I believe market awareness is crucial in investing. You constantly need to ask yourself ” Where are we in all asset classes in the general scheme of things”. One thing that has caught my attention this past week has been the Gold mining sector. Have a look at this recent chart of (NYSE:GDXJ)
Look at the volume numbers. They have gone through the roof. These trend changed mainly happen at market bottoms. We may have a firm bottom in Gold and in the miners. It came up against resistance yesterday as it approached $1200 but it is up again today in pre-market as it probably will try to surpass $1200 on the second attempt.
What does this mean for the stock market?. Well if Gold takes off, it will attract a lot of new capital. The risk reward ratio doesn’t look attractive at the moment when you look at US equities. Bonds are severely overbought on a general scale and if the stock market turns down, will bonds continue to be the flight of safety?. Will they become even more overbought?
(NYSE:UNG) is on my radar as it had a big move yesterday and is up again in premarket. Moreover it has a nice high IV percentile so it would be a good fit for the 1% portfolio I’m doing on Seeking alpha. Nevertheless, I would like a pull back like we had in (NYSE:GDXJ) before I sell puts in there
Other mining stocks such as (NYSE:SSRI) & (NYSE:CDE) have had wild swings lately in both directions. if you don’t mind owning these miners, recent activity in this sector has been perfect conditions for traders as one could swing trade practically every day for nice profits