Best of the Week
Most Popular
1.US Dollar Crashes, Gold And Bitcoin Skyrocket As Economic Recovery Lie Is Exposed - Jeff_Berwick
2.Now Obama Warns Americans to ‘Be Prepared’ for Disaster… What Does He Know? - Jeff_Berwick
3.EU Referendum - Britain's Immigration / Migrant Crisis Explained - Nadeem_Walayat
4.EU Referendum - British People vs Establishment Elite, Vote LEAVE an Act of Defiance! - Nadeem_Walayat
5.Prominent Billionaire Investors Warn of Financial Crash, Quietly Position Themselves - MoneyMetals
6.Bankers Warn of BrExit Financial Armageddon if British People Vote for Freedom - Nadeem_Walayat
7.Bad U.S. Jobs Report Prompts Stocks Bear Market Rally Towards New All Time Highs! - Nadeem_Walayat
8.Gold And Silver – Friday May Have Marked A Pivotal Turnaround - Michael_Noonan
9.EU Referendum - British People vs Establishment Elite, the Illusion of Democracy and Freedom - Nadeem_Walayat
10.Felix Zulauf: Monetary Stimulation Creates Bubbles, Not Prosperity Nor Growth - GoldandLiberty
Free Silver
Last 7 days
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16
Could Central Bankers Be Gold and Silver's BIGGEST Allies? - 20th June 16
Words Still Mean Things – Brexit With Graham Mehl - 20th June 16
Baroness Warsi the Manchurian Candidate Quits LEAVE for REMAIN, Boris Johnson Next? - 20th June 16
FTSE Soars, Stock Markets Bounce on LEAVE Polls Surge, Bookmakers Widen BrExit Odds - 20th June 16
Brexit Would Trigger Devolution of Europe - 20th June 16
Stock Market Week Of Uncertainty - 20th June 16
Will Gold’s Bullish Price Chart Outperform Gold’s 5 Bearish Indicators? - 20th June 16
Bonds And Stocks At All-Time Highs: Are Markets Confused Or Broken? - 20th June 16
Silver Sleeping On the Job - 19th June 16
BrExit Odds Sink, REMAIN Polls Boost by Jo Cox Killing by Radical Right Extremist, Conspiracy? - 19th June 16
How Elliott Waves Tell You When to "Jump In" & When to "Jump Out" of Markets - 18th June 16
Stock Market Inflection Point During Bifurcation - 18th June 16
Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - 18th June 16
Gold Stocks - Bull Markets that Follow Epic Bears - 18th June 16
The Fed Giveth and the Gold Bullion Banks Taketh Away… - 17th June 16
Brexit: "The Vote Heard Around the World" - 17th June 16
Gold Stocks Summer Breakout? - 17th June 16
Stock Investors Get Higher Returns and More Dividend Income - In Less Time With Less Risk - 17th June 16
How to Use the Gold-to-Silver Ratio? - 17th June 16
Inflation, Deflation & Associated Trading Prospects - 17th June 16
Overnight Markets Struggling to Stay Flat - 17th June 16
Gold Price Surges to Highest in Nearly Two Years On Central Bank and Brexit Haven Demand - 17th June 16
Stock Market Thinking Upside Down; Dow 18k Still Key - 17th June 16
Jo Cox MP Terror Attack Killing Claimed for "Britain First" - Witness Report - 17th June 16
Stock Market, Iron Ore, Bitcoin – Is Silver Next for Chinese Momentum Investors? - 16th June 16
EU Referendum Campaigning Suspended Following Shooting of MP Jo Cox, Suspect Named as Tommy Mair - 16th June 16
Why People are Migrating to the UK, Illegal Immigration, Housing Crisis Consequences - 16th June 16
Stocks Fluctuate Following Recent Decline - Bottom Or Just Pause Before Another Leg Down? - 16th June 16
The US Consumer-Driven Economy Has Hit a Brick Wall - 16th June 16
Bitcoin Price Going Parabolic Again, Now At $730 and Up 60%+ In Last Three Weeks - 16th June 16
China's Hard Landing Has Already Begun! - 16th June 16
Crude Oil Price - Oil Bears vs. Support Zone - 16th June 16
Central Bankers Are Wrong About Inflation and Deflation - 15th June 16
Alignment Of The Dow, Interest Rates, Debt and Silver Cycles Will Deliver A Fatal Blow - 15th June 16
Stock Market Bounce May be Over - 15th June 16
EU Referendum: Have the Bookmakers Got it Wrong? LEAVE Opinion Polls Lead - 15th June 16
Gold Price Rally - 15th June 16
How to Invest for Brexit Report - 15th June 16
Stock Market Short of the Decade? - 15th June 16
Stock Market Sell Off Coming! - 14th June 16
QE - The Good, Bad & Ugly - 14th June 16
This Demographic Shift Makes Our Social Security Useless - 14th June 16
Gold Stocks Ultimate Objective in a World of Monetary Transition - 14th June 16
Philosophy of the New World Order - 14th June 16
The Brexit Game - Boris Johnson vs David Cameron EU Referendum Zombies - 14th June 16
EU Referendum: LEAVE Opinion Poll Lead of 51% to 49% Whilst Bookmaker Odds Still Strongly Favour REMAIN - 14th June 16
George Soros Making Big Bets on Gold - 14th June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Junior Gold Stocks Flat Lining

Commodities / Gold and Silver Stocks 2013 Feb 22, 2013 - 12:01 PM GMT

By: HRA_Advisory

Commodities

Juniors are still in flat-line mode (on a good day). A bunch of new resource estimates were not enough to make much difference though in my experience they often don't. There are enough people tracking most stocks that the market tends to have a fair idea of what a resource estimate will look like. Weakening gold and silver prices dampened the impact of even good numbers.


I had hoped to come away from the January conferences with some new idea. There are a few stories I'm going through due diligence on but nothing jumped out at me. I'm hoping something does as I have become more and more convinced that what this market really needs is something new. I wouldn't expect traders to pay up for anything ahead of results but a story that hasn't been worked over by the market seems to be on most traders wish lists. Companies on the HRA list with new targets should all be drilling within 2-3 months. Hopefully one of these delivers the positive surprise the juniors desperately need.

I still expect at least a moderate rally in the juniors later but the sector is back in the danger zone. We need to see a bounce from current levels soon for that narrative to maintain any validity. If this year does turn out to be a "2009-lite" we should start seeing evidence in the next month or so.

Six weeks into the new year and there is still no joy for junior resource traders. In the large markets there has been plenty of good news, with several exchanges hitting multi year highs. In our little corner of the market however, gloom predominates.

I've noted in print and in a couple of recent investor presentations that the current conditions remind me in some ways of 2009. I'm referring to the junior market specifically when I say that.

The chart below shows the TSXV index for the year 2009. Before going farther I should stress that I am not expecting a gain for the year in 2013 anything like that the Venture delivered in 2009. That would be nice but it's very unlikely. My references to 2009 have to do with market conditions at the start of that year which were unusual.

Keep in mind also that we're talking about the Juniors specifically. The economic and major market backdrop was obviously much different in 2009.

As the chart on the next page shows there was a "Santa Claus" rally that lasted into mid-January before the first pullback. The first rally was a reaction to both the tail end of a four month up leg in the gold price and a horrendous tax loss selling season. Strong though the short term rally was, it is better classified as a "dead cat bounce". It wasn't until sometime later a real rally started.

Gold price moves sustained a second short rally into February 2009 until it was knocked back by the final drop in the major markets and a simultaneous pullback in gold prices. All in all, the market really went nowhere for the first quarter of 2009.

So far this year, we've definitely held to the "going nowhere" part of the script. The Venture index is now back to the range it bottomed at in December and the summer of last year. If we do manage to generate any upward momentum it's unlikely we'll have to worry about a "PDAC Curse" this year. Like 2009, there would not have been enough of a rally by the end of February for that to be an issue.

In 2009, the market turned up in mid-March and with the exception of 2-3 small pullbacks never really looked back until 2010. The Juniors were following the senior markets and commodity prices, both of which had similar rallies.

This time around the major markets are close to the highs they started their 2008 falls from. While I expect the large markets to have an ok year there certainly won't be a monster 2009 style rally to drag the juniors higher.

There should be enough good news on the economic front to move some commodities higher. We noted strong rallies in iron ore in the last issue. Base metals have held up relatively well. This means most of them, like the large indices, aren't in a position to stage major up moves from here.

The market has not been paying up for base metal discoveries lately anyway, unless there is a good precious metals kicker. That could change but I don't expect much help from that sector as it is small.

With those drivers discounted, what do we have left? To my mind we have three potential game changers; precious metal prices, discoveries and ...boredom.

Gold and silver have not behaved well recently. That is one reason for the latest failed rally. With the US performing relatively well there is no reason to expect gains from a falling US Dollar. The most recent down move resulted from stories that the G7 would act to stop members from devaluing their currencies.

The obvious target for that was Japan. In the end though, the G7 backed off and I suspect when the G20 has its meetings it will leave Japan alone too. Everyone recognizes Japan has to find a way out of a deflationary spiral and the Yen has been expensive anyway. If further falls in the Yen help Japan out of the corner its painted itself into most governments are willing to live with it.

The more cynical reason for leaving Japan alone is that other major currency blocks will keep printing themselves. Some of the recent drop in the gold price should resolve itself when the market comes around to accept that.

The move will be larger if Europe can get through some of its political issues. This has weakened the Euro. There have been calls from some quarters in Europe to weaken the Euro as a response to Japan's Yen moves. This isn't likely to happen. Germany is still the most powerful force in Europe and Germans are dead set against the idea of large scale QE. They are still terrified by the idea of inflation.

That terror is shared by few other central bankers and no politicians. Whatever the risks of QE and activist monetary policy, it's what worked in the last three years. That lesson is lost on no one.

Japan is again a prime example for politicians in other states. Deflationary spirals are extremely difficult to break out of. G20 politicians are far more worried about 20 years of Japanese style stagnation than they are about higher inflation. Make no mistake; most central banks will keep printing money.

The physical gold and silver markets remain stronger than the paper one and as several observers have noted, gold has built up a very large short position. It is a good set up for a strong upward move if a catalyst appears. That could be strength out of Europe, more QE from just about anywhere else or "risk on" buying accompanying an equities rally.

I haven't expected large upward moves from gold or silver but the short position in the physical market and ascent of activist central bankers in Japan and Britain could generate a good sized rally with a bit of a push.

Gold and silver moving back up could stop the bleeding in the juniors but it will take news flow and new discoveries to keep things moving.

In strict percentage terms, the current junior stock bear is milder than the last one but it doesn't feel that way to traders. The main reason for that is longevity.

When the junior sector collapsed along with global markets in 2008 the drop was very steep and very fast. Stocks dropped 75% in the space of a few months. The bottom after that fall was brief, lasting a few weeks.

The fall so far this time (ignoring some intervening rallies) the bear market has been two years in the making. The bottom, assuming that is where we are, as been forming for close to eight months now.

There is no reliable way to determine how long a bottom will last. It could go on for a while longer, but I suspect it won't. There are plenty of us sitting on underwater positions but there are also many with cash on the sidelines. Traders are getting bored and brokers are worried because they are not generating commissions. Both groups want to see something happen.

The most likely beneficiary of this situation will be companies with new discoveries that have not disappointed the market. The moves made by Goldquest and Reservoir last year indicate trader's willingness to pile into a successful exploration play. There were a number of these in early 2009 that definitely contributed to the strength of that market. So far this year I have not seen one.

Companies with discoveries will get attention--those with discoveries that don't need financing will receive even more. Pre discovery, attention will be focused on the strongest management groups and project sets.

In 2009 many predicted wholesale disappearance of junior companies. It didn't happen because the financing window reopened fairly quickly. That hasn't happened this time. I think the prediction of several hundred companies disappearing is much more likely to come to pass now. The only thing likely to hold it back is the TSX giving reprieves because it too is a public company now and wants to be able to book the potential listing fee revenues.

Short term painful but long term good. There are way too many junior explorers out there. Far too many companies did multiple spin out transactions of weak project sets they cannot finance now. There are only so many good projects and management/financing groups. I don't know what the number is but it's a lot less than the 2000 companies floating around out there.

Fading companies will hold back the Venture Index. Volumes are not bad over all compared to 2009. If gold can fight its way back to $1700 a base should be built and companies with good resources will see some gains. Like 2009 however, the best gains may be reserved for those with new discoveries. The intersection of hope and greed that new discoveries represent could be the catalyst so many have been waiting for. I'm hoping they start coming soon enough to finally make the market turn.

HRA Advisories, Resource Opportunities and the Oil & Gas Investments Bulletin are pleased to be hosting the annual Toronto Subscriber Investment Summit on Saturday, March 2nd, 2013 at the Royal York Hotel.

For the first time ever, we are opening a limited number of seats to the public. You will receive a full day of access to this private subscriber-only conference with your ticket purchase. This limited seating, exclusive event is designed to provide you with expert insight and specific investment strategies for today's resource market, as well as access to some of the most undervalued public companies in the industry today. Don't miss out on this rare opportunity to meet face-to-face with the experts and their top resource picks!

This event is a sell-out every year. Don't miss out on your chance to participate!
Click here to register now!

 

By Eric Coffin
http://www.hraadvisory.com

    The HRA – Journal, HRA-Dispatch and HRA- Special Delivery are independent publications produced and distributed by Stockwork Consulting Ltd, which is committed to providing timely and factual analysis of junior mining, resource, and other venture capital companies.  Companies are chosen on the basis of a speculative potential for significant upside gains resulting from asset-based expansion.  These are generally high-risk securities, and opinions contained herein are time and market sensitive.  No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned.  While we believe all sources of information to be factual and reliable we in no way represent or guarantee the accuracy thereof, nor of the statements made herein.  We do not receive or request compensation in any form in order to feature companies in these publications.  We may, or may not, own securities and/or options to acquire securities of the companies mentioned herein. This document is protected by the copyright laws of Canada and the U.S. and may not be reproduced in any form for other than for personal use without the prior written consent of the publisher.  This document may be quoted, in context, provided proper credit is given. 

    Published by Stockwork Consulting Ltd.
    Box 85909, Phoenix AZ , 85071 Toll Free 1-877-528-3958

    hra@publishers-mgmt.com   

    ©2013 Stockwork Consulting Ltd.  All Rights Reserved.

    HRA Advisory Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife