Market NAPALM Hits: Gold Reigns SUPREME!

It won’t take much to make Wall Street fund managers the biggest gold bulls of all.

I just got off the phone with a fund manager, who, to me, represents the classic suit and tie corporate trend follower, but he is a great friend of mine, nonetheless.

He told me that a few more days like this and he’d have to shuffle many of his holdings to get exposure to gold.

You see, in Wall Street, quality results are all that matter, and Q1 wasn’t good at all.

Courtesy of our good friend, Steve St. Angelo, here’s how asset classes faired up until now in 2018:

The only thing that’s missing right now is for the stubborn gold equities to start showing what they keep under the hood. 

So, don’t pile in yet. Keep your favorite names on a watch list, and wait for technical confirmation that gold stocks are on the move.

Courtesy: stockcharts.com
This is called the BPGDM or the Bullish Percent Gold Miners Index, and what I love about it is how accurate it is in telling me when it’s time to back up the truck.

Currently, it is trading at 39.29, the 50-DMA is 37.86, and the 200-DMA is sitting at 31.95.

In other words, the last 50 days have been higher than the previous 200 days, and yesterday was stronger than the last 50 days – it’s trending higher.

But, that’s not enough.

Portfolio Wealth Global back-tested the BPGDM and found that the ultimate entry point is just above 45 and best above 50.

The index simply tallies up how many gold shares are trending higher, opposed to how many are trending down. So, if it’s over 50, then more than half the sector is on the rise.

Think of the mining sector as a closed mall with a limited amount of buyers locked inside. Whatever funds they brought with them will need to be divided among the storeowners, but hardly anyone becomes rich because the funds are limited. Then, 10 buses full of people, who haven’t been to a mall in ages, happen to spot the signs and the doors open for an hour.

Frenzy begins!

That is how the mining sector moves in cycles. Most of the time, no one wants to own it (except for the people inside the mall), but for a brief moment, you experience such a wild buying momentum that it more than makes up for lost time (10 buses full of new buyers).

I’m not calling this the top for stocks, and most likely, the bloodbath is mostly over. Stocks will trade in a range for many weeks before the market finds a way to head higher and build confidence with speculators again, but what Portfolio Wealth Global does see is a change in hedging strategies.

The need to own precious metals exposure and the necessity of easing-off the short positions will give gold equities room to maneuver.

They’re so heavily shorted that just covering the shorts could take them 300%-400% higher in a matter of weeks, not months.

In light of yesterday’s trading action, I sold a sizable position held with Hormel Foods:

As you can see, the position beat the street by a wide margin since the Great Recession, but inflation will start chipping into their margins, going forward.

It’s a wonderful company with well-known brands, including Skippy, but after a big move, from less than $10.00 a share to over $33 today, I’m taking profits home.

I want to be liquid and ready for the commodities bull market.

This funneled the needed funds into the brokerage account.

Our team is now solely focused on finding the most undervalued gold stock in the world.

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