The past two months have been brutal for gold stocks.
The Gold Bugs Index (HUI) peaked in early April right above 330 and it finished May just below 255.
That’s a 22% drop in just two months!
That action has once again, crushed the hopes and dreams of the die-hard “gold bugs.”
Investor sentiment toward the gold stocks was wildly bullish in March. But today, it’s horribly bearish…
This contrary shift in sentiment likely indicates we’re nearing a turning point for the gold sector.
But even more potentially bullish is the gold sector Bullish Percent Index (BPGDM)… which is on the verge of generating a buy signal.
Take a look at this chart…
The BPGDM measures the percentage of gold stocks that are trading in a bullish technical formation. It’s basically a gauge of overbought and oversold conditions.
Since it’s measured as a percentage, a bullish percent index can only reach as high as 100 or fall as low as zero.
Typically, a sector is extremely overbought when its bullish percent index rallies above 80. And it’s extremely oversold when it drops below 30.
Trading signals are generated when the index reaches extreme levels and then reverses.
The blue arrows on the chart show the previous two BPGDM buy signals.
The Gold Bugs Index gained 17% in two months following the buy signal last October. It rallied 30% in three months after the December signal.
Those were big, profitable moves for traders who bought into the gold sector following those two BPGDM buy signals.
Now, the BPGDM is in position to generate its first buy signal of 2022.
The index closed below 30 last week… the gold sector is extremely oversold.
And once the BPGDM turns higher (which could happen any day), we’ll have a new buy signal.
If it performs anything like the previous two, then gold stocks should be much higher in the months ahead.
Best regards and good trading,
Jeff Clark
Reader Mailbag
In today’s mailbag, Jeff Clark Alliance member Ross and Earnings Trader member Daniel share their thoughts and thank Jeff for his trade recommendations…
Jeff, I was an energy commodities trader for my career, and I subscribe to many publications to increase my bandwidth to monitor equities and bonds which I may miss in my searches for investments. Of all these publications, I have to say yours has proven to be the most valuable to me.
The technicals you use are different from those I used in my career but have proven to give me a much more robust analysis process. Another plus is that most of your trade recommendations are for much shorter durations than those recommended by the other publications I use. Thus, giving me the opportunities with less risk. Keep up the great work!
– Ross W.
Dear Jeff,
On May 19, you sent a buy alert for a trade.
I was able to make 74.3% on this investment within seven days. Jeff, thank you for your research, recommendations, and for making investing fun and profitable.
– Daniel D.
Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com.