Ready to rumble. Buy now so you don't cry later when prices move up.
<<Date: Wed May 31 2006 10:54
trotsky (@pm stocks) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the Rydex pm fund had another $1.8m. in outflows yesterday, and its cash flow ratio thus remains a mere hair above its 2005 low, indicating that sentiment on pm stocks is very bearish ( which is in keeping with Wall Street analyst sentiment, as the sector continues to be among the lowest rated in the entire market ) . the best buys are the stocks which WS rates as a 'sell', such as e.g. HMY and DROOY - these are stocks that trade at a big discount to their peers on account of their low ratings ( also, from a contrarian PoV, low ratings harbor upgrade possibilities, while the opposite holds for high ratings ) .
the ongoing correction in the PoG has already been discounted several times over, so to speak, and should not do much more damage to the sector. regardless of where the correction ends, a medium term target of $850/oz. remains on the radar screen, as the old ATH serves as a price attractor after the secondary 1980 high has been slightly exceeded in the last run-up.
near term performance of the sector depends largely on how the broader market does from here - the bad news is that the market isn't out of the woods yet, it remains potentially panic-prone. otoh, absent a panic, it is oversold enough to harbor some short term rally potential, retracing at least part of the recent losses. the probability of a retracement rally is generally far higher than that of a panic, as panics are per definition rare, but one should keep in mind that the panic probability increases the more of the market's 'put support' is broken in an ongoing decline.
in terms of gold sub-sectors, mid tier producer shares are expensive, while many juniors remain cheap. it makes sense to look for potential take-over targets, as consolidation in the sector is bound to continue. in fact, due to the valuation dichotomy , it is bound to intensify. >>
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