This week's PortfolioDirect/resources has highlighted the declining volatility in small resources index returns as a guide to the recovery of the resources equity market. Peak values in the volatility index have consistently been precursors to strengthening prices. See the chart at (VIEW LINK). The indicator has produced 17 buy or sell signals over seven years (implying 4-5 months per trade). The volatility indicator is presently consistent with the index internals; that is, the number of stocks still below key moving averages. It is also moving in line with seasonal conditions. December is the month with the strongest seasonal returns for this part of the market.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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