Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stealth Bottom Coming in Gold Stocks

Commodities / Gold & Silver Stocks Mar 26, 2012 - 10:45 AM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleThe struggle of the mining stocks has surprised many including us. We thought record profits and a bullish environment would catapult the miners out of a consolidation and into a major breakout. The perception of an enduring recovery and the endurance and persistence of the wall of worry stage has left the gold stocks unloved and under-owned and for far longer than we expected. We do have to remember that the miners exploded in 2009 and 2010 and it is normal for a bull market to spend months in consolidation.


As a result we hear calls of market manipulation and intervention and calls to abandon gold stocks and only own physical metal. We heard these calls in 2008-2009 and now we hear them again, which would only prove disastrous for those who heed such advice. The miners are not only extremely oversold but recent price action suggests a bottoming process is beginning.

Let us start with sentiment which is an important factor in deciphering potential bottoms. SentimenTraderhas a new indicator based on put-call ratios, short-interest and analyst expectations which evaluates the overall sentiment of a sector. As we can see, the gold stocks are presently rated as bullish from a contrarian perspective. 

Another reason we are expecting a bottom is the relative strength in the leading miners. Gold Corp, Barrick and Newmont comprise about 42% of the HUI and GDX. Therefore, their status and performance carries much weight within these indexes. From the chart below, one can see that GDX printed new lows in October, December and again last week. While the market printed new lows, Gold Corp, Barrick and Newmont rebounded from strong support.The strong underlying support in these names bodes very well for the entire sector.

Recently, we bemoaned the poor construction and performance of the HUI and GDX which do not replace the laggard companies soon enough. Poor operational performance of some companies is a reflection of a tough business and not gold stock fundamentals. We solved this problem by creating our own large-cap index of the 10 largest and best performing gold stocks. This index helped us predict a 15% decline in the market. Days ago our index bottomed at the December low and has subsequently shown good follow through on Friday and today.

Certainly it has been a tough few months and a tough last 12 months for gold stock investors. However, the good news is two-fold. First, there are plenty of companies that have performed well and continue to perform well in this difficult environment. Second, the long-term correction and consolidation that began at the end of 2011 may be finally coming to an end. In recent months we believed a breakout was coming but instead, the market only continued to consolidate.

Our work tells us that the market has begun a bottoming process which could occur in stealth fashion and similar to what occurred in 2005. While amateur gold-bugs panic out of their positions, the real professionals are quietly accumulating the best of breed companies at a discount and accumulating select juniors at great values. The reemergence of the precious bull market will take some by surprise but not us.

If you'd like professional guidance in riding this bull market and uncovering the winning companies then consider learning more about our premium service.

Good Luck!

Jordan Roy-Byrne, CMT
Trendsman@Trendsman.com
Subscription Service

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in