Thursday, February 26, 2009

GDX Review

Top Line: Prices are still cheap...

The stock market is training participants. Every time the market bounces, sellers come in so everyone is learning to sell every rally. This is the market's way of shaking out weak hands, this time.

Tonight the market still seems to want to go down some more. There is this pull to Complete itself...Jerry Maguire style. We did get another chance to buy again today. We had another 12 cents in our account. Maybe once we get this rally, we can keep a little more cash on hand for these bargain prices.

We thought we should talk about GDX this evening. Gold has enjoyed a very strong rally over the past few weeks and GDX hardly moved up at all. Now, over the past few days, gold has dropped pretty hard and GDX has moved down until today. Today, GDX was up inspite of gold being down.

The way we see it, there are two angles. The first is that we think the mining stocks move in front of the metal, at least that's our contention. Looking at the last six months, gold and miners have moved together but the miners have moved in front of the metal itself. As gold rose in the past couple of weeks, it was Not confirmed by the miners. There was also the temporary blip over $1000. This kind of thing gets people excited about the possibilities.
Since we watch the miners and they told us that we should not expect gold to rise much, we are not too surprised by the down move. What does this imply for the miners is what is most important to us. Since the miners don't have a tell that we know of, we have to go to the second angle. That would be the subtle fact that the miners are undervalued compared to gold itself.

If you go back to last year when the miners and gold peaked, you can see the difference from today. This past week, as gold pushed above 1000, GDX traded in the 37 range. Going back to March of 2008, when gold moved above 1000, the GDX was at a price over 55. It is our opinion that GDX is 40% undervalued according to the price of gold. Yes, 55 is our minimum target.

We have started to consider the possibility that the market is going to wait until next week's jobs' report. We don't like waiting another week but it is a possible turning point. There are other possible turning points such as this is the end of the month. Either way, we will be patient...oh we really don't like this waiting stuff. Oh well...here are some more pics while we wait.

The Luau...





The Crater at Haleakala...this is a pre-dawn sequence...




This picture had a 13 second exposure time. There was a car on the road and, since it was so dark, the exposure time allowed the car to travel all the way through the shot. We thought it was worth sharing.








You can start to make out the crater in the higher light. The clouds are down in the crater, just to the left of center.




Now, you can start to see the sun paint the top of the clouds.



Haleakala is home to the Haleakala Observatory housing several telescopes. This sight is said to have the fourth best conditions on the planet.




But really, there are no people in the pictures so we need Jackson and others back...




For more pictures you can use your favorite search engine. The mountain is 10K high and you can see a long ways and all 360 degrees.


And, maybe one more whale shot...one of our best ones. You can see Haleakala rising above the clouds in the background.

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