Right now, the investment community regards commodities and junior miners as the red headed stepchild as they have been in a downtrend for more than seven years. The TSX Venture Exchange is hitting all time lows as this bear market becomes the most devastating in history.
Whenever you mention gold and silver stocks, investors relate to the wipe out in many stocks which includes not just the penny junior but the leaders like Barrick (ABX), Newmont (NEM), Yamana (AUY) and Goldcorp (GG). Instead the talk on the street is the high flying tech sector such as Apple (AAPL), Facebook (FB) and Google (GOOG). Its reaching bubble territory. Apple alone is worth four times the entire mining sector put together. The divergence between tech stocks and mining stocks has once again reached dot com proportions. History may not repeat itself but it tends to be similar.
What we are seeing right now with a high priced tech sector and the extremely discounted miners is comparable to the major cycle low at the turn of the millennium. Right before Y2K the dot com’s were reaching a bubble while the miners were completely ignored. We then witnessed a major expansion in the mineral sector for seven years from 2000-2008 while equities underperformed followed by a seven year contraction from 2008-2015 where the tech stocks have outperformed the commodities from 2008-2015.
It is possible we are once again at or near the turning point or bottom in the junior mining sector and near a top in the tech sector. Only a handful of the tech high flyers have pushed the equities higher. Already the transports and utilities have been under-performing. It may be wise to hedge gains made in the S&P 500 and Nasdaq and increase accumulation of precious metals and the junior miners near historic lows. Remember the greatest gains are made in the early stage of a bull market. Early stages of bull markets come after the previous bear market capitulation.
July 24, 2015 may have marked an interim low on the GDXJ as it experienced a classic bullish engulfing reversal pattern on high volume following a major capitulation. Since that low, support has come into the GDXJ. If its the beginning of the rally, follow through should occur by the end of this week ending August 7th. I am still cautious until I see some additional buying as the precious metals rallies have been fake outs in the past. In order to confirm the interim low I would like to see some increased buying before the end of this week.
Please stay tuned to my premium service which will be monitoring technical developments and which recently highlighted these three stocks last Tuesday that are bouncing higher on major volume.