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Signs Point to a Turnaround for Mining Stocks

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It appears that the miners will once again begin a period of rally (if they haven't done so already).

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Let's now move to a chart that measures gold stocks performance relative to the general stock market.



In this GDX:SPY ratio chart, we see a huge spike in the ratio volumes, actually much higher than ever seen before. A high ratio of volumes usually accompanies local extremes and we are surely close to a local bottom here, not a top. Clearly this could mark the end of the corrections in the entire precious metals sector, not only the mining stocks.

To finish off, we'll take a look at Gold Miners Bullish Percent Index.



The interesting thing about gold stocks is that the Gold Miners Bullish Percent Index dropped below 5 last week. The only two times that has been the case (since this index' inception in 2008) were in early November 2008 and early December 2008 -- after both parts of the major double-bottom pattern. Naturally, the implications are bullish as this is yet another signal that the sentiment is now extremely negative for the whole sector.

This chart confirms that the situation is critical. When it has been as oversold in the past, the major bottom had already been seen and higher prices quickly followed. The implications here are clearly bullish for gold prices in the weeks ahead.

Summing up, the outlook for the mining stocks is becoming more bullish with each passing week. Numerous signals this week point to a turnaround on the horizon and it appears that the miners will once again begin a period of rally (if they haven't done so already).

For the full version of this essay and more, visit Sunshine Profits' website.

Twitter: @SunshineProfits
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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