I Am Re-Iterating Last Week’s “Buy” Signal In Mining Stocks

Last week I posted analysis explaining why I thought the market was giving us “buy” signal from the trading action in the mining shares.  As everyone should know, stock forecasting is more like “horseshoes and hand-grenades” than a precision science.   Based on the action from Thursday and Friday, I am re-iterating my strong buy call.

During the last week I saw three strong contrarian signals that the manipulated sell-off in the precious metals was bottoming.

1)  The Marketvane gold and silver investor sentiment readings hit levels not seen since June 2013.   The silver sentiment reading hit it’s all-time low seen June 2013.   The gold sentiment reading did not hit an all-time low, but it went below 50, a level which usual coincides with market bottoms.

2)  The HGNSI (Hulbert Gold Stock Newsletter Index) dropped to -32.    This is a near-perfect contrarian indicator.  -32 means that not only are gold stock newsletters telling their investors to “sell,” but a high percentage are recommending that subscribers go short.

3)  For the first time ever, I received a “hate” email.  Some financial adviser who works for Merrill Lynch/Bank of America out of Arizona sent me a malicious email.  That’s a first and my first reaction was “we’re bottoming.”

Perhaps the most telling indicator is the trading action in JNUG.  Below is a daily graph of JNUG (a leveraged ETF based on a junior mining index) and a 2-day, 3-minute graph (click on the graphs to enlarge):

JNUG1

From this graph you can see definitive rising volume during the sector’s move higher from early June, and definitive declining volume during the manipulated sell-off.  It would appear that on Thursday we saw “capitulative” selling from people like the Merrill Lynch financial adviser.  Rising volume on moves higher, followed by declining volume on sell-offs is typically bullish.

The next graph shows a 2-day (Thurs-Fri) 3-minute trading graph for JNUG:

JNUG2

As you can see from this graph, Thursday’s capitulative sell-off had heavy selling into the close.  On Friday, not only was JNUG heavily bought into the close, but it popped up over $1 in the last few minutes on very heavy volume.  JNUG continued to drift slightly higher in the after-hours trading Friday (shaded area on the right).

Again, we will not likely see a “V” bounce in the sector.  There’s motivated forces (Fed, Goverment, Comex paper bullion banks) trying to keep a lid on the sector.  But last week saw extraordinarily heavy buying in the Asian physical market (record deliveries on the Shanghai Gold Exchange on Friday).  Plus India, despite import controls, has started to buy a lot more gold than it was buying at this time last year.

My short-term, large-cap trading play exceeded my target when I first issued that call in July (it bounced up over 10% before the sector sell-off hit).   The stock was hit pretty hard in the last and it has given investors a great entry price for another short term trading play OR long term entry into a high quality stock.  Ditto with the stock play I posted last week.  This Company will be starting up its first mine in December or January and is quite undervalued relative to the intrinsic value of the gold it has in the ground.

You can access these two reports and some great junior mining stock ideas here:  Mining Stock Research

18 thoughts on “I Am Re-Iterating Last Week’s “Buy” Signal In Mining Stocks

  1. Its like a broken record hearing how mining stocks and precious metals are going up up up. The bubble in PMs popped in 2011 and gold/silver will not go above their all time highs for another generation (if ever).

    I’m sorry but its time to move on to another investment category. Silver isn’t going to $50+ and gold isn’t going above $1900.

    Silver and gold are in a bear market and continue to gradually decline.

    I will eagerly follow your website to see how things pan out!

  2. The PMs and their miners are the current most hated asset classes that I’m aware of. This coincides with the fact that they are the only assets that are significantly undervalued. Buy low sell high; at least that’s one strategy. 🙂 Right now buying the S&P500 would be the opposite of this. Good luck trading.

  3. Looking back six weeks on a 60-minute chart shows JNUG having an hourly move just as large or larger 20 times out of the 210 bars. On 9/4/2014, JNUG lost 15 to 16% from open to close. I agree that we are not going to see a V-shaped bounce and the last bounce on Friday may have been a dead cat bounce. Can’t say I like the technical set-up for going long just yet…

    1. Yep. Sorry I can’t deliver immediate results like Wall Street can. My call is not a one day or one week call. I guess you didn’t happen see that gold rallied overnight up until London opened. That’s because you, like every other brain dead boob, only look at what happens to gold when the LBMA and Comex are open – when the paper manipulators dump fraudulent gold on the market. If that was stopped by the regulators, the mining stocks would be nicely green this morning.

      1. FYI, Shanghai was closed last night. But India was in full swing. That’s why gold rallied until Bombay closed and then got hit. Normally it rallies through the Honk Kong close and then gets flooded lower with paper gold from London and Globex (Comex)

        1. And silver is now sub $19/oz and gold is approaching the the sub $1200/oz mark.

          Face it guys, PMs are finished. This is a bear market, theres no denying that!

          1. By the way, this not meant to be like Yahoo chat board where you just vomit-post turret-syndrome like cheers for your view on the market. I will likely not post anymore retarded comments like that unless meaningful analysis accompanies your assertions. I think everyone who reads my blog is well aware of where gold and silver are trading in the paper markets. And gold is not even remotely close to “sub-1200.”

      2. I follow the gold price 24h a day. How can you say the markets are manipulated, the gold price is suppressed and making rising gold stock calls at the same time. Strange. Why don’t you follow the manipulation and go long? Wouldn’t be so brain dead, would it?

        1. I don’t know anyone who can trade this manipulated market with any success. It’s completely criminal. I trade this about as well anyone can. I raised a bunch of cash in my fund 2 weeks ago – took profits in some miners that had run up counter to the trend – i.e. we have about 4 positions that ran up quite a bit until Thursday/Friday. I started legging into more JNUG on Friday and I’m about to reload one of the stocks that I took big profits in.

          China was closed last night and that is HUGE. It lets the hedge funds and banks trample on the market once the physical closes. It happens every night. I’m too old now to stay up all night and trade this. I stayed up every night and traded silver futures – successfully – from mid-2005 – mid-2007. It was wearing on my health. I stopped trading silver futures altogether in early 2008 because of the extreme manipulation.

          The stocks are bottoming here and I apologize if you expect me to call the exact bottom to the day. I don’t know anyone who can do that – et tu, Brute?

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