to mean-revert.

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