It’s Friday. And, as regular readers know, on Fridays I often open up the mailbag and devote the Market Minute to answering your questions.

Today, I’m going to do something just a little different. I’m going to answer my own question. It’s one I suspect many readers have also thought to ask…

What the heck happened to gold stocks this week?


Well, for starters, the bullish setup I pointed to for the gold sector two weeks ago did not play out. Here’s an updated look at the chart of the VanEck Vectors Gold Miners Fund (GDX) along with the MACD momentum indicator

On three previous occasions this year, when the short-term moving average (the black line) on the MACD indicator crossed above the longer-term moving average (the red line), it marked the start of an intermediate-term rally for the gold sector.

That didn’t happen this time around. Shortly after I pointed out this pattern, the MACD lines reversed. The longer-term moving average crossed back below the short-term MA and gold stocks sold off.

Traders were also nervous about the gold sector this week going into yesterday’s European Central Bank (ECB) announcement. The market was anticipating the ECB would cut its monthly bond purchase program in half, but also extend the program for another year.

Gold traders saw this as a mild form of a tight money policy which is generally bearish for gold. So, gold stocks traded lower earlier this week in anticipation of the announcement.

Frankly, I thought whatever negative reaction the gold market was going to have was already discounted before the ECB announcement yesterday morning. But that wasn’t the case. Gold and gold stocks dipped lower right after the announcement yesterday morning. And the selling pressure increased throughout the day.

The bad news is that what looked like the setup for a strong intermediate-term rally failed. That means the sector probably has a bit more work to do on the downside – not too much more, though. The sector is already quite oversold.

And that’s the good news. The gold sector is quickly reaching an exhaustion point – which is where frustrated gold stock investors will finally throw in the towel. Then, once all of the sellers have been exhausted, that’s when we’ll get – at least – a strong oversold bounce.

Traders will know that we’ve reached the exhaustion point when GDX opens 1%-2% lower one day and then reverses to close up on the session.

Best regards and good trading,

Jeff Clark

P.S. Just as a reminder, my colleague Teeka Tiwari is putting on his special free training seminar on the cryptocurrency space on November 2 at 8 p.m. ET/PT.

There, Teeka will reveal one of favorite cryptocurrency plays for 2018. And you’ll have the chance to claim your portion of $1 million in bitcoin just for attending. To register for this event, click here.

And look forward to the Market Minute this weekend, as well. I’ve decided to feature two essays, coming to us from the bright minds over at the Palm Beach Research Group, that’ll help you understand the massive opportunity that cryptocurrencies may present…

Reader Mailbag

In today’s mailbag, we hear from a happy group of Delta Report readers about their success on recent earnings trades…

Jeff… I just wanted to say thank you for your morning updates and market commentary. It helps me tremendously in managing my long and short option positions.

I find some of the subscriber concerns/complaints about the trade recommendations curious. You are right, we have to take ownership of our trades and manage them. I made money on ABT—in at $0.58, out at $0.75. I did not wait for you to hold my hand and tell me what to do. HOG was a great trade. I got out early at $1.95 as you stayed with it to $2.05. But I bought more on the dip the next morning after your recommendation to lower my cost.

Just because we pay you for your thoughts doesn't mean we don't have to think and act on our own. Again, I appreciate what you do and how you do it.

–  Bob B.

I initially bought two contracts on HOG and was able to get in at $1.65. I was watching closely first thing the next morning and added four more for $1.23, moving my cost basis to $1.37 on the six contracts I then held. I was able to get out at $2.05 by 9:00 MST with a near 50% profit overnight! What a fantastic trade… I can’t begin to tell you how thankful and excited I was about that! I have been patiently waiting for more of these earnings trades to hit the Delta Report!

I was also able to execute the ABT puts at $0.67 this morning, and am excitedly awaiting to see how this one plays out as well. It’s refreshing to finally have some excitement in the market again!

Thanks again so much for the tremendous value that you create for us. I knew I had to have the lifetime subscription as soon as you were able to make the offer with your new publisher after following you over from Stansberry. Take care! And keep ‘em coming!

–  Ryan R.

I am glad you have a thick skin and a good sense of humor. I guess you wouldn't make it in your business otherwise. I'm sure it must be frustrating to deal with new (and not-so-new?) subscribers who don't carefully read your reports and/or are unwilling to do what you said!

Thanks for reminding us (with the occasional gentle rebuke as needed) about the basics of profitable trading. I'm sure the cardinal rule must be “Always follow the rules!”

–  Douglas H.

Pretty damn good call on the ONE-day “smackdown”, as it was mostly a feeling and not quite as much technical. I know Doug Kass had the same “feeling” starting Monday. Experience sometimes counts. Saw the rollover in MACD and RSIs.

–  Jeff W.

Really digging the service so far! Paid for my subscription in three trades and I’m new to options.

Love the constant barrage of intel that you send out morning, noon and night. I enjoy the way you handle these boneheaded responses from the poor saps that need their binky to trade. People pay good money for good advice and they don’t even read your messages. Thanks for being a standup guy and going the extra mile.

–  Jeremy H.

If you have any comments, questions, or even stories about past trading experiences that you’d like featured in our Reader Mailbag section, send them right here