FSJG Index™ Review
by Frank Barbera
September 9, 2006

General Comments

What a crazy week in the Precious Metals markets, where volatility took command like a lunatic at the controls of an elevator. Up, then down, then down some more was the pattern of the week. Gold advanced to a high of $648.70 before plummeting to a week-end low of $617.40. At the high of the week, Gold briefly sported a gain of 14.90 or 2.35% before the downside reversal to control. On Thursday and Friday, prices plunged falling $31.30 in two days on an intra-day basis to end the week at $617.40 on the December contract.

For the week, December Gold ended with a loss of $16.40 or 2.58% with the swing from intra-week high to intra-week low measuring 4.82%. If that wasn’t enough to rattle your nerves, the gold stocks — never a mild moment — sent a palpable shiver up the spine on many a shareholder this week as the XAU ended the week down 6.69 index points or 4.53%. Matching that loss was the widely watched HU, which tumbled from 353.21 last Friday to a close this week of 338.18 for a loss of 15.03 or 4.25%. Not a good week to be sure.

Financial Sense Junior Gold Index

Of course, given the heart stopping action in the metal and the senior stocks, one would normally expect even greater carnage among the smaller cap names. To be sure, it may too early too really tell, but at least so far, the smaller cap names hung in like champs with the Financial Sense Junior Gold Mining Index (FSJG) osing only 2.25% for the week. On Friday, this index closed at 261.50 down 6.04 index points from last week's reading of 267.54. Not withstanding the decline, the FSJG Mining Index still managed to hold above its 50-day average at 251.29 and the even more important — 200 day-average at 241.03.

Turning to some of the smaller Indices, results were not all that bad given the downside action of leading gold stocks in the XAU and HUI. On the week, the FS Junior Producer Index ended at 286.98, down 3.82 index points or 1.31% from last week's close of 290.80. For the Development Stocks, the index tumbled 2.57% from 676.66 to a close on Friday of 659.21. Exploration stocks fell the most, with the Junior Exploration Index ending down 3.37% at 135.31, down 4.72 index points from last week's close of 140.03.

On Friday, the Junior Producer Index ended above both the 50-and 200-day averages with the 50-day average closing at 277.49, and the 200-day average ending at 262.94. With regard to the Development Stocks, the 50-day average ended at 651.74 and the 200-day average at 659.04. Finally, the FS Junior Exploration Index ending above its 50-day average at 124.50 and above the 200-day average at 114.10.

Finally, while arguments can probably be made on both sides of the Gold trend on a short-term basis, one thing we did note going into week-end were a set of rather high ARMS Index readings on the Smaller Cap Miners. In our work, we track a Medium Term ARMS Index for the Junior Mining stocks, wherein we measure the degree of selling pressure taking place on the stocks that are going down relative to the degree of buying pressure taking place on the stocks that are going up, at any one time.

As it turns out, the ARMS Index (which is the ratio of these two ratios) is moving higher and ended the week at a value of 1.19, up from 1.07 just a few days ago. Historically, high readings above 1.25 on this gauge have often accompanied short to medium-term lows. So if there is more selling early next week, chances are this gauge will spike higher and lock in some kind of more important low.

Have a great weekend,

Frank

*Please note that the individual companies in this index are proprietary and will not be disclosed due to compliance and regulatory issues resulting from the relationship of FinancialSense.com, Puplava Financial Services, Inc., Registered Investment Advisor and Puplava Securities, Inc. Member Firm FINRA/SIPC.