*On heavy profit taking days like today it is easy to forget the big picture for miners. I hope this post will at least make you think twice before you even consider throwing in the towel.*This is a chart of the weekly Amex Gold Bugs Index (HUI) from 2002 to today's close. With horizontal lines I have identified the four major consolidations of the mining stocks since the secular bull market was born. *The first consolidation lasted 24 months and when the HUI mining index broke out in late July `03 it rallied to add a 60% gain to the index.*The December `05 breakout of the second consolidation phase led to another immediate 60% gain.*The third consolidation was truncated at only 21 months and when the HUI took off from the consolidation level once and for all in December `07, it rallied to an impressive 32% gain.*The fourth consolidation, and our current situation, has lasted a whopping 36 months. Price flared up 13% in December `10 but has since come back down quite literally to the consolidation level - essentially making no progress whatsoever.*It makes utterly no sense to me that a 36 month consolidation would amount to a quick 13% pop that is quickly taken away. That is not how secular bull markets work, for one thing.*Much more likely is that we get at least a 30% rally, taking the HUI from its current price to around 700. And due to the size of the consolidation, it is even more likely we get a 60% rally that takes the HUI just north of 850.
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