Monday, May 11, 2009

Volume clue of future direction

I follow the Toronto Stock Exchange (TSX) Diversified Metals and Mining Index ($SPTMN) as a proxy for interest in the base metal mining sector. Today's action is telling when looking at the volume supporting the move. To the 6 month daily candlestick chart:

Copper has broken down and base metal miners are going down with the rest of the economy and stock market. The dollar is at support and about to turn up in my opinion. I don't care if China and India are supposedly stockpiling commodities for now. The cracks in the bull case are going to start rapidly appearing over the next two weeks and the hibernation season for bears is ending. Buyers and inflationistas beware...

We will soon get another chance to see how Gold does during a brutal deflationary wave. Senior Gold stocks will not be immune to a big downturn in the markets. I continue to hold my long-term bull LEAP option calls on Royal Gold (RGLD) as a small cap Gold royalty company play but am not intermediate-term bullish on senior Gold stocks right now after the nice recent run up they have had.

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