For many reasons, I suggest that today or tomorrow will prove to be an interim bottom for gold stock shares. Possibly a bottom that we will not see again for many years.

As I have asserted lately, I felt that a catalyst would be required for the wall street herd to pay notice to Gold stocks and felt that earnings season would prove to be that catalyst. Currently, many gold companies have P/E ratios that are actually quite high. This is because they've been showing poorer earnings than they really have by including write downs for various things. As such we have P/E valuations of 50 or 60 times. Wall street doesn't like such high valuations unless they are giddy and losing their brains for things like Potash or during the tech boom when they were more than happy to value companies with P/E ratio's over 100 times earnings or even much higher.

However, if earnings increase by 2 times, then the P/E ratio drops in half or something like that. So I suspect that as the gold companies start releasing their earnings this season, we'll see some earnings double, triple or more, dropping P/E ratio's to very good numbers.

NEM, Newmont mining's earnings are out today and they look great. NEM should go up significantly as soon as the market wakes up to the numbers and that will be the catalyst for the producers. Once the producers start moving the juniors won't be far behind, particularly the near production or small producers.

We're also starting to see a lot of M&A activity. This always preceeds bullish market activity. As juniors get taken out and merge into larger companies, there becomes a shortage of cheap investment opportunities. This is where a company like NOX will benefit. Don't be surprised to see up days of 10% as the norm.

Lastly, technicals on Gold and the XAU look extremely bullish. The commodity is now in oversold territory, should find support in the high 800's and lags other commodities. The XAU is way oversold. With the catalyst of earnings prodding along the herd, it's looking very strong. I'm not alone in my assessment as we have Frank Barberra, one of the world's formost gold technical analysts calling for a buy across the board today.

Lastly, this weeks selloff may have been in part due to Mr. Gartman's bailing on Gold. This is a fellow with a lot of influence. However, he's been wrong before and I suspect he'll prove to be very wrong this time. When his flock see's that, as they did after his call to sell all Canadian energy holdings last year (what a huge mistake that was!), they'll rush right back in with new exubberance.

Good luck folks.

Diabullic