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Since my last posting, gold has gone up and the Dow has gone down bringing the Dow/Gold ratio down to 16.21. Gold closed today above its most recent high in late February of $1264.90
and is well above its 200 day Exp Moving Average of 1235.40. I'm seeing steady increases in other technical indicators which hint at a nice and continued bullish move.
Hopefully gold will be a good indicator for future increases in the price of NUGT as well. NUGT's chart is not nearly as nice looking as gold's; however, it just closed above the 100 day EMA today. NUGT's next test will be the 200 day EMA at 12.72. On-balance-volume, MACD, and ADX indicators all look good. The shares I bought last time at $7.51 were sold last Friday after missiles were launched on Syria and gold popped with initial market reaction. I had a 35% gain in less than a month and I thought it was prudent to take my windfall profits in a IRA. If NUGT goes back down, I'll buy those shares again and repeat this process. I sold less than 10% of my holdings that day so am very much invested in NUGT at this time and still very bullish on its prospects.
In closing, the economic numbers release recently do not bode well for the market but are great for gold. The jobs report wasn't very impressive and weather was again used as the excuse for lameness in the numbers. The estimated 2017 Q1 GDP is now below 1% in which we had a 3+% estimate early in the year. The Fed is already trying to hedge its 2% inflation mandate and is talking about it being an 'average' and not an absolute. The thinking is with all the time that the inflation rate was < 2% should be considered when inflation is now over 2%. They are starting to talk about waiting until 3% inflation before needing to fight inflation with rate increases.
The other news item that can swing markets is the upcoming 4/28/17 U.S. Budget deadline. My newspaper had this story buried in page 4 and things will be interesting on 4/28 if congress doesn't get things going. They have been operating for almost 6 months with no budget for this fiscal year- incredibly lame!
"Hopefully gold will be a good indicator for future increases in the price of NUGT as well. NUGT's chart is not nearly as nice looking as gold's; however, it just closed above the 100 day EMA today. NUGT's next test will be the 200 day EMA at 12.72. On-balance-volume, MACD, and ADX indicators all look good. "
Thanks, LaCostaRacer
GDXJ chart is not nearly as nice looking as gold's either; however, it just got back to the plus side for my most recent purchases. I was glad I got out in February @ 42 but I got back in too early starting around 39 and continued buying down to around 36. Hopefully, above the 50 day MA today @ $37.74
The Direxion Daily Junior Gold Miners Bull 3X ETF (JNUG) is trading at a significant premium to its net asset value, possibly the largest in its history.
That's likely a direct result of Direxion suspending its creation units for the ETF on April 13. "The suspension is due to the limited availability of certain investments or financial instruments used to provide requisite exposure to the MVIS Global Junior Gold Miners index," said Direxion in a press release.
Note that the Direxion's press release followed on the heels of VanEck's near-admission that its Junior Gold Miners ETF (GDXJ) was getting too big for its britches, a result of JNUG holding a substantial amount of its shares outstanding. VanEck's Market Vector Index Solutions or MVIS said that it would make significant methodology changes on April 12.
Depending on how low the share issuance suspension lasts, this could turn out to be another TVIX. Back in 2012, the VelocityShares Daily 2X VIX Short-Term ETN (TVIX) started trading at a premium after Credit Suisse (CS) stopped creating new units. Supply failed to keep up with demand, leading to extreme volatility.
This ETF might be best left for gun-slinging traders.
VanEck Vectors Junior Gold Miners: Too Big to Succeed?
April 17, 2017
Popularity has its pitfalls. The VanEck Vectors Junior Gold Miners ETF (GDXJ) saw assets climb 55% to $5.3 billion just this year alone.
Excess capital meant that the ETF saw some of its weightings in single stocks climb to more than 10%. ETF.com's Sumit Roy noted last week that GDXJ was so big, it had more than 18% stakes in 10 Canadian companies.
So the ETF started buying stocks not included in the index, and on Thursday, VanEck, which runs the index and the ETF, said it would they would expand the index's criteria for inclusion. Starting mid June, the index will include "companies ranking between 60% and 98%" of full market capitalization of the mining universe. Roy wrote that this would change the ETF "dramatically."
This isn't the first time the GDXJ expanded its universe, but investors haven't actually noticed that they are changing horses midstream. In the past week, more than $50 million has come out of GDXJ, according to XTF, but that gold mining ETFs lost their luster as a group. Some $186 million flowed out of mining ETFs over the same period.
How a $1.4 Billion ETF Gold Rush Rattled Mining Stocks Around the World
Money pouring into funds investing in gold companies set off price gyrations in the shares
April 23, 2017
Unruly trading in the shares of some small gold companies is rekindling investor concern about the pressure that fast-growing passive funds can exert on the stocks they are meant to track.
In the past six months, waves of money rushed into a $20 billion complex of interlinked exchange-traded funds that invest in gold-mining companies. The flows prompted the ETFs to amass ever-larger stakes in dozens of small firms. Efforts to check the funds’ growth triggered price gyrations in gold stocks from Sydney to Toronto, at a time when the price of gold was largely flat.
The turmoil illustrates how the rise of index investing could rattle trading in the years ahead, especially as the $4.8 trillion ETF industry sprawls into smaller markets, investors said.
“ETFs can move stocks, and that is what’s going to happen when investors flock into funds that hold small- and microcaps,” said Neil Leeson, research director at Spyglass Trading in Dallas.
In the past decade, ETFs have been blamed for unusual price swings in oil, utility stocks and high-yield debt. Just this month, a flood of cash into a new Canadian ETF jolted trading in the nascent marijuana industry, and in September, the Bank of Japan curbed its purchases of ETFs pegged to the Nikkei 225 index after its stimulus efforts distorted prices.
“There’s definitely the possibility for some issues to arise, but in the vast majority of cases we’re a long way off,” said Ben Johnson, head of ETF research at Morningstar, pointing out that ETFs in larger markets don’t come close to dominating trading the way the gold mining ETFs did recently.
The most recent example of an ETF knocking prices out of whack centers on the VanEck Vectors Junior Gold Miners ETF (GDXJ), which invests in small gold companies. The ETF has taken in $1.4 billion since September, forcing VanEck to hoover up mining shares.
Juicing its growth was the Direxion Daily Junior Gold Miners Index Bull 3X ETF (JNUG), which uses the VanEck ETF to give investors a triple-leveraged bet. For each $1 dollar Direxion took in, it funneled $3 into the VanEck fund.
VanEck plowed that cash back into gold stocks, becoming the largest investor in two-thirds of the 54 companies the ETF owns shares in, according to FactSet. In some cases, VanEck owned 16% or more of the available shares of those companies, bringing it into the range of a Canadian securities law that requires firms that exceed a 20% stake to offer a buyout to the remaining shareholders.
“We continuously monitor the portfolio,” said Ed Lopez, head of ETF product management for Van Eck. “Our primary concern is that we’re meeting our investment objective.”
With more money coming in than it could invest in its roster of gold miners, the VanEck junior ETF directed some of the overflow into the VanEck Vectors Gold Miners ETF (GDX), which invests in larger firms. That ETF swelled to $12.5 billion amid the combined inflows from its smaller sibling and the Direxion Daily Gold Miners Index Bull 3X ETF (NUGT), another leveraged copycat.
As the ETFs overran the market, more traders piled in. On April 12, Direxion received orders for $113 million in new shares of its leveraged junior ETF, the largest inflow in its history. The next day, Direxion closed the fund to new investors “until further notice.” The ETF’s share price rose higher than the value of its assets, reflecting the imbalance of demand over suddenly finite supply.
“We wanted to be sure we weren’t exacerbating the issue of the products growing too fast,” said Sylvia Jablonski, managing director of capital markets for Direxion.
VanEck simultaneously came out with its own fix. On April 13, its indexing arm said it would expand its lineup to larger companies. The change would force the junior ETF to buy some stocks and pare down others.
But those trades won’t happen for months because passive funds are obliged to follow the investment strategy outlined in their prospectus. Shareholders must wait for the next scheduled rebalance in June.
With the ETFs paralyzed, traders began bidding up the stocks being added to the index and selling those that the ETF must later shed. Gold prices barely budged the day VanEck announced the change, but stock prices of gold-related companies diverged. Canadian mining company Novagold Resources Inc. dropped 4.7% while Northern Star Resources Ltd. , an Australian rival, shot up 6.8%, according to FactSet. The junior ETF, stuck holding the falling stocks, lost 3.5%.
Benjamin Chiu, a quantitative equity trader at BMO Capital Markets, estimates that half of the VanEck Junior Gold Miners ETF (GDXJ) would need to be liquidated when the index makes its changes.
Jonathan Tiemann, president of Tiemann Investment Advisors LLC, bought shares of the GDXJ ETF for clients last year, a bet that could pay off if economic uncertainty sends gold higher. While his view on gold hasn’t changed, he is now considering selling those shares.
“It’s at a point where the ETF is subject to distortions,” said Mr. Tiemann. “It’s volatile enough as it is without the risk of some other weirdness happening in the market.”
The Dow crossed 21K today to retreat a little bit to close below 21,000. NUGT has been hammered this week as well as last week and is now trading at levels that I'm a buyer for. The shares sold last time are being replaced now at cheaper prices- I bought 40% of those shares today and will see how things go this couple of weeks to buy the remainder.. Since the last posting gold tested the $1300 level and the Dollar has continued to weaken. The budget issue is still very much in play this week. We'll see what happens when Trump releases his magical tax plan- seems like there is more downside risk at these levels that upside.
Dow: 20,957.90
Gold: 1248.50
Dow/Gold:: 16.78
USD: 99.08
SLV:15.59
NUGT: 29.74 (or 7.43 with last weeks stock pricing)
AG: 7.84
The gold market suffered another temporary setback today dropping $20 today after Janet Yellen spoke following a Fed meeting. She is holding a stiff lower lip and hinted about staying the coarse for raising rates- possibly as soon as June. I find this comical because I have heard this crap for a number of years now and we have had just two rate hikes and the economic numbers now are worse than other times when the Fed obviously did not raise rates. In the last week a GDP that was originally estimated by our inept Federal Reserve to be over 3.5% came in at 0.7% after second revision. Meanwhile more economic data pertaining to Q1 has come out that hints that even 0.7% could be ratchet down on next revision. Despite this week GDP estimate Atlanta Fed has come out with a 4% PLUS estimate for Q2 2017- amazing!!!! Apparently Janet has drank that cool-aid and thinks the recent data is only 'transitory'.
For you investors, you have to think of this as a buying opportunity. When the house of cards comes crashing down, it might be late to get gold and mining stocks at such attractive prices. With this said, I'll be conducting my LaCostaRacer Open Market operations tomorrow and begin buying at these prices. I was tempted to do that this morning when NUGT opened higher, but was scared of what Yellen would say. She's full of crap but somehow people still believe what she says and this moves markets. We'll see if she's so confident in June. If this is anything like 2016- or even in March of this year, we'll see a 20% jump on NUGT when that Fed rate hike doesn't happen.
Time will tell who is full of crap- me or Yellen.
Last edited by LaCostaRacer; 05-03-2017 at 10:30 PM.
I wound up buying more positions in NUGT and SLV on Thursday/Friday when things were really looking bad for those stocks. I didn't buy at the day's lows but managed a slight daily profit and a much better profit today. Yesterday's entry prices were NUGT @ 27.61. I bought SLV today on weakness @ 15.42.
Here is a link to an interesting article that describes some of the options manipulation going on with gold: Gold-Futures Shorting Attacks
Gold has finally strengthened this last week and is trading above all of its major moving averages with today's move. I added Bitcoin as a new metric above to track- mostly because I think gold should be trading higher than Bitcoin and see gold as a special buying opportunity now that it's below Bitcoin. Meanwhile the Dollar index has weakened below 98 and may weaken more if my hunch on the Fed delaying a rate hike in a few weeks works out.
Since last posting, I bought another lot of NUGT shares on 5/8/17 for 28.99. I plan on riding the tide up to around 45 and might unload those recently purchased shares in case I'm wrong on the Fed decision and NUGT drops. I also sold my entire position today in LL @ 26.17 at market open. I bought Lumber Liquidators when the formaldehyde news broke and it tanked- if we're in a recession it and many retailers will be dropping.
With this week's jobs and economic reports, the odds of the Fed performing the 2-3 rate hikes that the market is expecting are shrinking. Friday's jobs report bolstered gold and weakened the Dollar- now below 97. You can see this slow downward drift by checking a chart or previous 3 postings above- about a point
every time. Bitcoin has also jumped up impressively.
Since last posting NUGT is down while gold is up. SLV is also trending up along with gold. The market doesn't seem to think the gold rally is 'real' and the miners are not participating like they would otherwise. I see this as a buying opportunity and bought more shares on Wednesday @ 33.35. It appears that 32/33 is a good support level that has been tested a number of times the last couple of weeks.
I think NUGT is going up regardless of what the Fed will do on the 14th. If Fed doesn't raise rates, I anticipate 20% or higher pop like what happened in March 2016 when Fed elected not to raise rates. If the Fed does raise rates, I expect the statement to have some language in it hinting that they might be slowing down rate increases and that too will cause NUGT to trend up afterward.
The much anticipated Fed meeting happened and rates went up .25 to 1.25%. The surprise this time involved the relative 'hawkish' talk about the Fed selling its bond holdings-this is akin to quantitative tightening. You would normally expect the dollar to get much stronger with this but it only managed a 0.20 increase from my last post. Gold went down about $24 since last time and NUGT got clobbered with a 10% drop. Bitcoin also jumped but is almost $1000 less than a mid-day high and is extremely volatile.
Since last posting, I have continued to nibble on NUGT. I bought shares on 6/14 @ 32.15 and also 6/16 @ 30.25. I'll likely hold on this week and see if NUGT has found support around $30- these purchases are purely speculative and will be sold if I should reach a quick 20-30% profit the next few weeks. It might take a month or so before I see the gains materialize that I have come to expect with NUGT in this environment which is fine- I would rather have NUGT slowly rise than act like a Bitcoin.
I think the Fed will find selling bonds much harder than raising rates when the entire market factored in a 100% probability- it remains to be seen how that is going to work. If QE helped the economy as the Fed indicates, you would think that QT would hurt the economy and it already is weak. Large bond holders will likely front-load things by selling bonds before the Fed starts and get the best prices possible.
Last edited by LaCostaRacer; 06-17-2017 at 02:24 PM.
Gold is looking more steady now having gained about $50 the last two weeks and $71 from its recent low. The $1200 psychological support level held this last downtrend at $1204 which was a little lower than the previous test at $1214.
It seems that the promised reforms in taxes and health care are looking more shakey in becoming a reality. While stocks higher since last posting, I'm not sure these gains will be the same when markets begin to price things based on reality instead of hope. The bond market is looking at reality and the USD price also reflects realistic pricing. Since last posting the Dollar has lost 3.76 or over 4% while gold has increased just $18.80 or 1.5%. It seems like gold's pricing needs to adjust upward more than it already has.
I'm continuing to add to my NUGT positions when the chance occurs- it seems like these chances are happening on a weekly basis these days. Just last week I bought NUGT for as low as 29.76 on 7/24 and then for 31.52 on 7/27.
With the grid lock in Washington, weak Dollar, and some pending debt limit drama coming in September/October, I'm as confident as ever in these newly added positions and the more substantial sized positions I already own. Even Bitcoin is rising and that bodes well for gold in the long run.
Even the Fed is starting to become more wishy washy on their unwinding of their treasury positions- now the wording is 'soon' where before it was 'this year-2017'. If they intended to keep to the earlier posture it seems that they could have left the wording alone like they do with 90% of the remaining text.
GDXJ is broken.
At the beginning of the year the price of gold, the shiny yellow metal, was at $1173 and now it's at $1273.
Gold has gone up about $100/ounce YTD and GDXJ is down over the same period.
Why?
Since last posting, the Dollar has gone down while both gold and particularly Bitcoin has risen. Gold has broken the
$1300 resistance level this week. NUGT has risen as well breaking a $34 resistance level lase week and extending gains this week with a solid 4/5 day upside gains. I think this is the beginning of a new bullish trend and I'll be adding
to existing positions on any weakness going forward.
The Dow broke 22,000 in early August and backed off from this level. Even today, it broke 22,000 only to give back those gains and close below 22,000. I think 22k is a resistance level that is proving hard to stay above for an extended period.
I think the prospects of another 2017 Fed interest rate hike are dimming and this will be positive for both Gold and
the miners in general. Gold Miners rise or fall on the 'prospects' of gold's future pricing and not based on the actual
pricing. That's why you can see mining stock prices down when gold might be up.
Bitcoin's rise is impressive, but I think it's in a bubble- a bubble larger than the bubble it was in last month. If I owned any Bitcoin now, I would be selling it- particularly if gold breaks $1400/oz. I think the people lucky to holding Bitcoin might quickly move into a more stable holder of value.
^ Bitcoin is going up exponentially now, but how long do you really think it can hold that type of trajectory? This is more extreme than the Dot.com bubble and we know what happened with that one. The Johnny Come Latelies are now actively buying Bitcoin and will likely be holding the bag when it craters.
I had lunch with a friend who was eyeing Bitcoin when it was trading in pennies. He was going to buy it when it broke $1.00. I asked him what happened and he remembers how volatile it was then. I then asked him if he had bought some for $1.00 if he thinks he would have still owned it now. His response was no- he probably would have sold 1/2 when BC hit $2 and the other half when it hit $10.
This friend's reaction is just one data point,, but I think there is an important psychology principle on how people think about taking profits. These people now buying BC for $4000 must think it's a bargain and hope to sell it for $8,000 and higher. They are also buying it because they think it's going up and not for any real valuation metric. One year ago, BitCoin was trading below $600. So if it should break $6000, the strong desire to sell will really start kicking in for the recent buyers who are most likely the speculators and not the real believers in 'block chain technology'.
As with everything, what goes up will also go down. Eventually BC will start dropping and that's when it will be very interesting seeing how much faster the price moves downward.
Since last posting, gold has dropped about $40 on a number of possible reasons:
1. renewed speculation that the Fed will raise interest rates in December
2. stronger Dollar presumable because of the possible rise in interest rates
3. potential economic gains from a new tax plan that intends to bolster the economy
I also see that Bitcoin is down a little as well- hard to know if it has peaked or not.
I see today's trading interesting for NUGT which went down 2.64% while gold increased
1.26% or $16.00 to 1274.90. The gold technicals look interesting with the daily price
above its 200 day simple moving average of $1251.62. The weekly chart shows gold
above $1258.55. There's some support at these levels.
From a pure speculative perspective, I see today's 17.90 Dow/Gold ratio as extremely bullish
for gold. This is as high as the ratio has been since I started posting this ratio back on
page #12. I think this ratio is going to snap back this next month to the 10-16 trading range that it has been doing over the recent years.
04-11-2017, 08:31 PM
gold today
