The selling of gold mining stocks accelerated today. As the result, the Fidelity Select Gold Fund (FSAGX, last change: -4.92%) has reached a new 52-week low. The panic selling of gold stocks is not well explained by the news. This should serve as a red flag for investors who are trying to pick the bottom to go long in gold. We will not consider investing in this sector until prices stabilize.
Buy/sell signals for Fidelity funds are available at FidelitySignal.com
The panic selling of gold continued again today and the Fidelity Select Gold Fund (FSAGX, last change: -4.31%) was the worst performing fund in the FidelitySignal.com daily survey. In addition, multiple equity sectors “rolled over” in recent sessions and are in danger of entering a bearish downtrend. These events, taken together with the bubble-like rise of the Japanese stock market point to a highly unstable market environment. Unless the equity markets stabilize in the next few sessions, we see an increased probability of a serious correction or even a stock market crash.
Buy/sell signals for Fidelity funds are available at FidelitySignal.com
The afternoon explosions at the Boston marathon precipitated a second wave of selling in the financial markets. The largest losses today were in sectors related to natural resources, such as gold and energy. The currently most out-of-favor international markets are Latin America and Eastern Europe. The top gainer was the Fidelity Spartan Long-term Treasury Bond Fund (FLBIX, change: 0.77%).
The greater than 10% drop in the gold sector is an unusually large sell-off that have not been seen in recent years. Gold is highly oversold now and ripe for a relief rally, but we continue to caution investors to stay away from this volatile sector.
Fidelity funds with the largest drops in today’s session:
| Fidelity Select Sector Funds | Change |
| Fidelity Select Gold (FSAGX) | -11.38% |
| Fidelity Select Natural Resources (FNARX) | -5.27% |
| Fidelity Select Energy Services (FSESX) | -5.07% |
| Fidelity International Funds | Change |
| Fidelity Global Commodity Stock (FFGCX) | -5.44% |
| Fidelity Latin America (FLATX) | -3.70% |
| Fidelity Emerging Europe, Middle East (FEMEX) | -3.27% |
Buy/sell signals for Fidelity funds are available at FidelitySignal.com
The Fidelity Europe fund (FIEUX, change: -5.50%) drops as the Euro crisis escalates.
Mutual fund screens and buy/sell signals are provided by FidelitySignal.com
Our favorite model portfolio continues to be the Armageddon portfolio: http://fidelitysignal.com/armageddon_portfolio
Armageddon portfolio
Mutual fund screens are provided by FidelitySignal.com
We have warned about the risk of U.S. stocks moving lower in the fall season following the panic selling in early August. Unfortunately, our benchmark S&P 500 index fund moved below its support level today, breaking its support level.
Fidelity Spartan 500 Index fund (FUSEX, change: -2.86%)
The stock market has dropped in panic selling in the last two days and is approaching the support level (see FUSEX chart below). Our best hope is that short sellers will cover their positions ahead of the weekend, which will lead the market higher while reinforcing the support level.
Fidelity Spartan 500 Index fund (FUSEX, change: -3.18%)
The selling of equities today was ferocious, reminiscent of the worst days of 2008. Energy services stocks got hit especially hard (see FSESX below). This was part of the global sell-off of commodity-related investments (see FFGCX below).
Fidelity Select Energy Services fund (FSESX, change: -6.92%)
Fidelity Global Commodity Stock fund (FFGCX, change: -6.46%)
Mutual fund screens are provided by FidelitySignal.com
The last two days of panic selling in the financial markets around the globe brought gold stocks back to their trading range diminishing hopes for gold-related equity investments to serve as safe havens in the highly turbulent markets. A fresh breakout from the trading range will be needed to reassert gold investments as market leaders.
The data tells us that in the current market environment gold stocks no longer provide a hedge against losses in the stock market. Furthermore, the extent of the drop (see chart below) tells us that gold stocks are extremely risky investments right now. A risky investment that does not serve as a hedge against market downturns do not sound like a good deal for us.
The Fidelity Select Gold fund (FSAGX, down -6.99% today) regressed back to its mean after a false breakout.
Mutual fund screens are provided by FidelitySignal.com
Will panic selling resume in the stock markets following the Labor Day weekend? No doubt, this is a difficult market to invest in.
Our favorite model portfolio continues to be the Armageddon portfolio published by FidelitySignal. See their report at http://fidelitysignal.com/aug_2011.
