As I stated in my last weekly post on gold stocks, depending on your investment willingness and ability to handle risk it could be an OK time to be begin nibbling on gold stocks, but that I would not go all in. Today's trading action is the case in point, as gold is down more than 1.5% to about $1,670 per ounce as of this writing. Gold stocks are acting in kind, with the Market Vectors Gold Miner ETF (ticker GDX) falling 1.7% and the Junior Gold Miner ETF (ticker GDXJ) falling more than 2.8%.
With the decline in gold and gold/precious metal stock indexes, the timing models I employ are improving. However, it is my opinion that the timing models indicators will continue to "improve" and that the price of gold is likely to fall further from current levels. The following is the current price of the Gold Spider ETF (ticker GLD), which I use as a proxy for Gold.
What will stand out to most is the the price of the GLD has broken the 200-day moving, which I really do not put that much weight on except to the point that others look at the moving averages. More importantly, the price broke the previous near-term low put in on November 2. The volume benchmarks are also negative when comparing these two dates. So far in today's trading, the GLD has traded more than 21 million shares versus 14.7 million shares on November 2. This suggests to me that there are significant sellers here and the price of gold is under distribution. It is also important to note there is no volume support on the GLD until $158 per share, which is the top of the gap that opened on August 21. My guess is that the price of the GLD will trade into a range between $155 and $157, essentially closing the gap and into the next higher volume support range.
So what does this mean for trading and investing in gold stocks? Well assuming a similar GLD/gold ratio exists when the GLD reaches my targeted range (remember, the GLD is an ETF and is subject to tracking error due to management, trading and other costs and that over time, the performance gap, and hence any ratio should widen) would potentially result in timing model indicators pointing to a strong buy on gold stocks, all else equal. This is where I would consider getting more constructive on gold stocks.
With the decline in gold and gold/precious metal stock indexes, the timing models I employ are improving. However, it is my opinion that the timing models indicators will continue to "improve" and that the price of gold is likely to fall further from current levels. The following is the current price of the Gold Spider ETF (ticker GLD), which I use as a proxy for Gold.
What will stand out to most is the the price of the GLD has broken the 200-day moving, which I really do not put that much weight on except to the point that others look at the moving averages. More importantly, the price broke the previous near-term low put in on November 2. The volume benchmarks are also negative when comparing these two dates. So far in today's trading, the GLD has traded more than 21 million shares versus 14.7 million shares on November 2. This suggests to me that there are significant sellers here and the price of gold is under distribution. It is also important to note there is no volume support on the GLD until $158 per share, which is the top of the gap that opened on August 21. My guess is that the price of the GLD will trade into a range between $155 and $157, essentially closing the gap and into the next higher volume support range.
So what does this mean for trading and investing in gold stocks? Well assuming a similar GLD/gold ratio exists when the GLD reaches my targeted range (remember, the GLD is an ETF and is subject to tracking error due to management, trading and other costs and that over time, the performance gap, and hence any ratio should widen) would potentially result in timing model indicators pointing to a strong buy on gold stocks, all else equal. This is where I would consider getting more constructive on gold stocks.
No comments:
Post a Comment