Happy Investing in 2012

Happy New Year and Investing in 2012!

As an example of what you may expect, if you get in on my email list, here it is, a recent commentary:

=======================================================

Goombarh 73 - February 2, 2012

Good Morning,

It is time to get back to business folks, if you are interested in the stock market.

Since October, the general markets have recovered significantly.  The S&P500 is now at 1333, whereas the high was 1370 for last year, the highest since the 2008 crash.  That is if you were in the general markets, your portfolio should now be close to the highest since 2008, if you are an average investor.  Here is the headline from Bloomberg this morning:

http://www.bloomberg.com/news/2012-02-01/global-strategists-abandoning-bearish-views-after-missing-rally.html

This means there is a lot of big money, still on the sidelines that will come into the markets later and assist with driving things upwards.  Also, this is a presidential election year, and no, the president will not allow the economy to falter during his re-election push.

For myself, I invest in the riskier small cap resource stocks, and no I am not back to the highest since 2008.  The barometer for my portfolio may be the TSXV index which is at 1640 presently, a good distance of 33% off from the peak of 2464 achieved in February 2011, the highest since 2008.  In fact, I am a good 50% off from my own peak achieved in about March 2011.  What I hope to have learned from this latest episode of the markets gyrating downwards, is to take a portion of the winnings off the table, when the market is good.   This is a very important lesson to take to heart.  Preserve the cash, and redeploy later, when the markets are down.

Now back to business, the markets are moving upwards and the investor needs to be in and positioned to be able to reap the possible future gains.  Let me refresh myself as to my goals and market positioning guidelines.  Following are some guiding market thoughts collected over time.

Goombarh Strategy 2012

1.      Know something that will be valued higher in the future.

a.       shale oil - Bakken, Kurdistan oil (held back with politics)

b.      Folded porous carbonate structure allowing high producing level -Shoal Point Energy (SHP, SHPNF) - huge multi-billion barrel oil prospect; oil tests coming in 2012 and running right now.

2.      Track the trend of a commodity that is moving higher or may have a future shortage.

a.       oil, and metals; take a look at Zinc

b.      potash - Ethiopian Potash (FED, ETPHF) - shallow open pit capable deposit; 43-101 coming.

3.      Consider that the general markets are in uptrend before investing.

a.       S&P now moving upwards.

4.      Leverage carefully.

a.       Warrants, and such

b.      Petroamerica Warrants (PTAWF)

5.      Lower priced stocks move higher with easier gains.

a.       TSXV stocks, explorers and developers with solid management and properties

b.      Developers becoming producers - Silvermex (SLX, GGCRF) - producer growing larger, Great Basin Gold (GBG) - solid management and will come on stream with two producing gold mines, Westernzagros (WZR, WZGRF) - Sarquala producing 5000 barrels per day, Mil Qasm test and Kudimir 2 are coming in 2012.

6.      Consider marginal players, with bad news factored in and a change in outlook.

a.       Marginal stocks have the highest gains in a turnaround. - Petroamerica, (PTA, PTAXF) - turning into producer.

7.      Consider that market judges on growth prospects rather than absolute value

a.       market is not rational and will move on hype; so consider when to get out!  Already have getting out in mind, when you are getting in.

As to what is exciting recently, take a look at Shoal Point Energy.  Here is the chart from yesterday:

SHP has broken out and is now at .40 cents.  Here is a link to their latest corporate presentation:

http://shoalpointenergy.com/pdfs/SHPAGM%20Presentation%20Jan%2026,%202012.pdf

I am sitting on my hands (not selling), and if it is not too optimistic, this stock may be a possible home run.

Petroamerica (PTA, PTAXF) may be readying themselves for a big run. 

Ethiopian Potash (FED, ETPHF) has crashed lower, possibly on the decline in sentiment about potash pricing and sentiment about Ethiopia as being safe place to invest in, but they are presently drilling and should have a 43-101 within 6 months.

Westernzagros (WZR, WZRFF) is being accumulated by persons unknown and are awaiting news from Mil Qasm and Kudamir 2 (being drilled by Talsiman Energy).  This is a good longer term stock in my opinion.

Silvermex (SLX, GGCRF) will move with Silver prices higher.  They have strong management and will be able to deliver on their promises of increased production, but it will take more capital and time.

Oh, attached is my latest take on Great Basin Gold (GBG, which I have posted on Seeking Alpha.  This would be my safest longer term play.  Great management and gold production coming on-line. 

Until next time,

Marco G.

http://goombarhsedge.blogspot.com/

http://seekingalpha.com/author/marco-g/articles

===============================================

To be on my email list, send your email address to goombarh at gmail.com.  It is that simple, and I will not disclose your address to anyone.

Hunt for Silver - Canadian Zinc

Hunt for Silver - Canadian Zinc

April 24, 2010

By:  Marco G. http://goombarhsedge.blogspot.com/

The first "Hunt" in the Hunt for Silver refers to the Hunt brothers family led by Nelson Bunker Hunt, the many children of the Texan oil billionaire who were notorious in being the prime factor in the  1980's Silver price rise to $50 (Eichenwald, 1989):

Silver prices rose from $11 an ounce in September 1979 to a peak of about $50 an ounce in January 1980. The price of silver then collapsed, falling below $11 an ounce in about two months.

Nelson Bunker had formed the idea of investing in the Silver commodity in 1970, when it was still only $1.50 an ounce (Swanson, 2009).  By 1974, he had over 9% of the world's free supply, with Silver priced then at $3 USD (Tillberg, 2011), of 55 million ounces in futures contracts under the Hunt family umbrella.  For $175 million dollars the Hunts took delivery, which was considered unusual for speculators.  Then under the guard of a dozen armed Texas cowboy marksmen (LaBorde, 2011), the Hunts secretly transported a portion of their bullion using unmarked Boeing jets from New York to storage in 6 Switzerland vaults (Hurt III, 1980).

Later, on July 1, 1979, in Bermuda, the Hunts formed the International Metals Investment Company together with two affluent Arabs, Sheikh Ali bin Mussalam and Sheikh Mohammed Aboud al- Amoudi (Markham, 2002) as partners for Silver investment.  This company bought 43 million ounces of Silver.  Another associated investor Naji Robert Nahas, an Egyptian born Brazilian, in partnership with Norton Waltuch, bought 42 million ounces of Silver (Tillberg, 2011).  There were other unidentified Middle Eastern traders that were Silver buyers in the fall of 1979.   

On October 3, 1979 when Silver had risen to $17.88 USD (Hurt III, 1980), the Chicago Board of Trade (CBOT) changed the rules so that no traders could hold more than 3 million ounces of Silver futures (Maloney, 2011).  Those holding more were forced to liquidate.  Then on January 7, 1980, COMEX the other exchange, also changed the rules limiting investors to 10 million ounces of Silver futures and any overage had to be liquidated.  The January 21, 1980 peak of the Silver price rise was $49.45 USD based upon the London PM fix (Silver Institute, 2011), with Silver futures priced at $52.50 USD (Maloney, 2011).  It is estimated that the Hunts and their allies controlled 77% of the world's Silver at that time (Tillberg, 2011).  That same day , January 21, 1980, COMEX, with the backing of the Commodities Futures Trading Commission (CFTC) in Washington, announced liquidation orders only, no new buying (Maloney, 2011).  The Silver price began to plummet.  As some of the Hunt holdings were purchased on margin, with the dropping Silver price, the Hunts had to find more funds.  This they did, using their other investments until March, 1980.  On March 14, 1980, Volker, then head of the US Federal Reserve decreed that banks could not make loans for speculation in precious metals (Tillberg, 2011).  Now the bank sources of funding for the Hunts dried up.

The climax of the unravelling of the Silver prices came on "Silver Thursday" (Wikipedia, 2011), March 27, 1980, in a $100 million margin call for the Hunts.  They faced a $1 billion USD in losses on that one day.  The Hunts' Silver holdings were estimated to have been $10 billion at the peak and had dropped to around $3 billion earlier that Thursday  (Time Magazine, 1980).  Then the Silver price collapsed from $21.50 to $10.20 within 3 days (Time Magazine, 1980).

Following these wild Silver price gyrations, the CFTC in 1981 set speculative position limits in futures contracts to forestall future attempts to corner commodities (Stephenson, 2011).  The two Hunt brothers, Nelson Bunker Hunt and William Herbert Hunt  were charged by the CFTC in 1985 (CFTC, 2007) after an investigation that they had attempted to manipulate Silver prices in 1979 and 1980.  Because of these charges, legal proceedings and fines, the Hunts filed for bankruptcy protection in September, 1988 (Wikipedia, 2011).  In 1989, Nelson Bunker Hunt settled with the CFTC (Eichenwald, 1989).

William Bunker Hunt's reason for investing in Silver was stated as (Time Magazine, 1980):

"Silver looked safer than overseas oil concessions, the way things were going.  And precious metals were a good hedge against paper money."

Now in April, 2011 the second "Hunt" for Silver may just be occurring at the present time, not by a group of a few rich investors, but as the savings of choice of the new emerging market's middle classes as the Silver prices are closing in on the 1980's record price of $49.45 USD.  See the 10 year price for Silver following:

As of this writing on Easter weekend the Silver price has closed trading at $46.45 USD while the price overseas is flirting at over $47 USD.

One related investment that the Hunt's had during the last Silver price run was the Prairie Creek mine in northern Canada.  The mine infrastructure was 95% completed in 1982 when the property was placed into receivership.  This rich Silver, zinc, lead mine was to become a cornerstone in the Hunt's Silver empire, but due to the Silver price collapse, the property was unclaimed until purchased in 1992 by San Andreas Resources now renamed as Canadian Zinc (US:  CZICF, Cdn: CZN).

This mine is distinguished by their high grades of ore, with an average grade of 155g of Silver, 12% zinc, 10% lead and .3 % copper per ton of ore.  At today's prices, the ore is worth over $700 per ton.  There are 6 million tons of Measured and Indicated (M&I) Resources with a further 6 million tons of Inferred Resources from the 2007 technical report.  That gives a value of $4.2 billion USD of metals in the ground by counting only the M&I Resources (another $4.2 billion for the Inferred).  Using a rule of thumb for a market valuation scale of from 2% for a discovery to  24% for in production, if we apply a 12% of the in ground value for the M&I Resources over the 138 million share float, the stock value comes to over $3 USD per share.

The found strike length of the resources is over 16 kilometres long with the originally discovered vein mineralization.  Recently, stratabound mineralization has been found to be coincident with the vein structure.  This stratabound style of mineralization is much thicker and exploration is in progress for further discoveries along the veins.

In the author's opinion, Canadian Zinc is poised for upside with the rising metals prices, pending permit approvals and forthcoming exploration successes.

References:

CFTC. (2007). Significant Dates in CFTC History - 1980s. Retrieved April 23, 2011, from www.cftc.gov: http://www.cftc.gov/reports/strategicplan/2012/2012strategicplanapp0202.html

Eichenwald, K. (1989, December 21). New York Times - Business Day. Retrieved April 23, 2011, from New York Times: http://www.nytimes.com/1989/12/21/business/2-hunts-fined-and-banned-from-trades.html

Hurt III, H. (1980, September). Silver Finger. Retrieved April 23, 2011, from sharelynx.com: http://www.sharelynx.com/papers/BunkerHunt.php

LaBorde, L. (2011). H.L. Hunt and the Circle K Cowboys. Retrieved April 23, 2011, from rapidtrends.com: http://www.rapidtrends.com/hunt-brothers-and-silver-story/

Maloney, M. (2011). How the Hunt Brothers Capped Gold...Yes, GOLD! Retrieved April 24, 2011, from www.silver-info.com: http://www.silver-info.com/how-the-hunt-brothers-capped-gold.htm

Markham, J. (2002). A financial history of the United States. New York: M. E. Sharpe Inc.

Silver Institute. (2011). Price History 1979 to 1980. Retrieved April 23, 2011, from www.silverinstitute.org: http://www.silverinstitute.org/19791980.php

Stephenson, E. (2011, Mar 28). Timeline - US CFTC road to reform. Retrieved April 23, 2011, from reuters.com: http://in.reuters.com/article/2011/03/28/financial-regulation-timeline-cftc-idINN2818930520110328

Swanson, D. J. (2009, March 22). Once world's richest man, Bunker Hunt has "no regrets" 29 years after silver collapse. Retrieved April 24, 2011, from www.txcn.com: http://www.txcn.com/sharedcontent/dws/dn/latestnews/stories/032209dnprobunkerhunt.3d93ff8.html

Tillberg, J. (2011, March 4). The hunt Borthers, How they Did It and What we Can Learn From it. Retrieved April 28, 2011, from Seekingalpha.com: http://seekingalpha.com/instablog/170390-jason-tillberg/144117-the-hunt-brothers-how-they-did-it-and-what-we-can-learn-from-it

Time Magazine. (1980, April 14). Business: The Hunts Are on the Hunt. Time .

Time Magazine. (1980, April 7). Nation: He has a Passion for Silver. Time , p. 1980.

Wikipedia. (2011, April 22). Nelson Bunker Hunt. Retrieved April 23, 2011, from en.wikipedia.org: http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt

Wikipedia. (2011, April 21). Silver Thursday. Retrieved April 23, 2011, from en.wikipedia.org: http://en.wikipedia.org/wiki/Silver_Thursday#cite_note-0

Disclosure: The author is long Canadian Zinc.

Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Gold/Silver Continues Up - Get some Corn and Wheat!

Goombarh 55 - April 26th, 2011

Good Afternoon,

Been busy, have not sent out anything recently.  Sorry about not notifying for the Gold Precious Metals (PM) volatility yesterday and today; because it is options expiry for the month again.  Therefore sit tight with your positioning, the PM will recover.  Silver has touched $50USD and then drops 10%.  Gold reaches new heights and then drops 1%.  Comex has decreed new margin requirements:  http://www.zerohedge.com/article/cme-hikes-silver-initial-and-maintenance-margins-9; but it is to no avail, as there is still strong buying coming in with each decline.  Check the strength in the daily moves up, even as the day starts negative, in the chart following of Goldcorp.

My sense, is that there are further gains in PM ahead still and the May factor is not here yet.  Look at the trend of the GLD being supported by the SPY, so as regular markets move up, so will the precious metals.  See the following chart of GLD compared with the SPY.

What about the Gold miners, you ask?  Well, I just bought GG.ws Goldcorp warrants, as I think only the strongest of the strong leaders, they will still move up.  As for the others, such as GBG, I believe the moves will only come after strong production reports, and that is only likely this fall.  This time here is for accumulating the Great Basins and Silvermexes of this world.

As previously mentioned, I have bought DAG, the double bull agriculture ETF because there will be a wheat and corn shortage this summer.  This will serve as my cash holding until the fall metals runs start, later this summer.

Until next time,

Marco G.

http://goombarhsedge.blogspot.com/

http://seekingalpha.com/author/marco-g/articles

Top Safe Picks @ Bargain Prices - GBG, GGCRF/SLX

Goombarh 50 - April 11th, 2011

Good morning,

All is well with Great Basin Gold (GBG), though the market does not appreciate this emerging mid-tier producer.  News this morning:

http://finance.yahoo.com/news/GREAT-BASIN-GOLD-UPDATES-cnw-2743733436.html?x=0&.v=1

More exploration finds at Hollister with high grade extensions off their existing gold veins and surface exploration startup.  This I believe will be the key to unlock the future potential of GBG.  It is possible to find another deposit similar to Hollister at their claims! At Burnstone the ramp up is on-going, and they are finding more Gold in the Kimberly layered sediments that is the reef.  The thickness is greater than expected and the grades are higher than expected.  However, as the mine is in South Africa, the market will just ignore this, and will wait for the expected Gold output information before re-rating the share price, this fall.  Great Basin is just a great bargain at this price level!

As stated in the Silver article sent out yesterday, I believe Silvermex (GGCRF, TSX: SLX)is a great bargain at this price level also!

Those are two, underestimated strong precious metal stocks, while Gold and Silver prices are pursuing higher prices.  One can do no better that these two for a relatively safe, yet prospective stock.  I would not be concerned about the ups and downs, as multiples are in store for these two.

Further thoughts for readers, I do understand that there is a varied background out there.  On the one hand, I advocate paying attention daily, as I try to do, yet on the other, I say the buy and hold is dead.  Many readers would not have the time available to perform daily monitoring of your positions, nor would you wish to, as there are other things to do in life.  Do not try to emulate, the jumping in and out of stock positions, as I seem to be doing recently.  For a longer term hold, meaning over 1 year, the above two stocks cannot be beat in my opinion.  Their strong management coupled with their prospective mining properties are an ideal mix for the rising environment for equities, precious metals rising and demand growth stemming from the emerging markets middle classes.

Enough said, and now I am looking for more risky and volatile situations for myself and other traders.  As disclosed previously, I have positions in:

·         Pacific Wildcat Resources (PWCRF, TSX: PAW) - Rare Earths in Kenya Africa.

·         Ethiopian Postash (TSX:FED) - KCL in Danakil basin in Ethiopia.

·         Compliance Energy (CPYCF, TSX:CED) - Coal in BC Canada.

·         Shore Gold (SGHDF, TSX:SGF) - diamonds in Saskatchewan, Canada.

·         Anvel Gold (ANVZF, TSX:AVK) - gold miner in Mali, Africa

Until next time,

Marco G.

http://goombarhsedge.blogspot.com/

http://seekingalpha.com/author/marco-g/articles

Gold After the Earthquake, Tsunami, and Nuclear Disruptions

Gold After the Earthquake, Tsunami, and Nuclear Disruptions

You the reader are obviously looking at this because, you too would like to know what is next for Gold.  Well, after the recent dip since the beginning of March and culminating in the "Ides of March" (March 15th), an examination of the Gold price in USD is in order to determine the next phase for Gold:  (Click on the chart to enlarge)

The chart above shows a steep drop happening on the Ides that showed a spread of $60 USD in the drop to just touching the blue 50 day moving average line and then bouncing back.

Today is Saint Patrick's day and this may be a good omen for Gold investors; so using the green theme, the author sees an about-face for the Gold/Silver and mining sectors.  The fall on the 15th was enough and Gold held steady yesterday, March 16th, around the $1400 USD level.  The fundamental drivers for Gold and precious metals have not changed.  For review from an earlier post, these driving forces are:

1. Inflation of Paper Currencies

The markets interpret the FOMC's previous pronouncements as inflationary for paper currencies, and this effect is expected to continue until there are some indications of inflation being reined in. This currency inflation is a fundamental driver for the precious metals.

2. Rise of the World's Middle Class Supporting Gold Prices

There is a rising middle class as the world's emerging markets continue to grow and gain parity with the world's developed markets. The size of the world's middle class growth is largest in the Asian economies and of a scale that the world has never before seen. Asians have a particular affinity for the precious metals due to their history and culture of precious metals being a store of wealth. This buying by emerging middle classes provides a strong base of support for precious metals prices.

3. Peak Gold Is Coming Due to Higher Costs and Lower Grades

Barrick Gold's (ABX) chief executive Aaron Regent already declared a state of "peak gold" in 2009. The thesis is that gold mining is difficult, and the challenges of increasing costs, lower gold grades, and difficult operating environments all coalesce to decrease gold production supply. This "peak gold" dynamic is ensuring that the new production supply of precious metals will be constrained in the future.

It seems, that the author's call for another "Bull Run for Gold" was disrupted by the natural Earth disaster of the Japanese earthquake, the resulting tsunami destruction and the follow-up nuclear debacles.  The resulting stock markets disarray disrupted the upward path for the rise of Gold.
Not to belittle the human suffering impacts of these events, but the news of these happenings should have now been priced into the markets. Other market factors would include the Copper price, which is recovering after being oversold in February due to the Asian Lunar New Year.   Also, the Steel ETF  SLX is bottoming and is showing signs of moving up.  And finally the  TSX Venture has bottomed and is slowly moving higher. These three equities and indices are leaders for the general markets and may be signs that the S&P is due to recover.  The regular markets have had a good shakeout.  Most of the gains in 2011 for most stocks have evaporated due to this shakeout. 

Japan has injected upto $170 Billion equivalents to calm and support the financial markets after the severe drop on March 15th.  The Japanese will repatriate their world-wide investments to fund the re-construction, and the impact will be felt in world markets, but recovery shall prevail.  The FOMC sees no further need for monetary injections in the US as the recovery is strong enough.

In the author's opinion, with the general markets coming back, the Gold Bull Run shall continue.  So, therefore, the Gold/Silver stocks should move forward from here.

Disclosure: The author is long Gold and precious metals and other mining equities.

Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Silver Bull in Wave 3 - Feb 16, 2011

Goombarh 33,  Feb 16th, 2011

Good Morning,

Just one chart to show where we are at in the Silver Bull.  Came across this quite accidentally when surveying my positions and watch list stocks.  The chart is of SIL, Silver miners ETF.

A longer time frame certainly improves the vision and perspective, doesn't it.  Sometimes one can not see the forest for the trees obscuring the view! 

This chart reminds me of Elliot Waves, where just impulse wave 1, 100% (double) move has occurred this fall and wave 2, a 50% correction has just ended on Jan 25th or so.  Then we are in the beginnings of Impulse wave 3, which as you students of Elliot may know, will be the most powerful and longest up wave.

The author has not seen this view of the charts anywhere recently, and so you the reader should treat this information as an early participant, to take advantage of this information.

What is this chart telling us...We are in the middle of a massive Silver Bull!

Where are we headed in this Silver Bull...well, wave three according to Elliot theory is expected to be 1 to 1.63 times the length of wave 1; this may take the SIL chart to....an estimated $34 to $42 range or an estimated 41% to 75% gain from today's price

Does this work?....Yes, mostly, my experience is that Elliot is a pretty good predictor of value or stock price...within the accuracy range of 20% or so.

Can I apply the same info to my stock...Yes, you may be able to roughly translate the 41% to 75% move to your own Silver stock.  Of course your Silver stock will be different dependent upon the stock characteristics, but you now know and have the comfort that the portended trend is upwards for another 50% in the next half year or so.

The weakness of Elliott, in my experience, is that the time frames are not very finite...that is the dates for the peaks are uncertain.

What else is the chart telling us?

1.      Miners are leveraging the Silver metal itself; note the red trace is for SLV the Silver metal ETF.  Note that SIL leveraged upwards but did not leverage downward in the pullback, which just indicates the strength of this move, and continued bullishness from the market participants.

2.      Volume increase is up; bullish move.

3.      True Strength has bottomed and is moving up.

4.      Chaikin Money flow has bottomed and is moving up.

Is this infallible?....Of course this is fallible...this is the stock market ...which is an extension of our world...and anything is possible for the future.  There are no hard and fast future crystal ball predictions, just possible indications.

So position yourselves readers, the best is yet to come for Silver miners!

Until next time,

Marco G.

http://goombarhsedge.blogspot.com/

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.

Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.