The other day I did an update saying that I saw a key sign that we were nearing the end of the current pullback in gold, silver, and the mining stocks. I didn’t think we had bottomed yet, but thought that we were getting closer.
Yesterday’s action showed that it isn’t here yet as gold rallied strong in the morning after the ECB launched a new QE program and even lowered their interest rates below zero only to fizzle on the close.
Yes the ECB now has official negative interest rates!
Take a look at the chart for gold.
That type of action suggests lower prices in the short-term, but doesn’t mean a gold crash is coming. Gold now has support in the area of its 50-day moving average at 1476 and the 1/3 retracement point of the May low and recent high, which is at $1458 on the technical analysis charts. We could of course base above those levels for a few weeks, but don’t be shocked if a move to $1476 happens.
A drop to either of these levels is really no big deal considering how much gold has gone up since May and even last October. Gold and the mining stocks still are outperforming the stock market from where everything stood last September.
My expectation is that we’ll get a bottom in that area and then sideways action like we saw in May and June for a bit before turning up for good.
I’m getting emails from some people freaking out, but I’m thinking these people are in triple ETF’s or just went 100% into this space last month after watching it go up and are therefore getting banged up.
Triple ETF’s are toxic and wreck accounts when held and when you put 100% of your money into one market you get hurt whenever a simple pullback happens and end up destroyed in a bear market.
Most mining stocks are still up huge year to date and there are many small cap mining stocks that have barely pulled back at all during this dip.
Witness Aftermath Silver, which I have talked about so much recently, because it is simply becoming a wonder stock.
So here is what I’m doing:
1)First I am not selling. But I never bought a massive position in this space to start with. I just allocated 14% of my money to metals ETF’s and another 14% to mining stocks. These positions are not so big that I need to jump in and out. They are the right size for me so I do not get scared when there is a pullback in them.
2)Instead of being afraid, I am looking to buy more mining stocks and am planning to do so! I’m going to send private trading alerts to my Power Investor members when I think the final turning point has arrived for big cap mining stocks and GDX. I will buy more if I need to in order to get my allocation levels back to 14% and will probably make a new report on the best ones to buy like I did in June.
When the move started I did three buys in the group for mining stocks from May to July. After that though I stopped putting out new buys because I believed that the metals market was running away and the only times I like to make recommendations are when there is a good entry point. I am not a guy who yells picks every single day.
I am all about buying when markets start to turn up instead of after they already have gone up a lot. But now that we have a dip playing out there is going to be huge opportunity here if people would just keep their eye on the ball! That takes patience and it takes being calm – something that is becoming more and more rare in the stock market world. This is why so far this month I have not been able to make a new stock pick for you.
Personally for me the markets is serious money. If I want to play for action I will put a penny in a slot machine or a few hundred down on a poker table. Maybe you like sports betting. Do that for action do stocks for the serious money. Football season is starting and it is getting so big NBC now has a sport betting show where they talk to professional bettors.
3)I also am looking to buy other new small cap mining stocks like Aftermath Silver that are holding up too and I think can go up like it did last August. This weekend I’m going to share the watchlist I have in a Power Investor Update and a new buy I am making soon in a new small cap stock, probably next week.
If you aren’t in the group go here to join so you can be prepared to take advantage of this metals market:
http://wallstreetwindow.com/join-power-investor/
-Mike
Note: Mike Swanson owns a position in GDX and in Aftermath Silver. Because it is a small cap stock with a market cap of less than $100 million he also is placing himself on a voluntary 30-day trading restriction period from the date of this post in which he will not buy or sell a share of Aftermath Silver stock.
