Coffin Brothers martet take from Kitco
Don’t Panic!!
Readers of a certain age and literary persuasion will recognize that famous tag line from The Hitchhiker’s Guide to the Galaxy and today (February 7th) seems a good day to bring it out again. Gold bugs, silver bugs and commodity buffs of all varieties just finished a very trying day in the market. This was a breather we expected and predicted. Markets do not go straight up, nor should they. As frustrated as some gold followers have been by the “two steps forward-one step back” market action of the yellow metal it’s been a good thing. Markets that go up that way are building new stable resistance levels all the way up. We won’t add a redundant gold chart here since you’re reading this on Kitco, but the following chart of the TSX Venture Index may help add some perspective t o today’s market action.
We use the TSXV index as a proxy for “exploration” stocks in general. As you can see, year-over-year it’s a market that has made a lot of people happy, even though there were a couple of scary swoons along the way. The index is up 41% in the last year, and that is quite impressive. Even more impressive is that the bulk of that gain, 29%, came in just the past three and a half months! The market basically went straight up through that period. Admittedly fun, but still a situation begging for a correction. We often suggested taking some profits in our publications recently. Not because we were heading for the exits but because a pullback was inevitable. Being a little ahead of the pack means a correction can be faced with relative calm and you can go bargain hunting when it’s over. The next question now is “how long and how deep?” If it fits the pattern of most bull market corrections in this sector it will be fairly quick but fairly deep, probably 10%+ before its over but it should be over in a matter of a few weeks, if not days.
Where is the good news in all this? The fundamentals driving commodities higher did not change over night and the reasons for following precious metals are just as compelling as they were yesterday. We hit a nasty pothole, for sure, but it is only that. Want a little more perspective? Gold is up 33% in the past year, and that’s after today’s $20 loss. Check out the sector’s statistics in your local paper for other industry sectors over the past year. You came to the right place.
David Coffin and Eric Coffin
David and Eric Coffin’s research may be found at: https://www.hardrockanalyst.com/index.php