\tHere’s an updated look at the GDX chart…<\/p>\n
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\tBut the sector is now overheating. GDX is approaching its February high of $25.70 – which was my ultimate target for this rally phase. And last week’s Commitment of Traders Report showed that commercial traders (aka the “smart money”) had amassed a net short position of 250,000 gold futures contracts.<\/p>\n
\tThat’s shy of the 314,000 short futures position the smart money held in gold (and gold stocks) in August of 2016. But it’s in the upper end of the range that usually signals that we’re nearing a top in the gold sector.<\/p>\n
\tAlso keep in mind that last week’s COT report reflects positions as of last Tuesday. The price of gold has rallied another $50 an ounce since then. It’s a pretty good bet that the smart money short position is quite a bit higher today (we’ll find out when the next COT report comes out on Friday).<\/p>\n
\tMy point to all this is that while we may not be at the absolute top of the current gold stock rally, we’re close enough to the top to take some more money off the table.<\/p>\n
\tTraders should take advantage of any strength over the next day or two – especially if GDX rallies up towards the February high of $25.70 – to lessen their exposure to the sector.<\/p>\n
\tWe bought gold stocks as the smart money turned bullish back in July. Now, with the smart money turning bearish, it makes sense to take some profits.<\/p>\n
\tBest regards and good trading,<\/p>\n
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