The first round of major gold miners have reported earnings, and we’re all still here! No tsunamis drowning cities, no meteors falling from the skies. The charts show no huge ups, and no huge downs either. So you can stop paying attention to the naysayers and dooms-dayers and settle in for some nice, old-fashioned, money-making, trading horse sense.
(Wow, that was a lot of … words. I may need to take a break. ha.)
In my view there was relatively little action, even in light of some pretty decent news. It seems profits are flowing in the gold sector, maybe not as big as gold bugs would like to see, but certainly not small. NEM even announced a $0.05 dividend, TWICE the current payout, and the market… yawned. NEM dropped, from a high of 37 the day before the report to just above 35 right now. Sounds like you could buy money at a lower price, right? Well, maybe, but only if NEM doesn’t go down from here. And, 2.5 cents is just not enough to go chasing after; that’s like what, eleventy-four seconds of normal price movement…
So, as I like to believe I say, in the absence of all else we return to common sense. For me the very bottom layer of medium- to long-term investing strategy is our old friend the Simple Moving Average. Or SMA for short. And no, that’s not SAM spelled badly.
Yep, buckle in for some good ol’ 2nd-grade math. At least, it was in the ’60s. Maybe it comes later in the Common Core books, but heck I don’t understand how they teach addition nowadays.
We use SMAs to try to detect trend changes, using a shorter-term average and a longer-term average. Sounds bad but modern charts do all the work for you. A few mouse clicks sets it all up. “All you do” is decide how long the averages should be, click click click, and voila. Here’s a chart of our old friend GLD taken around 10AM today (Friday 10/28/2016) with 3 of the most common SMAs plotted.