Category: Gold

Gold and the Ideal Buy Point

Next month marks the 3-year anniversary of the bear market in silver that started in May 2011.  Later this summer we will hit the 3-year anniversaries of the bear markets in gold and gold stocks.  We are now psychologically conditioned for pain and punishment in the gold markets and to beware of the next downward plunge.

In reality though gold has been in a basing phase.  It’s not going down anymore, it’s going sideways where the downward plunges are muted and the upward rallies are still fake bear market rallies.  What’s interesting about this base is that it started right at the height of bearishness in the gold market.  That two day massacre in gold back in April 2013 when gold plunged below $1400 actually started the left hand side of the base.  So right when everyone was panicking about gold, in reality it was starting to form a major bottom!

Just a couple months later after trying and failing to get back above $1400, gold made the low point in the base in June of 2013 around $1200.  Gold then tried once again to get back above $1400, but then failed and retested the bottom of the base in December 2013.  So a well established base formed in gold between $1200 and $1400 as you can see in the chart below.

gold Continue reading

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Bracketology and Contrarian Investing

As we get geared up for the Sweet 16 this weekend it’s interesting to note how investing and participating in a NCAA tournament bracket pool share some similarities.  To win an NCAA pool, you have to pick a bracket that beats your opponents by picking teams that win games and earning more points for correct picks than everyone else.  In the market you have to pick assets that go up or down in price before your opponents get into the same assets, so that you have someone left to sell to, to realize your gains.

You get the most points in an NCAA pool by picking the correct Final Four and winning team, and the least amount of points for the early round games.  In investing you usually capture bigger gains by taking a longer term view and betting on big trends. Continue reading

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Learning From The Devious Gold Bear

Bear markets can be devious creatures.  They start off with a lot of emotion, usually some type of euphoria and excessive optimism at the top.  But underneath it all the market is typically thrashing, making volatile swings as buyers are piling in at the wrong time and sellers are taking profits.

Once the sellers take control the bear market starts it’s downtrend.  At that point the bear launches into it’s second phase of faking out market participants, i.e., the bear market rally. These periodic false rallies serve to make it look like the bear has ended.  But once each bear market rally fails, the next leg of the bear market is kicked off.

As a speculator it’s important to learn from bear markets, how they form and how they deceive on the way down.  The more experience a speculator has with bear markets the more prepared they will be for the next one.  Let’s take a look at some key lessons we can take from gold’s latest bear market: Continue reading

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Gold: Get Positioned and Sit Tight

Get Positioned

If gold is entering a new bull market then it’s a great time to get in.  Technical evidence is mounting, big volume is coming into gold mining ETFs and they are leading the market.  Take a look at the monthly volume on the Junior Gold Miners ETF GDXJ.  After a huge volume increase in January, the buying pressure hasn’t subsided as February is set to smash the record volume set just last month.  GDXJ is also pressing up against downtrend resistance and the monthly MACD is turning higher, setting up a potential breakout.

gdxj
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Gold Stocks On Fire

The gold sector is on fire.  GDXJ is a leader in the ETF universe up over 40% YTD.  According to the Stage Analysis below GLD, GDX, and SIL all transitioned into Stage 1 this week.  On individual gold stocks, over 70% of the stocks listed below are now in Stage 1 or Stage 2.  The volume in GDXJ and GDX were also huge last week, GDXJ traded over 25 million shares for the week which blew away previous record volume.  GDX had it’s second most up volume ever last week.  SIL had it’s most up volume since 2011.

gdxj

gdx

GLD and SLV continued to move higher last week, but haven’t seen near the increase in volume that the gold miner ETFs have.  I’d like to see the volume in those ETFs increase to confirm the new uptrend.  Also I would expect to see some type of pullback or consolidation occur in the gold sector sometime soon, given the huge gains.

Stage Analysis

Ticker Stage Weeks
GLD 1 1
GDX 1 1
SIL 1 1
GDXJ 1 2
PALL 3 3
PPLT 4 3
SLV 4 22
Totals
Stage 1 57.2%
Stage 2 0.0%
Stage 3 14.3%
Stage 4 28.6%

Stage Transitions

GLD transitioned from Stage 4 to Stage 1

GDX transitioned from Stage 4 to Stage 1

SIL transitioned from Stage 4 to Stage 1

Stage Analysis

Ticker Stage Weeks
AG 1 1
AUY 1 1
EGO 1 1
GOLD 1 1
HL 1 1
KGC 1 1
NGD 1 1
PZG 1 1
RVM 1 1
SAND 1 1
SLW 1 1
VGZ 1 1
GG 1 2
LODE 1 2
ANV 1 3
AU 1 3
RIC 1 3
AAU 1 4
GSS 1 4
PVG 1 4
ABX 1 5
AEM 1 5
AUQ 1 5
MVG 1 5
THM 1 5
AXU 2 1
EXK 2 1
MDW 2 1
MGN 2 1
MUX 2 1
NG 2 1
PAAS 2 1
PPP 2 1
RBY 2 1
RGLD 2 1
SSRI 2 2
LSG 2 2
ASM 2 3
FNV 2 3
TAHO 2 3
NSU 2 4
BRD 2 5
SWC 2 7
AGI 4 14
SVM 4 16
SA 4 20
IAG 4 21
AKG 4 21
TRX 4 21
CDE 4 23
DRD 4 42
PAL 4 52
TGD 4 52
NAK 4 53
BAA 4 66
NEM 4 66
BVN 4 70
GFI 4 77
GORO 4 83
HMY 4 102
XRA 4 126
Totals
Stage 1 41.0%
Stage 2 29.6%
Stage 3 0.0%
Stage 4 29.6%

Stage Transitions

AG transitioned from Stage 4 to Stage 1

AUY transitioned from Stage 4 to Stage 1

EGO transitioned from Stage 4 to Stage 1

GOLD transitioned from Stage 4 to Stage 1

HL transitioned from Stage 4 to Stage 1

KGC transitioned from Stage 4 to Stage 1

NGD transitioned from Stage 4 to Stage 1

PZG transitioned from Stage 4 to Stage 1

RVM transitioned from Stage 4 to Stage 1

SAND transitioned from Stage 4 to Stage 1

SLW transitioned from Stage 4 to Stage 1

VGZ transitioned from Stage 4 to Stage 1

AXU transitioned from Stage 1 to Stage 2

EXK transitioned from Stage 1 to Stage 2

MDW transitioned from Stage 1 to Stage 2

MGN transitioned from Stage 1 to Stage 2

MUX transitioned from Stage 1 to Stage 2

NG transitioned from Stage 1 to Stage 2

PAAS transitioned from Stage 1 to Stage 2

PPP transitioned from Stage 1 to Stage 2

RBY transitioned from Stage 1 to Stage 2

RGLD transitioned from Stage 1 to Stage 2

Connect with me on Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

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If You Bought The Fear…

The media is good at spreading fear in the financial markets.  Fear gets people’s attention. Yet there’s one thing that they never tell you after the fact: buying fear makes money.  If you bought the bottom of the financial panic in 2009, whether it was stocks, real estate, commodities, etc., you made money.  If you bought the panic over the Euro in 2010 you made money.  If you bought the fiscal cliff fear in 2011 in the stock market, or you bought the dip in the dollar as everyone thought it was headed off a cliff in mid-2011, you made money.  If you bought the fear in European stocks in 2012, even the fear in Greece where there were riots in the streets, you made money.  If you bought the fiscal cliff fear at the end of 2012 in U.S. stocks, you made a bunch of money.  There’s more than one example each year from 2009 where buying fear and panic in a depressed market made outstanding returns.

How do we translate this into trading opportunities in 2014?  One area that stands out is the commodities complex.  Fear has been present there since 2011 when commodities topped.  The fear snowballed into panic in 2013 in various commodities.  The gold and silver markets panicked in April 2013 and bottomed not long after in June 2013.  There’s still a lot of apprehension and fear in these markets even in early 2014.  Yet it’s quite possible these markets have bottomed and are heading higher.  Take a look at what is performing strongly so far this year (courtesy of Finviz):

perfytd
Continue reading

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The Next Big Trade To Unwind

Markets tend to have no set rules that always work.  Especially on shorter term time frames.  But as you stretch the time frame out to the longer term general guidelines start to form for how markets behave.  This includes concepts such as bear markets following bull markets, and bull markets following bear markets.  Periods of overvaluation in stocks tend to be followed by periods of undervaluation.  And relationships between asset classes tend to switch as one asset class becomes extremely overvalued or undervalued against another.  The market hates extremes so by definition trends that reach extremes tend to eventually reverse.

With that being said one of the oldest trends in the market right now that is also sitting at an extreme is long gold, short gold miners.  If you follow the gold market at all, you know that gold went up for 12 years in a row, then had a horrific 2013 as it finally had a major correction.  That was previously one of the longest trends in the market to finally experience a major reversal.  Which in gold’s case was a bull market finally going through a bear market.  But within the gold trend the relationship of gold outperforming gold miners has been in place since 2006!  Gold stocks have been in a bear market versus gold for over 8 years!
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Could Wall Street Be Wrong On Gold Again?

It seems as if all the major Wall Street institutions are bearish on gold, even after a 2+ year bear market and a major pullback.  At first glance you might be a little discouraged by reading major bank after major bank release a lower forecast on the price of gold for 2014 and beyond.  But knowing their track record of forecasting the gold price you might feel a lot better, and even see the possibility of a contrarian trade forming.

Let’s flashback to August 2011 when gold was about to make its latest high.  As you can see by this article published by Reuters, the major banks were RAISING their gold price forecasts for 2011 and 2012.  This was right when gold was making a major top!  Sentiment back then was bullish on gold, and gold was one of the only things going up.  Little did Wall Street know it was 100% wrong on the gold price, but like so often happens in markets it turned out to be a herd opinion that was wrong.  Unlike today though this time it was a herd opinion in the bullish direction.
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Key Sectors To Watch In 2014 – Part 2

Junior Gold Miners

If gold miners got destroyed in 2013, junior gold miners got taken to the woodshed, obliterated, then eviscerated.  You really can’t find a more beaten up sector over the past 3 years.  You can’t find a sector that is more hated, where more pessimism and fear reign supreme.  So if you’re a contrarian, you should stand up and take notice.

Here’s something that you need to understand.  Junior gold miners don’t always just go down.  In fact one of the biggest gains in any sector from its 2008 low to 2011 high was in the junior gold mining sector.  The Canadian Venture Exchange gained 256% from its December 2008 bottom to its March 2011 top, a huge gain over a period of 27 months.  The GDXJ junior gold ETF came out in late 2009.  In 2010 it was one of the best performing ETFs in the market gaining about 67%.  From its 2010 low to its 2011 high, a little over a year in duration, GDXJ was up over 100%.  So the junior miners have experienced bull markets in the past.

There’s a saying that bear markets follow bull markets, and bull markets follow bear markets.  For a great example of that checkout the history of the Canadian Venture Exchange.  The chart below shows the major bear markets shaded in red, and the major bull markets shaded in green.  If you notice after the 2008 bear market ended, an increase in buying pressure went on to produce the bull market from 2009-2011.  That’s what is missing currently as the Venture has built a base but buying pressure still hasn’t shown up in full force.

cdnx1

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Key Sectors To Watch In 2014

Solar

Even though many solar stocks had massive gains in 2013, the solar bull market is still quite young.  Most solar stocks began their uptrends early in 2013.  So their bull market is barely a year old.  Before this year solar stocks had been in a bear market from 2008 and basically forgotten and cast aside.  They formed a base during most of 2012 which led to the massive breakout in 2013.

Gains at the start of a bull market are usually huge.  The gains in solar stocks in 2013 were definitely that of a new bull market.  After such big early gains bull markets usually go through a consolidation period. That could be what is next for the solar space.  If solar stocks consolidate high and don’t give back much ground, look for the uptrend to continue going.

The chart below shows the Stage Analysis of the solar ETF TAN.  Notice the breakout from a Stage 1 base on increased volume in 2013.  The Stage 2 advance is still in its early days even though many solar stocks have seen huge gains.

tan Continue reading

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