Look to Gold if the Market Turns

Calling all gold bugs!

   

I’ve recently talked about how copper might be indicating a drop in the market, but don’t worry – there may be bullish plays in other metals names.

Video Transcript

The gold miners, or gold stocks, are down at levels that we’ve only seen one other time in the past decade.

How this generally works is when you have high readings on the Gold Miners Bullish Percent Index, you have little tops in the market or the index, depending on what you’re tracking. When you have low readings on the Gold Miners Bullish Percent Index and perhaps a little divergence, you get a rally. So, in this case, the Gold Miners ETF (NYSE:GDX) went from being down 10% to up nearly 15% a couple months later. So, it had a pretty good swing.

[The major holdings for the GDX include Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG), Newmont Mining (NYSE:NEM), AngloGold Ashanti (NYSE:AU), Kinross Gold (NYSE:KGC), Yamana Gold (NYSE:AUY), Silver Wheaton (NYSE:SLW), Gold Fields Limited (NYSE:GFI), Buenaventura Mining (NYSE:BVN) and Randgold Resources (NYSE:GOLD).]

Also, if you look at times that there was frothiness, like when the Gold Miners Bullish Percent Index had a reading of 80, that coincided with the top in 2011. That’s when it gained 40% in that timeframe and then tanked for the next year after.

Gold stocks are actually off of their 52-week lows but one interesting thing within the GDX or the Junior Gold Miners ETF (NYSEARCA:GDXJ) or the Gold Bugs Index (HUI) or the PHLX Gold/Silver Index (XAU), a lot of them put in some bullish outside key reversals. So, if there are quick, short-term bullish (long) setups that could possibly buck the trend even during a market decline, it might not be gold or silver the metal, but it very well could be gold stocks.

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123.  For more information on which service is for you click here.


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