Excuse the typo. The indexes are under pressure, which will delay the ending of QE, sending Gold higher. The Russel and the Nasdaq tend to be the index trend leaders and they are trending lower. This means big positions going flat and into the safe haven, so I have two good reasons to expect higher gold prices this next week.
The miners followed the GC contract higher pre-market on Friday. The GC contract held most of its gains during the day, but the miners diverged from the GC contract during regular trading hours and followed the indexes down. The miners generally move independently of the indexes. This price action may have given us a decent long entry for Monday.
In this particular chart I have pushed the stochastics to triple the time frame to give a better long or short trading direction.
The 18 and 45 MA on the 30 minute chart is giving a very good crossover signal for swing trading. You can at least use the MA crossover for taking profits and going flat. My advice not to be short the miners overnight last week was based on the MA crossover and dynamic world events.
I have no positions in the miners at the moment. My bias it to the upside for next week. Do not be short the miners overnight next week if you want to sleep well.
Comments and opposing views are welcome. I will share a few sites if anyone shows some interest.
Comments
GCEventsmoveGDX
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April 8, 2014 The GC contract popped about 12$ overnight, with GDX opening about 2% higher. This was to be expected given the indexes under selling pressure for three days in a row. The indexes were green today led by the Nasdaq and the Russell. If the indexes are red again tomorrow, today's action will be considered a dead cat bound with further downward pressure.
Gold is up 3$ aftermarket. Do not be short GDX this week,especially overnight.
GCEventsmoveGDX
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May 7th. No clear move yet to the upside. Too many opportunities shorting the indexes for Gold to make much of a move. Do not be short GDX overnight this week.
mittleider
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Great. Thanks for all your answers. I'm still a noob. :)
GCEventsmoveGDX
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Gold is very emotional. It moves with the news and fed statements about diluting the dollar, not the eventual outcome of unsupported equities. When QE ends the equity markets are expected to be rolling along on their own anyway.
The Gold market had been waiting for a pullback. Brenanke's statements of tapering QE ended the Bull market for Gold.
I would not deter an individual from having physical gold in their portfolio just in case the rapture comes. But that has nothing to do with trading.
mittleider
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If we don't end QE, we dilute the general economy. So we should hedge against inflation by buying gold. I totally understand this.
But if we end QE, the economy will not be propped up by the Fed. In my mind, this would remove support in equities markets, making it a riskier investment. Therefore, it would still be a good idea to invest in gold. However, instead of the price of gold rising when Bernanke started talking about ending QE, it fell.
GCEventsmoveGDX
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You are absolutely correct that the intention of QE is to bolster liquidity and pump more money into the marketplace. Look at the rise of the indexes in the last few years. Also look at gold in the last few years and then the fall of gold when Bernanke started talking about ending QE
Our trading edge is knowing which way gold is trending, and why. GDX is not to be traded as an equity, more as a future, tracking gold.
mittleider
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Ok I see. I definitely agree with your point to hedge against inflation with gold. Can you also comment on why my idea is inaccurate? I think that as long as you're in the market, you should be hedging against inflation.
If QE buys up equities, then you should just as well be able to buy equities, because you are putting your money into the same market where the price is rising. The figures at this site federalreserve.gov/releases/z1/current/accessible/b100e.htm show the assets of the Fed. Don't you want to be in the market that is being pumped up with trillions of dollars? The price of your assets will be rising due to all of the buying, even if all the extra dollars are diluting the general economy.
GCEventsmoveGDX
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Thanks for the Question. Gold miners do not follow equity price action, they follow the price action of the commodity that they produce. There is more demand for gold when the Fed extends QE and dilutes the dollar by printing more of them. Gold is simply an inflation hedge. Check out last years GDX chart vs SPY, and then GDX vs GLD.
mittleider
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Can you tell me why delaying the end of QE will send gold higher? QE generally pumps money into equities, so shouldn't this give investors incentive to also buy equities, because they know the price should rise, (or at least be given a large support).
Gold is up 3$ aftermarket. Do not be short GDX this week,especially overnight.