Gold, silver and mining stocks didn’t do much on Friday, so what we wrote in Friday’s alert is generally up-to-date. However, since the week is over, we have weekly closing prices and volume levels. One of the ratios that we monitor provides a very significant indication as far as weekly price changes are concerned. Let’s take a closer look (below chart courtesy of stockcharts.com).
This is the juniors to stock market ratio – more precisely, the GDXJ ETF (proxy for the junior mining stock sector) to the SPY ETF (proxy for the S&P 500 Index) ratio.
What does this have to do with gold? Much more than one might expect. Let’s keep in mind the following about precious metals junior mining stocks and investors in general: Juniors are less likely to be held by institutional investors than individuals (mutual funds, for instance, often are allowed only to invest in big, senior companies, listed on major stock exchanges); Generally, individual investors tend to depend more on emotions than financial institutions do and when the sentiment peaks, local tops are formed.