How to Time Gold Stocks Using the BPI

Some interesting trading research and musings by Jeff Clark today, as he describes a method to time the buying and selling of gold stocks.

Clark’s found that when the eight-day moving average crosses above the bullish percent index, it’s time to buy – and when the converse happens, it’s time to sell, or go short. It’s a twist on the popular method of timing stocks using the BPI. Clark says a little adjustment is needed for gold stocks, due to their huge volatility.

I personally have become fascinated with these sentiment indexes recently. Over the weekend, I perused the Wall Street Journal, and concluded that at least anecdotally, gold seemed to be a little too popular right now.

Is the dollar a doomed currency? Of course it is. The problem is that everyone knows that right now. And when everyone is on one side of a trade, you know the other is due for a mega rally. Since it’s tough to picture a scenario where both the dollar and gold rally, it may be wise to be cautious on gold for now, especially if you believe the buck is due.