There is an old market saying, "As January Goes so too the Year". Tensions
between Russia and the West continue to push precious metals higher, while
the equity markets such as the Dow and S&P500 are crashing. Gold climbed
back above the critical $1200 mark. Once again the Greek debacle is coming
back to haunt markets as investors fear another decline in the Euro. The Dow
was down over 300 points yesterday as investors are beginning to brace for
uncertainty from a declining oil price pushed down to punish Putin and his
friends.
As expected the end of tax loss selling should support a rally in the beaten
down junior miners. We could witness a powerful January Effect where the small
caps outperform. A break above $1240 in gold could really ignite renewed buying
across the sector.
Investors should specifically watch out for breaks of critical moving averages
such as the fifty day moving average (50 DMA). A break above the line indicates
a potential change in trend. The junior gold miners (GDXJ) have broken above
the 50 DMA for the first time in four months. This is happening in January
which is usually a sign for a positive year. This means the probability of
a change of trend has increased. Confirmation of a major bottom would be a
break of November highs at $30.
Now until at least March when PDAC begins in Toronto is a very favorable season
to watch the junior mining stocks.
