Friday, January 11, 2008

Gold's rise continues

Gold had another good day on Bernanke's promise of substantive action. Spot gold gained over $11 in regular trading one day after the Gartman dip (Dennis Gartman was on CNBC a day before saying that he sold half of his position).

Let's take a look a gold stocks (using GDX as a proxy) which as far as I'm concerned, is where the actions are. The stoschastics are in the overbought territory, but in a bull market, overbought can become more overbought. Indeed, we see the %k and %d lines criscross above 80 indicating very shallow pullbacks. Although I trimmed back my position on strength today as GDX got close to the top of its Bollinger band, I expect to re-load within the next couple of trading days.

When GLD, SLV and GDX are plotted together, it's obvious that gold has been leading the other two. GDX hasn't even regained its November high since money has been mostly flowing into the majors. This tells us that this advance is still in the early innings. We expect the opposite to be true when this advance matures.

Which way goes EEM?
I have had several EEM puts since the end of '07. After missing some great opportunities to take profits, they are now underwater. It's one big blemish on an otherwise great year so far. Anyway, if the downtrend is still intact then it's closer to the top of the channel than the bottom. Either way I won't have to wait for long to find out.