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April 11, 2013 / Jeb

When Will The Panic End In The Junior Miners?

The resource area may be in the midst of a three month capitulation and major rotation.  Old, tired players are trying to sell at any price making room for the next fresh group of value investors and entrepreneurs picking up discounted assets.

This sort of parabolic downward move historically represents bear market bottoms as the shorts cover and value investors step in.  Extremely powerful upward moves can follow as shorts cover and fresh new buying comes in.  Short term investors may be  mistakenly selling their wealth in the earth assets at pennies on the dollar to chase the sectors actively supported by Central Banks such as housing and financials.  These sectors may be risky, overbought and could easily correct.

I believe long term resource investors should exercise caution selling into this panic after a 2+ year decline as this panic capitulation may mark the bear cycle low and become a major reversal area.  Smart capital may soon enter the wealth in the earth sector to hedge against inflationary risks as mining equity valuations hit record lows while large cap equities move into parabolic territory.

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