Monday, June 14, 2010


During the recent correction miners underwent a significant change of character.

I've mentioned many times in the past that the selling pressure at intermediate cycle lows tends to pull everything down with it. That always includes the miners. Mining stocks are notoriously volatile and gold bugs are probably the single most nervous group of investors on the planet. So it's not unusually to see the HUI drop 20-25% during an intermediate level correction in the stock market.

You can see that during the first two intermediate degree corrections we've had since this bull market started, miners followed that pattern to a T as panicky gold bugs fled the sector in droves.

During this latest intermediate term correction something changed though. During the first stage of the correction the mining sector could have cared less what was happening in the stock market.

During the first two weeks of the correction while the market was in crash mode miners actually rallied over 14%. Miners, like gold had completely decoupled from the stock market. It wasn't until gold put in it's smaller daily cycle correction that the miners pulled back at all and even then it was only a mild 16% pullback.

Pretty impressive action considering the stock market was still experiencing severe selling pressure at the time.

It's apparent that miners have now moved into strong hands. Hands that aren't going to sell at every little wiggle in the market. Hands that are going to scoop up the shares that flighty retail investors are foolish enough to let go of.


  1. Toby,

    I love your work, and I make sure to check your blog regularly, but I'm a bit skeptical on your HUI claim. Heck, it's almost plowing through 450 today! I've read some commentaries indicating that numerous funds employ a long GLD/short HUI pairs trade that would lend credence to the trend of gold shares holding their ground initially on gold price declines yet underperforming on gold's up days. I realize that sentiment in the sector is quite depressed, but I see few catalysts on the horizon for higher miner prices. We're already in near-record gold territory yet the HUI can't even kiss its November 2009 highs. What gives?

  2. The problem is the same one that affects about 95% of all retail traders/investors...impatience.

    The miners have had a huge run since the 08 bottom. It's going to take a period of consolidation before they can breaqk out to new highs.

    Now if one was able to see the future they could just get in right before the move commenced. Unfortunately despite what some would like to claim none of us can see the future so we just have to be patient.

    I will say that the move will start when it loks least likely so about the time you just can't take the boredom an longer and are about ready to hit the sell button that's when you should be buying aggressively.

  3. Lol. Somehow I expected a response like this; so much in fact, that I fancied my question rhetorical. It's just venting from a not-so-nervous PM bull; I held through the 2008 rout and added more afterward. If that pillaging didn't steel my nerves, nothing will.

    Unfortunately, the "boredom" point was reached a while ago. The mining sector seems to have fantastic fundamentals relative to most other sectors, and given my profession (I work for a start-up gold mining company,) I'm technically "all-in".

    All the best,


  4. Toby,

    Whats with this mirror site of your blog- ???

  5. Different URLs can lead to the same site. It is possible that goldscents is a better name than the previous name. There could be a change of name during the life of the blog. To keep the previous readers, 2 URLs goes to the same place. Pure guess.

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