What a start to the week! Yesterday saw markets sell-off hard and today it has all been reversed after Trump mentioned delaying the new China tariffs. In today's algo driven markets, silly headlines like this create wild gyrations in the markets, making for difficult trading.
Today's market rally was accompanied by a $56 plunge in gold, which indiscriminately flushed overbought gold mining stocks and laggards alike. Gold had rallied all the way up to $1535 in overnight trading and this morning's flush took it to $1479, which was the largest and quickest flush I have seen in several years. It has since recovered to $1502 (subject to change) and many miners have printed long hammer candles. Below is chart of the gold mining sector at the time of writing this post.
Most gold mining stocks look like a version of this chart with some looking stronger than others. Personally I think the flush was healthy for the sector as the casino patrons were getting over-bullish and many will have been pushed out of the market for the time being. Some of these charts are starting to look like "buys" again but a legitimate question is whether the selling is done. The move down wasn't really that large considering the magnitude of the drop in gold.
Things remain very volatile across all sectors, so traders need to be able to either handle it (with fewer and smaller positions) or move into cash until things stabilize. Looking at the broad stock market, we can see that despite today's 2% rise, nothing has really been resolved, as the index has not yet recovered the 50 day moving average that it gave up last week.
The battle going on in the broad markets is hugely important and for now I am watching things unfold and have not taken any new positions this week. Over-trading can be a common problem and sometimes the best decision is to simply wait until another juicy opportunity presents itself.