For a few days last week it looked like the ‘junior miners’ had finally decoupled from the mainstream stockmarket trend. They actually rose as the Dow and S&P plunged. Sadly it didn’t last – before long they turned down once again. It seems we were being teased.

I use the CDNX, the benchmark index for the Canadian Venture exchange which is heavily weighted towards mining exploration issues, as a proxy for Canadian juniors. As you can see by the chart, after violent sell-offs it has repeatedly found support just below the 2400 mark – where we are now. Previous price action, and the fact that we are on or just below the 200-week moving average (orange line), would suggest that we are at an entry point now – for those that have the stomach for it. If we break that support, ouch.

The next chart shows the price of Oil (black line – USO) against Gold (blue line – GLD) against the CDNX. It’s apparent that as oil rises, the CDNX tends to decline and vice versa. (The rationale for this would be that as oil rises, mining costs rise and thus profits fall. As oil falls, costs fall and profits rise).

In the long-term, I am very bullish on oil, as you know. But in the intermediate term, it looks like we may have formed a top. The huge volume and extreme volatility we have seen over the last few weeks are one sign, another is that oil stocks have sold off quite brutally since the beginning of the month, as the next chart of the XLE, which is an ETF representing the major oil producers, shows:

Yesterday the sell-off in oil gathered pace. If we have formed an intermediate-term top in oil, and are about to see a few months of decline, I am looking at a potentially bullish scenario for juniors and we should get a decent rally. We can but hope.

AIM market makers kill their own market

In Monday’s Money Morning I had a go at AIM, in particular at AIM’s market makers. I was very surprised the amount of emails I got all saying, “Good for you,” “Somebody has to tell these people” and the like. A lot of people are clearly deeply frustrated by this market.

We have two examples this week of how the practices of AIM’s market makers kill AIM dead.

Last week I tipped Leyshon (AIM:LRL), a late-stage gold development play in China. Some huge buying came into the stock, the likes of which had not been seen since 2006.

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