Last Friday the unemployment numbers came out and it caused a spike in the mining stocks. Today, those gains were held and even increased.
People are starting to realize that the FED will not get to raise interest rates anytime in the near future, though they keep saying they are going to do so. Friday’s jobs report was not strong.
Our current economy is built on the low interest rates. Just a little spike in rates, spilling over into the mortgage rates, will cause a massive slow down. The only reason builders can build right now is because home loan rates are so low (I just got a home loan a few months ago for 3.75% with no closing costs – that’s insane!). Home building (jobs & materials) is one of the major factors helping drive our economy; it will be too detrimental for it to slow down.
On Friday we saw large gains for the miners, ranging from 6-8% in SIL, GDX, & GDXJ. In the past few months, there have been a bunch of days with big gains, but they have always been negated the following day or two with equal drops.
Today was the first time there was a strong follow through on the whole group with the mining stocks up another 2-5%.
I see this as a sign that the census is beginning to turn and you’re going to start to see money come back into this sector which has just been hammered over the last few years.
Now this doesn’t mean you should go “all in” on this sector. It could still bounce around with large percentage ups and downs for quite a while. But in the grand scheme, it is at a bottom. Look at the chart for any mining stock (I hope to find time to include some screen captures in this post soon) over the last 3 months and you’ll see a definite low point that no matter how many times the stock tries to reach below, it can’t. It keeps getting bought up. Arbitrage says the miners are just to cheap to get any better of a deal (unless we have a major market meltdown, in which case everything will go down en masse).
Just make sure you start getting involved in this sector and read through my past posts to garner tips on how to do so.
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