Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Is Panic Selling Marking Bear Market Bottom In Gold and Silver Miners?

Commodities / Gold and Silver Stocks 2013 Apr 06, 2013 - 12:49 PM GMT

By: Jeb_Handwerger

Commodities

One of the ways to look for a bear market low is to look for panic selling and capitulation after an extended downtrend. Since 2013 began the Venture has had 3 months of losses compared to the Dow Industrials.


$CDNX:$INDU Ratio

This may be a record consecutive decline as money seeks out income in large cap dividends rather than growth in smaller speculative issues. Remember that just as parabolic rises forecast major tops, cascading waterfalls, capitulation and panic selling usually marks major bear market bottoms. Value investors try to buy near a major low and look for panic selling where fundamentals and balance sheets are disregarded. This may be exactly what is occurring in the junior mining investment arena.

The resource area may be in the midst of a three month capitulation and major rotation. Old, tired players are trying to sell at any price making room for the next fresh group of value investors and entrepreneurs picking up discounted assets.

This sort of parabolic downward move historically represents bear market bottoms as the shorts cover and value investors step in. Extremely powerful upward moves can follow as shorts cover and fresh new buying comes in. Short term investors may be mistakenly selling their wealth in the earth assets at pennies on the dollar to chase the sectors actively supported by Central Banks such as housing and financials. These sectors may be risky, overbought and could easily correct.

I believe long term resource investors should exercise caution selling into this panic after a 2+ year decline as this panic capitulation may mark the bear cycle low and become a major reversal area. Smart capital may soon enter the wealth in the earth sector to hedge against inflationary risks as mining equity valuations hit record lows while large cap equities move into parabolic territory.

Despite the record printing of fiat currency that was thrown at the toxic U.S. housing market and financial sector, mining equities and commodities have been beaten down. These easy money policies not affecting commodities defies all reason and logic in the short term. Remember it is a goal for governments to disguise inflation from the masses. As I have always reminded you the markets will do whatever it can to misdirect and confuse the amateur investor in the short term.

There is a major disconnect between the markets and the real economy. The Dow is hitting record highs, yet the job market is weak. Many investors were concerned that the Fed would have to exit from quantitative easing. This recent jobs report will delay any hawkish move and will continue to support printing dollars to attempt to boost the economy. Quantitative Easing will continue for some time benefitting precious metals and commodity prices.

Gold and silver may bounce off important support levels.

GLD SPDR Gold Trust Shares NYSE + BATS

Banks, housing and the US equity markets are soaring despite an extremely high unemployment rate. This will force the Fed to continue quantitative easing. Silver may even outperform gold to the upside as it has been basing longer and may be a more affordable alternative to struggling middle class wage earners who are looking to hedge against further currency devaluations and potential bank confiscations.

SLV iShares Silver Trust NYSE + BATS

Eventually, capital will flow into precious metals especially silver which is holding key technical support and is demonstrating increasing momentum. No one has wanted to buy silver and mining equities for over two years now, but that may change soon as governments continue to promote inflation through easy money policies. This year may mark the turning point for silver and the miners which represent deep discounts to value investors.

Short sighted investors chasing momentum and the investment crowd are bidding up Dow dividend stocks. This craze is nothing new.

In the late 1990s, there was a big boom in dividend stocks. Billions of dollars went into this area as investors believed they were a safe haven and they could never lose. This continued rapidly until the price of the Dow dividend stocks moved too high and the dividends became minuscule compared to other growth opportunities. Eventually, investors rotated into the speculative stocks. This may happen again as history may not repeat but it tends to mimic.

The more sectors or investment approaches become popular, the less chance of being successful. Therefore, I look for what is not popular at the moment to 99% of the population and look for areas where I see supply-demand imbalances, which could spark the next rally. Remember 2011 and 2012's worst performers could be 2013 and 2014's best performers.

You have to buy when there's blood in the streets and real value. That's when you have to step in and pick up the bargains. One should fight the crowd when you see value and learn to wait. To paraphrase Jesse Livermore, "Money is not made in the buying or selling, but in the waiting."

Many investors are chasing the latest bandwagon dividend Dow stocks hitting new highs, rather than doing their homework and finding discounted opportunities which are trading close to liquidation levels. A wise value investor could pick up companies now at cheap prices, wait and sell them when the return to favor.

Savvy investors will take advantage of these depressed prices. To paraphrase Gerald Loeb, "The worst way to combat inflation is to buy something at an inflated price."

Look at discounted opportunities in the resource sector, study the fundamentals and invest in bargains. Stay away from chasing sectors that are overbought with questionable fundamentals.

Amateur investors usually chase what is rising or popular, while the pros look to acquire undervalued assets. The public is usually misdirected into the latest fad which may be just about to crash. Be careful of analysts who recommend stocks at 70 times earnings like Amazon and ignores companies that are trading at record low discounts like Barrick at 6 times earnings.

Subscribe to my free newsletter to get up to the minute updates on rare earths, uranium, gold and silver.

By Jeb Handwerger

Disclosure: Author owns no stocks mentioned.

http://goldstocktrades.com

© 2013 Copyright Jeb Handwerger - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jeb Handwerger Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules