I'm wary of taking a position in GDX for fear of a good market
correction taking gold stocks down. I tried to quantify my
fears via the charts. Generally speaking, over the last four
years, gold stocks have led copper, which has in turn led the
overall market. The big question then is: after the
inevitable market correction, will we continue to rally (and thus
GDX should really start to take off (probably 30% upside from here
-- target of 75 or so on GDX). This assumes a longer term
bullish view on overall market -- that after a multi-week
correction, we blast higher and head to 1450 or so. Also
backing that up: during the April Flash Crash, gold stocks held
their own.
Of course there is a chance that the bear market resumes and
gold stocks are in fact leading us south and will trap every gold
bug in a plunging elevator. See the start of the 2008 bear
market -- I remember lots of late gold bugs panicking to buy those
dips.
FWIW, Jack Chan (who runs a simple service much like Matt's GDX
swing trade) will up his position in GDX from 30% to 50% on an up
day in GDX today. That is pretty aggressive for JC --
although he has been sitting in cash for two years and is getting
fed up with runaway markets.
Thoughts on swing positions on GDX? -- Yes, I realize the GDX
system is long.
Looks like you're paralyzing yourself with over analysis. Why
don't you use the chart that you've drawn yourself? If we pullback
to support you can take a position with tight stops below. If
you're afraid that the train will leave without you, start
averaging in now. Size your positions to manage your risk. Have
your stops in place. Since you wish to swing trade, if the position
moves in your favor look for a method to pyramid up (lots of info.
out there on this). This way you trade the chart and you'll have a
trading plan. Good luck.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
Title: Bias against gold stocks
Posted by kalinm on 11th of Feb 2011 at 11:10 am
I'm wary of taking a position in GDX for fear of a good market correction taking gold stocks down. I tried to quantify my fears via the charts. Generally speaking, over the last four years, gold stocks have led copper, which has in turn led the overall market. The big question then is: after the inevitable market correction, will we continue to rally (and thus GDX should really start to take off (probably 30% upside from here -- target of 75 or so on GDX). This assumes a longer term bullish view on overall market -- that after a multi-week correction, we blast higher and head to 1450 or so. Also backing that up: during the April Flash Crash, gold stocks held their own.
Of course there is a chance that the bear market resumes and gold stocks are in fact leading us south and will trap every gold bug in a plunging elevator. See the start of the 2008 bear market -- I remember lots of late gold bugs panicking to buy those dips.
FWIW, Jack Chan (who runs a simple service much like Matt's GDX swing trade) will up his position in GDX from 30% to 50% on an up day in GDX today. That is pretty aggressive for JC -- although he has been sitting in cash for two years and is getting fed up with runaway markets.
Thoughts on swing positions on GDX? -- Yes, I realize the GDX system is long.
Looks like you're paralyzing yourself
Posted by Vida on 11th of Feb 2011 at 11:39 am
Looks like you're paralyzing yourself with over analysis. Why don't you use the chart that you've drawn yourself? If we pullback to support you can take a position with tight stops below. If you're afraid that the train will leave without you, start averaging in now. Size your positions to manage your risk. Have your stops in place. Since you wish to swing trade, if the position moves in your favor look for a method to pyramid up (lots of info. out there on this). This way you trade the chart and you'll have a trading plan. Good luck.