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Gold Stocks Are Back in Bull Mode

By Jeff Clark
Thursday, June 26, 2014

The gold-stock rally kicked back into gear last week.
 
We started the year expecting a rally in gold stocks. And we weren't disappointed. The Market Vector Gold Miners Fund (GDX) rallied nearly 40% from its bottom in December to its top in March.
 
That's the sort of rally that almost always kicks off a new bull market. But it's also the sort of rally that creates a "buying panic." And that's exactly what happened. Investors chased gold stocks higher into overbought conditions in March. Disappointed investors then sold as the sector failed to gain any ground and chopped back and forth for months.
 
But, as I told you in April, that's how bull markets work. And there are big gains ahead when the young bull market starts its next move higher.
 
That's where we are right now. GDX has recovered everything it lost in May. And the gold-mining sector is approaching its highs of the year...
 
Take a look at this chart of GDX plotted along with its 50-day moving average (DMA) and nine-day exponential moving average (EMA)...
 
GDX stock EMA
 
The biggest rallies in the gold-mining sector occur when GDX is trading above both its nine-day EMA and its 50-DMA. That indicates the sector is in an intermediate-term rally phase. Traders can hold onto positions longer and try to make larger profits.
 
When GDX is trading below the moving averages, the rally attempts are short-term and shallow. Traders need to be nimble and take profits fast.
 
The kickoff point for an intermediate-term rally occurs when the nine-day EMA completes a "bullish cross" above the 50-DMA.
 
You can see how gold stocks launched higher immediately following the bullish cross back in January. GDX soared 30% in two months. We have a similar setup today.
 
Gold stocks are back in rally mode. But as you can see from the chart, GDX is extended above its nine-day EMA right now. So it's not a good time to pile into the sector. There's too much risk of a short-term pullback.
 
Traders should look to add exposure to the sector after GDX pulls back toward the support of its nine-day EMA or consolidates long enough to allow the nine-day EMA to catch up to the current price. Any pullbacks in the sector are buying opportunities.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

Steve Sjuggurud's True Wealth subscribers are already up 37% with his January gold-stock recommendation. Steve says "there is still plenty of upside left in this particular stock – and yet this stock might be the safest gold stock you can own." Learn all about it right here.
 
Last week, Amber Lee Mason gave readers a lesson in how commodity markets work. "If you take this idea to heart," she writes, "you'll be able to multiply your money many times over." Learn Amber's key to commodity trading – and which commodity she believes will boom next – right here.

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Market Notes
Worldwide oil boom continues as oil-services giant Schlumberger hits a new all-time high.
 
"Hated" agriculture giant Monsanto soars to a new five-year high after latest earnings report.
 
Utility stocks NextEra and American Electric hit new all-time highs.
 
"Big Pharma" uptrend keeps going... sector fund IYH is up 71% over the past two years.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1957.68 -0.3% +23.3%
Oil (USO) 39.27 +0.5% +16.4%
Gold (GLD) 127.10 +0.1% +2.9%
Silver (SLV) 20.24 +0.8% +7.0%
U.S. Dollar 80.20 -0.1% -2.9%
Euro 1.36 0.0% +4.0%
Volatility (^VIX) 11.72 -3.4% -36.6%
Gold Stocks (^HUI) 233.82 +0.4% +6.2%
10-Year Yield 2.56 -1.2% -1.2%

From The Crux
World ETFs
Symbol Price
Change
52-Wk
India (IFN) 25.15 +0.2% +42.1%
S. Africa (EZA) 68.50 -1.0% +27.9%
S. Korea (EWY) 64.40 -0.3% +28.0%
USA (SPY) 195.25 +0.3% +25.6%
Israel (ISL) 18.16 -0.1% +27.4%
Taiwan (EWT) 15.49 +0.3% +22.0%
Canada (EWC) 31.66 -0.4% +22.6%
China (FXI) 36.72 +0.1% +18.1%
Russia (TRF) 15.38 -0.3% +16.2%
Lat.America (ILF) 38.60 0.0% +12.7%
Japan (EWJ) 12.03 -0.5% +11.1%
Singapore (EWS) 13.52 -1.2% +7.7%

Sector ETFs
Symbol Price
Change
52-Wk
Biotech (PBE) 43.70 +0.6% +55.6%
Semis (PSI) 22.26 -0.1% +43.2%
Alt. Energy (PBW) 6.78 +0.9% +35.5%
Transportation (IYT) 146.09 +0.8% +35.6%
Defense (PPA) 32.25 -0.1% +35.3%
Big Tech (QQQ) 93.10 +0.4% +34.6%
Basic Mat (IYM) 87.32 +0.7% +31.7%
Health Care (IYH) 128.53 +0.9% +31.2%
Industrials (IYJ) 103.45 +0.0% +27.9%
Software (PSJ) 36.51 +0.1% +25.6%
Water (PHO) 26.51 -0.5% +23.2%
Insurance (IAK) 47.97 -0.2% +22.6%
Telecom (IYZ) 29.97 +0.3% +22.5%
Consumer Svcs (IYC) 123.01 +0.7% +23.5%
Utilities (XLU) 43.45 +0.0% +21.9%
Financials (IYF) 82.94 +0.1% +19.9%
Media (PBS) 25.01 +1.8% +22.6%
Construction (PKB) 22.02 -0.6% +17.9%
Real Estate (IYR) 71.28 -0.3% +14.7%
Retail (PMR) 33.58 -0.5% +13.7%