FSJG Index™ Review
by Frank Barbera
October 3, 2006
(as of September 29th)

General Comments

It was a better week for the Precious Metals complex, where rebounding prices for Gold, Silver and Platinum helped the long-beaten mining stocks recover some recent declines. For the nearby Comex Gold, prices recovered back above $600, with a gain of $9.00 to end the week at $604, up from $595 the prior week. With Gold moving back across important psychological resistance at $600, the XAU rebounded to close the week at 128.42, a gain of 2.61 index points of 2.07% from last week's close of 125.81. For the HUI, this week saw the index gain 6.05 index points to close at 300.54, up 2.05% from last week's close of 294.49.

Financial Sense Junior Gold Index

With the senior mining indices gaining ground, it was no surprise to see small cap miners also recovering recently lost territory. For the Financial Sense Junior Gold Index (FSJG), the week generated a gain of 7.16 index points or 3.07% to close at 240.20, up from 233.04 the prior week. On Friday, the 50-day average ended as resistance for the FSJG Index at 248.87, with the 200-day average at 246.26.

Among the sub-indices, the FS Junior Producer Index powered ahead by a gain of 5.51% to finish at 262.08, up 13.70 index points from last week's close of 248.38. For the Junior Producer Index, the 50-day average closed at 271.54, with the 200-day average at 267.74. For the FS Junior Development Index, the week yielded a gain of 3.36% with the index closing at 616.68, up 20.10 index points from the prior week's value of 596.58. On Friday, the 50-day average ended at 640.10, with the 200-day average finishing at 667.63. Finally, Junior Exploration stocks were weak and lost ground, with the Exploration Index ending at 122.87, down 1.16 index points from last week's close of 124.03. For the FSO Junior Exploration Index, the 50-day average closed Friday at 127.04, with the 200-day average at 118.60.

Going forward, one element of the technical picture to be watching closely will be to observe the direction of the key 50-day and 200-day moving averages. At the present time, for the FSJG Mining Index, the 200-day average is still headed up; while the more medium-term 50-day average is trending down. As can be seen in the chart below, when BOTH moving averages are trending higher, it usually means the market has potential to be begin a larger scale advance. In the graph below, I plotted the FSJG Index data points for only those dates when both the 50 and 200-day averages are moving higher.

Essentially, when this condition is present, it means the market is “set up” correctly and potentially ‘in gear’ for a big advance. For next week, a close back above 250 on the FSJG Index would quickly bring the average back into gear on the bullish side of the equation.

That’s all for now,

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.