Similar to the late nineties, negative sentiment for the miners is at an all time high as investors are panic selling shares in order to chase the high flying equity markets. The global economy is not as strong as investors believe and this rising dollar and collapsing oil price could drive the US back into recession. QE 4 may be the next option or negative interest rates right here in the US.
It was interesting to see the reaction after the Fed Meeting going into tax loss selling season. Investors are beginning to once again realize that zero or negative interest rate policies are here to stay in the West. Notice the Swiss instituted a negative rate policy to deter capital flight from Russia.
Meanwhile, the Russian Ruble is in freefall as the Central Banks raise interest rates to over 20%. Russians are buying gold as they realize that the US dollar rally could fizzle out soon should the Fed propose QE4.
Remember Powerful January Effect for Junior Miners
This down period in the resource sector in prior years was followed by a very powerful first quarter. Late December buying has provided some excellent trading opportunities in the resource sector in the past.
As we close out the year and tax loss selling season, we must not ignore the historic situation we are in right now with recent black swan events with Russia which has driven the US dollar and large US equities to nosebleed valuations and crashing the commodities market to historic lows.
It is my opinion that investors sitting on US dollars are approaching a huge buying opportunity during this tax loss selling season when junior resource stocks are beaten down to a historic pulp.
Smart investors should be placing stink bids now before they leave for the holidays. Buys in late December and sells around March have proven to be good trading strategies for the resource sector in prior years.