Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Analysis of Canadian Junior Gold and Silver Mining Stocks CDNX Index

Commodities / Gold & Silver Stocks Feb 05, 2009 - 12:33 PM GMT

By: Clive_Maund

Commodities Diamond Rated - Best Financial Markets Analysis ArticleFor over 18 months most junior mining stocks have put in an absolutely terrible performance. The chart for the CDNX index, which best represents junior gold miners as it is made of about 500 stocks most of which are mining stocks, makes this abundantly clear - and many investors in the sector will not of course need reminding of this.


On the 4-year chart for the CDNX index we can see that after it broke down from a classic Head-and-Shoulders top it crashed, with the decline being exacerbated by the tidal wave of selling that overwhelmed commodities and stockmarkets generally. The severe decline continued until as recently as late November, before the index finally steadied, having dropped by an amazing 80% or so from its highs. The question now is whether that's it - whether the brutal bearmarket in juniors is over.

The sheer scale of the decline, which is out of all proportion to the drop in the gold price certainly suggests that the selling has been grossly overdone, and in fact the current absurdly low valuations of the better junior gold and silver stocks would reasonably lead one to surmise that investors have decided that there won't be any need for exploration and development in the future, and that, therefore, existing mines will soldier on forever. The notion is ridiculous and is an indication of the walnut-brained manic-depressive idiocy of most investors. We can therefore conclude that the chances are high that the December low was the bottom. Additional technical factors suggesting that the index has bottomed are the huge gap between the 50 and 200-day moving averages, which shows that the index remains extremely oversold, despite the normalisation of many short-term oscillators, and the rising trend of the MACD indicator shows the recovery in sentiment that is a necessary prerequisite for a major uptrend.

The 1-year chart for the CDNX index is most revealing for on this chart we can see that following the severe decline during the second half of last year, a clear Head-and-Shoulders bottom appears to have developed with the index suspected to be completing a shallow Right Shoulder, although there remains some chance that it will drop back further in the short-term to mark out a deeper Right Shoulder. This H&S bottom pattern thus far has a downsloping neckline and we will only be able to be sure that it has broken out upside from it once the index gets above the resistance that is above the neckline and approaching and at the 1000 level. Observe how this potential base pattern has allowed time for the 50-day moving average to flatten out and turn up. Volume indicators are now bullish, particularly the Accum-Distrib line which has risen robustly over the past 5 weeks, suggesting that an upside breakout is pending.

While 2008 was a bad year for gold stocks, as shown by the HUI index dropping from its March peak over 500 to hit a low at 150 in October, before closing the year at about 245, it was even worse for the juniors. This is made graphically clear by the chart created by dividing the CDNX index by the HUI, to reveal the former's performance relative to the latter. Our 3-year chart for this ratio is truly shocking as it reveals that the juniors lost more than half their value in 2008 relative to the 15 large gold stocks that comprise the HUI index, which themselves suffered heavy losses, and this came on top of similar very heavy losses relative to the HUI constituents in the latter half of 2007, so that the ratio of the CDNX relative to the HUI now stands at about 3, compared to a peak at over 10 in mid-2007. This fact alone strongly suggests a relative recovery in the beaten down juniors.

On the 6-month chart for the CDNX index relative to the HUI index, we again see evidence of a reversal in the juniors, although this time of course it is a relative reversal. The same Head-and-Shoulders bottom that we saw in the 1-year CDNX chart shows up again in this ratio chart, although here it is more symmetrical with an almost horizontal neckline. This reversal pattern in the ratio strongly suggests that juniors are about to outperform. The ratio is close to the trough of the suspected Right Shoulder of the pattern, implying that the juniors should soon start to outperform noticably. The quality junior silver stocks are shaping up to be star performers. We have been accumulating these since November and some of them have already made very substantial percentage gains.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2009 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund 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