Revealed: This Week’s Hottest Gold Trade
I just returned to my Michigan lake house following a brief visit to Chicago. It’s nice to get back into a routine here up north before the weekend!
Meanwhile, the markets are getting their groove back following this week’s oil purge. After a rough couple of sessions, the major averages are putting together a little winning streak. We’re looking for stocks to finish the week strong!
Let’s put this week’s action in perspective…
First, we have to remember that we’ve already enjoyed a tremendous rally off the March lows. Tech stocks have shown exceptional strength during this rebound, helping to push the Nasdaq Composite higher by more than 25%.
Of course, there are also laggards in this market, notably small-caps stocks. The small-cap Russell 2000 has gained just a little over 6% this month, compared to the Nasdaq’s positive move of nearly 12%.
Naturally, this disconnect has some market pundits worried. But I’m looking for the rest of the market to play catch-up with the Nasdaq.
After all that’s been said and done, tech is down less than 5% year-to-date. Think about it! Despite an unprecedented market rout, the Nasdaq is just a measly 15% rally from its all-time highs. That’s an impressive momentum move.
Also, don’t forget that the S&P 500 is back above the 2,800 level we’ve been watching for the past couple of weeks. Even the oil rout couldn’t hold the S&P below this mark longer than a single trading day:
The S&P holds strong at 2,800 following a brief dip earlier this week.
Everyone will remember this week because of the complete annihilation of the May crude oil contracts. But let’s not forget that the stock market has bounced back. We’re back above the halfway point of the drop from the top on the S&P. If the laggards continue to play catch-up, more bullish trades are in our future…
Chart of the Day: Another Golden Opportunity
Oil is hogging all the headlines this week as crude crashed, then rebounded yesterday in spectacular fashion.
But our attention is focused squarely on gold despite the insane volatility happening in the oil pits. Gold is perking back up after briefly retesting its breakout zone and gold futures are now attacking the $1,750 level after flagging for the better part of the past two weeks.
More importantly, the strength in the precious metals market is finally bringing some momentum to the gold miner trade. The miners suffered alongside the broad market when stocks broke down in March. Yet after bottoming out on March 16, the VanEck Vectors Gold Miners ETF (NYSE:GDX) exploded higher, breaking out to multi-year highs earlier this week after posting a clean double off its lows…
Gold miners have come into focus as one of the hotter trades this week as even some of the smaller names are starting to pick up momentum. GDX gained more than 13% on the week as of yesterday afternoon, while it’s little brother, the VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ), is working hard to catch up. The junior miner ETF has jumped 15% this week yet has not yet cleared its February highs.
I don’t think the gold trade is going anywhere just yet. We’ll no doubt see some serious volatility in some of the more speculative miners, but trading opportunities will abound as more speculators get involved.
— Greg Guenthner