Customer Service 1 (888) 261-2693
Advanced Search

A No-Brainer Buy Signal for Gold Stocks

By Jeff Clark
Tuesday, February 23, 2010

Be careful trading gold stocks right now.
 
The Bullish Percent Index for the gold sector (BPGDM) did turn higher and trigger a "buy" signal since I wrote about it a few weeks ago. And the stocks have bounced a bit more than 10% off their lows. But they're not acting well.
 
In fact, the action on Friday should cause concern for any gold stock bull...
 
Gold, the metal, opened lower on Friday, reversed, and then closed higher. But the gold stocks opened lower and stayed there. In a bullish environment, gold stocks lead the metal. So they should have turned higher first on Friday. But that didn't happen. The Bullish Percent Index did turn higher last week. Now, however, it has leveled out and could turn lower today unless the sector rallies.
 
Take a look...
 
 
 
A downturn in this chart would reverse last week's "buy" signal and send the sector back into "sell" mode.
 
While that would be inconvenient for the gold stock bulls, it would create the potential for an even stronger buy signal when the BPGDM turns higher again. From a longer-term perspective, it would be much more bullish for the gold stocks to decline one more time and test the recent lows before rallying higher.
 
That doesn't have to happen, but it would be an absolute "no-brainer" buy signal for the gold sector if it did. It would set up the best buying opportunity in a year for these stocks.
 
For now, a sustainable rally in gold stocks is a 50/50 proposition. I'd much rather see a sharp drop in the sector that shakes out the remaining weak hands.
 
Best regards and good trading,
 
Jeff Clark




In The Daily Crux Recent Articles
Market Notes
Oil surges past $80 per barrel after rising 13% in two weeks.
 
Oil-service rally continues... Baker Hughes, Smith International, and BJ Services hit fresh highs.
 
Euro slides to nine-month lows against the U.S. dollar.
 
Earnings today... AutoDesk, Home Depot, Macy's, Target.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%