Friday, May 20, 2011

Gold Stocks Could Be Ready For A Bouce: Steve Sjuggerud

After pointing out that gold stocks have underperformed gold itself, Dr. Steve Sjuggerud bases his bullish forecast on the Gold Miners Bullish Percent Index (BPGDM) oscillator. Although it's still falling, and is not yet in oversold territory, it's approaching levels at which both it and the Market Vectors Gold Miners ETF have bounced upwards.

Here's the graph:

In Dr. Sjuggerud's article, this graph correlates the BPGDM with the ETF itself:

He concludes that it would be wise to stock up on cash so as to take advantage of the opportunity.

If so, then the oscillator itself has better be kept an eye on so as to determine a good selling point unless it's being used as just a timing device for a long-term investor's entry point. In the latter case, the fundamental values of the underlying companies should be used as the basis of whether or not to invest at all. Although the gold-mining sector has a P/E lower than that of the general market, what matters for cyclicals is where earnings are going to go. A gold mania would be the best earnings-booster - while it lasts - because gold, and revenues, would handily outpace costs.


  1. I must confess I'm really realllyyyy puzzled about this whole gold stocks issue... There seem to be so many different opinions on it, it's really hard to make any sense of it what so ever!

  2. The trouble is, gold stocks aren't going up as much as they normally do when gold shoots up. That's got a lot of people puzzled.