PM Stock Investors - Clive Maund Article

ksammut

Clive Maund - Strap Yourself In...

We are on the point of a major breakout by Precious Metals stocks that is expected to lead to a powerful rally. The reason that the rally will be powerful is that stocks have been held in restraint since late last year by a zone of very strong resistance in the vicinity of the 2008 highs. This resistance is on the point of being overcome and when it is the last argument that bears are using to justify their position will crumble - namely that of the non-confirmation of gold's continuing new highs by stocks - and they will be forced to cover or face annihilation. This covering should give added fuel to the accelerating rally.

The concern that gold and silver are heavily overbought is of course understandable. However, some of the biggest rallies in markets have commenced with the market breaking out in an overbought state and then running an overbought condition for a long time as it continued higher, with all those who missed the boat waiting for a sizeable reaction that never happens. We are well aware that gold and silver are now extremely overbought on a short-term basis and thus prone to a sharp but relatively shallow “air pocket” reaction which should be bought aggressively, as any such reaction, although unnerving, is likely to be short-lived.

As we look at this 4-year chart for the HUI index, we can appreciate that the big gains lie right ahead of us for the market has barely broken out yet, and the blue arrow shows the kind of advance we can look forward to if it, and the XAU index, break out to clear new highs shortly. So despite the gains of recent weeks, the lion's share of the expected major advance lies immediately ahead of us.

Many investors have been vexed by the underperformance of PM stock relative to the metals. As we have seen on the HUI index chart, conditions are ripe for stocks to surge now. With regard to the possibility that stocks will soon outperform the metals, the chart for the HUI index over gold certainly makes for interesting viewing at this time. On a chart for this ratio going back 18 months we can see that it has been converging within a Symmetrical Triangle for over a year now and as it is approaching the apex of this Triangle it MUST break out soon. For various reasons it is expected to break out upside, not least of which is the fact that stocks have a marked tendency to follow gold. If it does and gold continues to ascend as expected, it is obvious that it is perfectly reasonable to expect a dynamic and substantial uptrend in PM stocks.

laxmaster92

Do the charts show up for anyone? I'd be interested to take a look at them.

Also, what is everyone's thoughts on the article?

ksammut

<< <i>Do the charts show up for anyone? I'd be interested to take a look at them.

Also, what is everyone's thoughts on the article? >>



Strange, the charts showed this morning. Maybe a temporary blip.

roadrunner

IAG chart

I think Clive probably has it right. A number of miners have already been in corrective mode since September, and others just started in the last 2 days. If you're waiting for a good dip to get into them it's probably coming very shortly. Quite a few better juniors and intermediates are already off 10-15%. Today's 3-5% drop might be indicative of more to come, or could just be all we're going to get. GDXJ and GDX have some large gaps to fill from Monday's big jump and have a little ways more to go to fill them (55.6 for GDX). I notice that intermediates KGC, AUY, and IAG have already moved down to exactly fill their gaps. I posted the IAG chart above as sort of a bellweather for the intermediate to senior miners in general. It's in a consolidation triangle that doesn't have much further to go before breaking out. And the triangle shown can be pushed back even further to the last gold peak in late November 2009. So IAG and other gold miners have really been consolidating for 10 months while gold is already in breakout mode. While IAG's move could be either direction I'm betting on the upmove to follow gold and silver. I purchased some shares today figuring it really hasn't participated in this new rally and seems well supported by the rising trend line. It doesn't make any difference to me but John Paulson is heavily into this stock.

GDX also has a gap back at 53 from the mid-September breakout. It could possibly head back to there...which would only be a 10% pullback. Right now it's at -5%. For now, GDX has pulled back to retest the breakout of the upper channel line.

These 10 miners have been in corrective mode for several weeks for longer

Some of those guys are on my watchlist. Note that MFN just reported some operational issues while XRA and NXG just diluted their stocks by 7%/16% with recent stock offerings.

Miners vs. the Canadian dollar

If you're a Canadian miner paying your bills in Canadian dollars these are the charts to look at.

roadrunner

KUCH

<< <i>IAG chart

I think Clive probably has it right. A number of miners have already been in corrective mode since September, and others just started in the last 2 days. If you're waiting for a good dip to get into them it's probably coming very shortly. Quite a few better juniors and intermediates are already off 10-15%. Today's 3-5% drop might be indicative of more to come, or could just be all we're going to get. GDXJ and GDX have some large gaps to fill from Monday's big jump and have a little ways more to go to fill them (55.6 for GDX). I notice that intermediates KGC, AUY, and IAG have already moved down to exactly fill their gaps. I posted the IAG chart above as sort of a bellweather for the intermediate to senior miners in general. It's in a consolidation triangle that doesn't have much further to go before breaking out. And the triangle shown can be pushed back even further to the last gold peak in late November 2009. So IAG and other gold miners have really been consolidating for 10 months while gold is already in breakout mode. While IAG's move could be either direction I'm betting on the upmove to follow gold and silver. I purchased some shares today figuring it really hasn't participated in this new rally and seems well supported by the rising trend line. It doesn't make any difference to me but John Paulson is heavily into this stock.

GDX also has a gap back at 53 from the mid-September breakout. It could possibly head back to there...which would only be a 10% pullback. Right now it's at -5%. For now, GDX has pulled back to retest the breakout of the upper channel line.

These 10 miners have been in corrective mode for several weeks for longer

Some of those guys are on my watchlist. Note that MFN just reported some operational issues while XRA and NXG just diluted their stocks by 7%/16% with recent stock offerings.

Miners vs. the Canadian dollar

If you're a Canadian miner paying your bills in Canadian dollars these are the charts to look at.

roadrunner >>





RR, thanks for the above. What symbol is NovaGold? Thanks

roadrunner

RR, thanks for the above. What symbol is NovaGold? Thanks

I would have hoped you ran across the answer to that question while doing your due diligence on the stock. It's NG.

roadrunner

jmski52

Clive doesn't make this kind of call very often. I think that he's right and that now is the time to buy the dip.

Nothing has changed.