Some divergence is building again today in the metals and the silver juniors. Silver is surprisingly firm and outperforming gold again this morning, but the producing silver juniors seem to be under pressure. Is this another trade by funds, long the metal and short the juniors? It is worth noting that many of the silver juniors have been able to report a net profit in their most recent quarter, so the economics of those companies that were able to continue building operations have begun to gain traction. One would expect this operating strength would generate more market support, not less.

The fact is that the retail sector is still not even paying attention to the mining stocks. There are a few PM funds that are buyers, but I suspect many more funds are just playing a profit spread, and since they can short into thin volume and lock down the stocks it is low risk to do so while going long the metals. In a real bull market we know the shares outperform the metals. When that short play starts to break down, the funds will cover and go long. We will get a double across the board for the entire sector, and then the public will wake up and start buying to push us to a blow off top.

We are long way from there now. All of the above is strictly my own assumptions.

cheers!

mike