US stock market futures are gapping down this morning but gold is up at the moment after gold closed above $1900 on Thursday. The other day I made note of how gold, silver, and the mining stocks are starting to firm up against the stock market. All three have been outperforming the stock market year to date. The price of gold fell only about 10% in March when the S&P 500 fell over 30% and then went up about 55%.
But at the end of July gold and silver began to consolidate. I put up a chart the other day going back a few years showing multiple triangle patterns for the gold/S&P 500 relative strength ratio. That ratio goes up when gold outperforms the stock market and when that happens mining stocks rocket.
That chart may have been a bit confusing for you, because it goes back over several years. If we just look at the past few months this golden triangle pattern happening now is much easier to see. It is a ratio showing the performance of gold versus the S&P 500.
This chart triangle pattern will be something I will be keeping an eye on. I think now is the time though to make buys on mining stocks, because when this indicator goes up mining stocks soar.
My top stock pick for this month ticked up yesterday for a nice 12.18% gain, but it hasn’t broken out yet. It is still consolidating in a range too between its 20-day Bollinger Bands – the two pink lines on the chart – much like it did in July.
Silver Dollar Resources trades under the symbol SLVDF on the US OTC. Notice how the 20-day Bollinger Bands on this chart are now very close together with their width indicator below 20. It looks good. It is coiling and getting ready in my opinion. This is a new stock that has two big mining industry players as big shareholders. You have to see who they are. The full details are in my post yesterday that you can read here.
-Mike
Disclosure: Mike Swanson owns shares of Silver Dollar Resources, Inc. Because it is a small cap stock with a market cap of less than $100 million he has put himself on a trading blackout on it and will not buy or sell a share of it for at least 30-days from the date of this post.
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