“At a market bottom, falling prices eventually force out large numbers of traders, resulting in volatility and increased volume.” ~ Cory Mitchell (Investopedia)
This quote on market bottoms perfectly sums up the gold miners (GDX) during the last couple of years:
With each successive price decline both volume and volatility have made new highs. After the most recent decline to below $13/share in GDX we have certainly seen large numbers of traders “forced out” of the market as evidenced by the steep 4-day drop between Friday 8/21 and Wednesday 8/26 and the near record weekly volume which has poured in this week. Long term market bottoms are notoriously tricky to time, however, the price action in the gold miners over the past couple of years has all the earmarks of a major market bottom in the making.
The junior mining sector as represented by the TSX-Venture Composite has suffered a similar magnitude decline as it did during 2008, albeit on a much longer time frame:
While we can’t know the exact timing of the eventual bottom in the mining space, we can say for certain that there are a plethora of cheap stocks out there. The seeds of the next major bull market are being planted and shrewd investors who pick up high quality companies at bargain prices are sure to do very well over the long run.
I believe that we are now in the midst of a historic opportunity to do just that; buy world class resource companies at pennies on the dollar of their intrinsic value. This window of opportunity could be around for another 6 months or another few weeks, it is impossible to know the timing of when other investors will appreciate the absurd valuations to which many mining stocks have fallen.
I will be in Vancouver in October to attend the Subscriber Investment Summit on October 8th at the Pan Pacific Hotel. This event is always one of the best opportunities to meet with management of some of the highest quality firms in the industry and to hear from some of the smartest people in the resource space. Entrance is free and attendance is limited to 250 people so what are you waiting for?
Read also: Icahn Takes Large Stake In Freeport – Sign Of Mature Mining Bear?