Thursday, January 27, 2011

Precious Metal's Sentiment Changes and Bottoms!

Precious Metal's Sentiment Changes and Bottoms!  
The author was perusing charts whilst devouring his breakfast steak (well, maybe not breakfast, but real thick beef loin, as I had been surviving on only coffee for 5 hours this morning), and I came across this startling chart for my bellweather Gold stock, Goldcorp (GG, TSX: G), displayed following:  (click to enlarge)
The large white candle for this prime Prima Donna Gold stock yesterday stands in stark contrast to the declining red candles since December.  Though today, there was red, the fact remains, that quite possibly sentiment has changed for the Gold and precious metals sector.  Okay, not so fast, maybe not changed, and just one stock, but indicating some early thinkers have initiated change, and the correction may have bottomed.  Looking above the price chart, the PPO (Percentage Price Oscillator) is showing the faster average (black line) poised to cross over the slower average (red line).  The PPO is similar to the MACD (Moving Average Convergence Divergence) but uses percentages rather than absolute prices).  The PPO black indicator is poised to cross the slower red line supporting the idea of bottoming of prices and the change of sentiment.  At the bottom of the chart, the CMF(Chaikin Money Flow) has gone less negative, again indicating less money leaving this stock than previous.  (Eh, Marco, grasping at straws here --less negative, rather than turning positive, tut..tut!). 
Goldcorp is a high quality recognized Gold stock, and if smart money is moving in, then this bears paying attention to.  Note that earnings season and end of fiscal year for these large cap producer stocks is just around the corner, and the precious metals miners that are not hedged should be enjoying rather high prices for their commodities sold this past fall and winter.  Is this stock positioning for the good news expected?
To extrapolate the idea for the precious metals sector, the XAU to Gold ratio chart was examined.  The XAU is the 17 precious metal stocks index that is traded and the ratio is the indicator of leverage or lead over the Gold price.  The absolute ratio is not important, rather it is how the graph looks relative to its history.  The chart is following:  (click to enlarge)
Examining the graph above, the information is similar to Goldcorp's, the long white candle yesterday overwhelms the previous red candles and brings the ratio back over the 200 day ma.  The $XAU:$Gold ratio PPO is also indicating bottom and change in sentiment.  The Gold stocks may have turned and begin again to leverage the price of Gold.
Okay, what about the Silver sector?  Perhaps the author's call for Silver bottom last week was a little bit early.  The chart for SIL, the ETF of the top Silver miners in the world follows:  (click to enlarge)
The chart for SIL above is also displaying a long white candle yesterday, and red for today.  The SIL stock price has declined almost 30% since the beginning of the year.  Is not Silver expected to move more than Gold?  Are not the Silver mining equities expected to leverage upon the Silver price moves?  (Yes, the equities also leverage the Silver price moves downwards)  The early smart money seems to be investing now in the Silver equities.  The author posted  a previous listing of possible suspects a few postings back, here.
Finally, just to ensure, that we are not just out in left field all alone, let us examine the health of the Canadian Venture Exchange, the home of the majority of Junior mining stocks.  Note that Seeking Alpha contributor J. S. Kim has just posted an exemplary article about investing in mining juniors here.  The chart of the Venture Composite Index follows:  (click to enlarge)
The chart for the Venture appears to have idled since the 2011 year started, but is showing a low 3 days ago and a white candle for yesterday.  The chart looks healthy, though some detractors may say the chart appears to be topping.
Perhaps, this may be a wise time to position oneself in selected Precious Metals Junior mining stocks?

Disclosure: The author is long Junior mining stocks.
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Tuesday, January 4, 2011

Sample Notes and Flash for Readers on Email List

As we enter the year 2011, the markets are just as inscrutable as previously.  The possibility of a global economic recovery is promising, yet there are still many reasons to be wary.  Where should one dip their toe into the investment markets?

I am a firm believer in the rise of emerging markets and a firm recovery in North America.  I believe the safest and most reliable gains will be in the basic materials sector.  For myself, I am positioned in smaller miners and precious metals explorers and special mining situations.

For readers, interested in a sporadic notes email, just pop me your email address and I will put you on my distribution list for my market thoughts and occasional flashes.

Marco Goombarh

Goombarh 20, Jan 4th, 2011
Good Morning,
Just sitting and examining the news, looking for a bit of inspiration here, while Gold/Silver is showing volatility and dropping about 2%.  Just wondering about the AGQ, double bull Silver ETF down 4%.

Floods in Queensland is affecting world coal production.  About 50% of the world's coking coal comes from there and may be affected for a few months, due to the widespread flooding covering an area the size of France and Germany.  See Bloomberg news here:
Interestingly, the US coal miners have just been on a tear in the last week.  CLF, MEE, PCX, CLD.  Similar for the US listed China Coal miners, SCOK, LLEN, PUDA.

An interesting posting about mining at Seeking Alpha:

Noticed Alco is up 4% while rest of miners are sagging.  Support for the idea of Aluminum in a new upswing.

Copper has hit new highs and is driving copper miners.  Norsemont and Mercator Minerals are both up.

Rare earths are certainly in a frenzy, with AVL and REE up large, but I am afraid, that I have no insights or comments about those, except that I am not a participant and I don't plan to be. 

Almaden (AAU, TSX:AMM) is up with anticipation of the epithermal gold drilling results to be released in one large batch.  My previous thoughts on that:

As stated previously, I am expecting good news from Great Basin Gold (GBG) and am nibbling to increase my position prior to the results expected at the beginning of February.

Longer term, I am expecting to pull some monies out from Gold companies as they rise and re-deploy to the smaller base metals miners.  I see rises for aluminum, Zinc, Nickel and other metals that will be needed in recovery, but have not yet participated in gains.

Overall, I am doing nothing, but just sitting, watching and digesting the news, as I am keeping steady with the previous positioning and awaiting an inspiration for any new trading ideas.

Marco G.
Goombarh Flash 11, Dec 24th, 2010
Good Morning,
Just had a chance to go over the Great Basin Gold (GBG) transcript of their conference call on November 16th.   Wow, they are talking of 5000 tons of Gold ore that averages 15 ounces per ton, on page 15:
Link to transcript:
Link to quarter presentation:
Also on page 4, Ferdi's talking about being cash flow positive in this quarter ending December 31st:
With the increased production from Hollister and first production ounces from Burnstone, we expect to be cash flow positive from operations in quarter four 2010.
What with the possibility of some of the super bonanza high grade Hollister ore hitting the books and also turning cash flow positive, GBG should have some great news in mid -February, 2011.
Smart people should begin to position themselves appropriately. 
Marco G.