FSJG Index™ Weekly Review
by Frank Barbera
June 10, 2006

General Comments

Hints of a potential diplomatic negotiation with Iran and the possibility of a dialogue between the US Europe and Iran, weighed heavily on Gold prices in the week just past. For the week, Gold declined by $32.70 /oz from a reading of $642.50on 6/2/06, to a closing value of $609.80 on 06/09/06 for a total decline of 5.08%. For Gold, it was the fourth losing week in a row with Gold prices now down nearly $125 from the May 11^th high, -- a total decline (so far) of 16.96%.

Against this miserable backdrop, Gold Stocks did not fair well with the headline Philadelphia Gold and Silver Index (XAU) as it tumbled 15.25 index points on the week or 10.61%. For the Amex Gold Bugs Index (HUI), similar destruction was wrought, with the index cascading by 11.24%, from last week's close of 337.58 to a finish on Friday of 299.63. Both the XAU and HUI made it five straight closes on the downside, failing to gain ground on any day this week.

Financial Sense Junior Gold Index

Obviously “pain” was the order de jour for Mining Share investors and in that sense, “pain” was handed out “across the board” with the Financial Sense Junior Mining Index (FSJG) falling a like-minded 7.85% on the week from 255.02 last week to a Friday close of 234.98. For the FSJG Index, the 50-day average ended at 270.52 and the 200-day average at 212.48.

Remarkably, at the high this year of 298.16 on 5/09/06, the FSJG Mining Index sported a YTD gain of 51.51% with that advance now trimmed to a gain of just 19.40% on Friday. The index was at 234.98 versus its 12/30/05 close of 196.79. Put another way, from the high on 5/09/06 to present, the FSJG Index is now down a hefty 63.18 index points or 21.18% in just 22 trading days – Hey, who says investing in Gold Stocks is ever boring, right? To be sure, there wasn’t a dull moment to be found in any of the other FSJG Sector Indices with the Junior Producer list getting crushed for a loss of 8.29% moving from a reading of 287.48 last week to a close on Friday of 263.63. With the Junior Producing Index down 23.85 index points on the week, the 50-day average finished at 295.33 and the longer-term 200-day average at 231.90.

Within the three sub-indices, the FS Junior Development Index felt the most pain with that index falling from last week's close of 666.67 to a close on Friday of 600.65 for a decline of 66.01 index points or 9.90%. From its recent high on May 9^th of 830.33, the Junior Development Index is now down an astounding 229.68 index points or 27.66% in just 22 trading days. Even more remarkable is the fall from grace with this index up 44.51% YTD thru the May 9^th high. It is now up just 4.54% YTD thru Friday’s close having ended last year at 574.55.

On Friday, the Junior Development Index fell to within three points of its 200-day moving average which ended at 597.63, with the 50-day average now falling sharply to end Friday at a reading of 732.09. How quickly things can change. In perhaps what can be best described as the “surprise” of the week, the Junior Exploration Index did NOT implode and instead actually fell the least of the indices mentioned, with the FSJG Exploration Index falling just 4.48% on the week. On Friday, the Exploration Index ended at 115.36, down 5.42 index points from the prior week's close of 120.78. For the Exploration Index, the 50-day average ended at 129.70 with the 200-day average at 96.70.

Finally, with the Small Cap Mining Indices mostly flat for the week, the Medium Term Summation Index ended at +172.67, up from +136.83 the prior week. After an extensive advance such as the one seen in recent months, a “normal” medium-term correction would see the Summation Index move down to the area near zero and possibly even fully oversold territory near –500. At the present time, with the Summation Index already more than half-way down the range, it appears that the possibility of another important bottom could be looming in the weeks ahead.

In reviewing several more medium-term timing oscillators for the Junior Golds, we find that the Medium Term A/D Ratio ended the week at .77, which is fully oversold and below the oversold benchmark of .85. However, despite a fairly substantial oversold value, thru Friday’s close the A/D Ratio was still making new lower lows in tandem with prices and has thus not set up the kind of positive divergence which normally attend a more important final low.

In addition to the still declining Medium Term A/D Ratio, we find that both the Medium Term Ratio of Up-to-Down Volume and the McClellan Summation – both of these gauges are still (a) NOT fully oversold and (b) currently do NOT sport any type of positive divergence with price. As a result, none of our key medium term timing indicators is at present showing the prospect of an immediate bottom. Of course, in the world of Gold and Gold Stocks, events can changed very quickly forcing everyone to remain vigilant and on the look out for any signs of a turn.

*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.