Bear Market Cycle Bottom Forming in Gold and Gold Stocks Right Now
The bullish percent index chart shows when gold might bottom and how soon it will recover.
Essentially, it shows what percentage of gold-sector stocks are at or above a moving average, which normally would be 50 days. When 70% or more are above a 50-day moving average, sectors can be peaking out. If you look at the chart at the bottom, I have labeled various incidents with A, B, C, and D.
A. The precious metal as we all know peaked in the fall of 2011 at $1,923 per ounce, and the bullish percent index was at 80%! Usually at 30% or so, we see bottoming out in most cases.
B. We saw a rare case in the summer of 2013 where the bullish percent index for gold stocks was at 0%; yes, that is not a misprint.
C. Gold bottomed at $1,181 in late June 2013, and then rallied up to $1,434. We saw gold stocks rally 40-80% in individual cases, and the bullish percent index rallied up to 55%.
D. If we fast-forward to December 2013, we have gold pulling back in the final fifth wave down from the bull cycle highs in August 2011 at $1,923. The bullish percent index is back to 10% and heading towards zero, or close, once again. At the same time, the Gold Miners Index ETF (NYSEARCA:GDX) is at five-year lows and even lower than June-July 2013 lows.
These types of indicators are coming to a pivot point where gold is testing the summer $1,181 lows and may go a bit lower to the $1,090 ranges. At the same time, we see bottoming fifth wave patterns combining with public sentiment, bullish percent indices, and five-year lows in gold stocks. This is how bottoms in bear cycles form, and you are witnessing the makings of a huge bottom between now and early February 2014 if I am right.
I believe that now (and over the next four to five weeks) is the time to buy gold and gold stocks. In my opinion, this is the time to start accumulating quality gold-miner stocks as well as the precious metals themselves as the bear cycle winds down and the spring comes back to gold and silver in 2014.
Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.