The second leg of the precious metal miner bull appears to be just about ready to begin. The July trading action in the sector was typical for this time of year while the 12-month consolidation of the initial 179% impulse move in the GDX has traded sideways on historically low volume. Realized volatility in the global miner ETF has been in a downtrend since November, as market participants (who are not on vacation) have mostly ignored the miners while continuing to focus on the high-flying US equity market.
This consolidation has reminded me of a similar period during the previous miner bull. After a huge move in which it more than doubled from mid-2005 until early 2006, the HUI Gold Bugs Index traded sideways just below the 340 level for 11 months, from November 2006 until September 2007. After this period, the index surged 37% in just two months.
Despite the lethargy in the miners, the best in class juniors continue to bifurcate from the rest of the pack and many have made 4-year highs this year, while both the GDXJ and the TSX Venture exchange have traded sideways. Highly respected sector investor Rick Rule likes to repeatedly inform us that 85-90% of the junior sector is “valueless” and the trading action thus far this year in the space has been proving his point. read more at Kitco