Sure enough, HUI fell for a few days. It lost about 7% over the next week – dropping to $260. Traders who were quick to act had a chance to lock in good gains on that decline. <\/p>\n
But, the gold sector quickly reversed course. The BPGDM turned higher earlier this month. And HUI put on an explosive rally – all the way up to 310.<\/p>\n
I’m still wiping the egg off of my face. But I’m not buying gold stocks right here – because the BPGDM is on the verge of another sell signal.<\/p>\n
Take a look…<\/p>\n
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![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202407\/20240725-JMU-01.png\")
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In most cases, a sector is overbought – and subject to a correction – when its BPI<\/strong><\/a> rallies above 80 (meaning 80% of the stocks are trading in bullish<\/strong><\/a> technical patterns).<\/p>\n A sector is oversold when the BPI dips below 30. The BPI generates a sell signal when it turns lower from overbought conditions. We get buy signals when the BPI turns higher from oversold levels.<\/p>\n At the current reading of 89, the BPGDM is in extremely overbought territory. It will generate another sell signal when it turns lower.<\/p>\n Of course the gold sector could rally from here. Of course the BPGDM could still work higher towards its maximum reading of 100.<\/p>\n Anything can happen.<\/p>\n <\/p>\n Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n From a risk\/reward perspective, however, buying the gold stocks right here – with the BPGDM so extended – doesn’t offer much reward. And the risk could be substantial.<\/p>\n Gold stocks typically fall hard following a BPGDM sell signal. The various signals over the past four years led to declines of anywhere from 12% to 30%.<\/p>\n The sell signal in early June, though, yielded only a small decline. So traders might be tempted to disregard the potential for a meaningful decline this time around.<\/p>\n That’s probably a mistake.<\/p>\n The BPGDM has proven to be a reliable indicator for pointing to reversals in the gold sector. With it on the verge of its third flashing sell signal in three months, it seems to me there’s probably more risk in the gold sector than many traders currently appreciate.<\/p>\n At the risk of having to wipe even more egg off of my face next month, I suspect most gold stocks will be lower in the weeks ahead.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark P.S.<\/strong> Now it may not be exciting news for gold stocks right now… but there are crucial, brief moments throughout the year where gold goes volatile – and profitable. It’s all got to do with the Fed’s FOMC announcement happening just a few days from now, on July 31.<\/p>\n Most traders wait for the Fed to say the word and then trade off of the buzz… but this special 10-day period before these announcements is where the real money can be made. I call it the Fed Blackout Window.<\/p>\n![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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Editor, Market Minute<\/em><\/p>\n