I am not a fan of how gold stocks are trading right now.
As I’ve said many times this year, I think the gold sector will be much higher later this year than where it is today. So, I expect to have plenty of exposure to gold stocks in anticipation of a large rally in that sector.
But in the short term, if I set my gold-colored glasses aside and focus just on the technical action, it doesn’t look good.
Gold has held up reasonably well during this stock market correction. The yellow metal hit $1,355 on Monday. That put it up about 3% for 2018 – which is far better than the stock market.
But, GDX – despite rallying last week – has lagged that action. GDX started the year at $23.25. It closed yesterday at $21.62. So, while gold is up 3% in 2018, most gold stocks are down about 7%.
That’s not good. Gold stocks tend to lead the action in gold. So, with the performance of GDX lagging the performance in gold, we just might be setting up for a downside surprise in the gold sector.
Here’s the current chart of GDX…
On Monday, GDX ran right up to the resistance of its 50-day moving average (MA) line. And then it turned back. On Wednesday, GDX tested its 9-day exponential moving average (EMA) – $21.87 – as support… and failed.
Now it looks like GDX is headed back down to the $21.25 support line – which has been tested twice this year already.
If GDX fails to hold at the $21.25 support level, then look out below. We could see a quick flush lower for the gold sector. GDX might press as low as $20. And that’s where I’ll be willing to step up and buy.
It’s a lot to ask for. And I’m not saying things will play out this way. But you should be prepared if the opportunity presents itself.
The next few days and weeks might be tough on the gold sector. But short-term weakness could present a chance at longer-term gains.
Best regards and good trading,
Jeff Clark
Reader Mailbag
Today, some kind words from Delta Report and Market Minute readers…
Hi Jeff, I recently retired from hospital after 37 years. I am getting income from your trades. Thank you so much. I am 70, but sometimes I do your aggressive trades. Love your critiques every day! Happy Easter!
– Crystal
I want to thank you for good job you are doing with the market updates every day. I have been trading options for long time and you’re the best I have ever met.
– Olu
Loving your daily thoughts and outlook – lots happening. This past month, and especially the past week, I’ve noticed a correlation between the 10-year yield and S&P resiliency. If the 10-year does not bounce with the market, the S&P bounce won’t hold. It is not perfect, but Tuesday was a great example. Yield dropping steadily all day, S&P reversed and caught down to it aggressively. You are better at analyzing these things, but wanted to let you know what I’m nibbling at and finding some success on short-term trends in case you think there is merit there. Keep up the great work!
– Marcus
Hi Jeff, I’m a fairly new reader of Market Minute and I really appreciate this publication. However, I’m not new to knowing about you, as some years back I had subscribed to another letter and along with it came an opportunity to be introduced to you when you did a 101-type class on options. I had already been trading options and had a similar story to yours — as a rookie, I made a lot of money. Then, after I thought I knew what I was doing, I lost it and more! So I related to you right away and enjoyed your class! So, I’m glad I recently discovered your Market Minute and have the opportunity to learn from you again!
Now, back to the market… yes, call me aggressive, but I bought right near the close on Friday, as everything looked maxed-out on the downside (technically) and I couldn’t see it falling much more without a bounce first. I should have taken a larger position, but I’m not rolling in money right now, so I play very conservatively. So, I got in at 3 points above the low and had a nice profit by Monday afternoon. I knew it was too soon to take my profit, but I took it anyway, for better or worse. Then I waited for the expected minor pullback to reassess the situation, and sure enough, I was able to get back in near the lows of that pullback on Tuesday, so hope to ride the rest of this bounce into the target area and sell, as I see the same thing you do, although I’m not convinced it will retest all the way down to the Feb lows, but I’m sure it will correct toward them, but maybe you’ll be right again! That’s a good thing as I know there is much I can learn from you!
Maybe I’ll subscribe to your Delta Report in the future, but not ready right now. I’ve had tons of trading services over many years and am currently enjoying a break. Thanks for your great e-letter! PS: I hope you’ll just ignore all the unhappy readers who write in ugly things. They are unrealistic duds, who expect perfection timed to the real-time minute for free! That doesn’t even exist if they paid a million for it! They don’t appreciate what they have in you, which you even give your time and experience to them, for free, no less! They are crazy, not to mention lazy, unwilling to do any work on their own to learn about trading and the markets. They want everything handed to them on a platter. Nonsense!
– Lynn
Thanks, as always, for all your valuable feedback. You can keep sending it right here…