Gold Stocks, GDX Bull Market Review

 

gdx-oct-21-2016

 

Gold stocks have started a turn, but we may never be sure if it hadn’t landed with a “thud” or stopped on a clear spike.

In this case I will look at this move that contains an expanded pattern which gives the correction more time and a potential recent October bottom. I would also call this a potential running expanded flat so that would dictate a strong “C” wave. I would love to see that happen, but otherwise we could still be stuck in a correction.  

I cannot give direct investment advice as I’m not a certified financial consultant, but how would a person that is going to jump on this bandwagon going to do it?  The people that do it can place all their cash on this bull market, but that is exactly what we are not supposed to do. The trick is to bet very, very small to your net cash trading account, because we would be too late already.  It was the grinding bear market that allowed contrarians (insiders) to accumulate large positions, but they “never” do it with large chunks of their net cash.   

Jumping in at this point basically tells me that investors left about 100% gains on the table already. Other ETFs are even more skewed.  If a person bought 100 shares of GDX next week he would put up about $2500 in risk money, but if this person only had $2600 cash in his trading account, then he can’t do anything for the rest of the bullish cycle, and he would freak out every time, their trade turns into the red.  Taking a profit just because any trade goes into the green is also not the way, as you may take a 20% profit, but there could be another 100%, in this market left. The thing is, it will never go in a straight line so you have to know when we are only in a correction and not the end of a bull market.  

The gold/gdx ratio is sitting at a bit under 51.5:1 which makes gold stocks about the average from a very expensive ratio of 29:1. Gold stocks have lots of room to shrink this ratio, before they hit another potential extreme.