Dana Lyons – Outlook On US General Equities, Bonds, US Dollar, Gold, Bitcoin, And Commodities
Dana Lyons, Fund Manager and Editor of the Lyons Share, joins us to discuss the turbulent markets, through the lens of quantitative and technical analysis, and review which sectors look appealing for both long and short strategies. We start off with the recent jump higher in the US general equities, and while Dana felt enough data was in for an intermediate low a few weeks back, he is using this rise in prices to sell out of growth stocks as they bounce, and looking to deploy short hedges against the markets once things move back to prior levels before the breakdown.
Next we shift over to the bond market, which he feels has topped after a 4 decade run, when rates hit all time lows 2 years ago, but has been trading the short term moves higher in rates, and looking to see if they’ve topped in the near-term. This led to a discussion on the US dollar which Dana is still constructive on, and conversely, is bearish on the outlook for the Euro. Dana is also still longer term bullish on gold and the gold mining stocks, and feels the technical action we’ve seen over the last few weeks and since the breakout in 2016 has been very strong. He’s not as bullish on Bitcoin or Ethereum, and despite the recent bounces still sees the potential for lower targets. We wrapped up with commodities which Dana is still longer term bullish on, and even if there is a pullback to consolidate the recent moves higher, he sees that as a good buying opportunity for the medium to longer term.
Click here to stay up to date with Dana at the Lyons Share website.
Upping my purchases particularly in biotechs and PMs. No longer 90%+ in cash—-down to 86% in cash. IMO, the next 3-4 months will be a great time to get back in selective markets and stocks. Will be purchasing regularly.
I might add that March is usually the worse month for PMs out of the 12 month cycle but it didn’t hold true this March.
Hi Doc – Thanks for the update on which sectors have your attention (Biotech and PMs) and how you are deploying your cash reserves. Are you still short the conventional markets, and if not, at what levels would you consider putting market hedging positions back on?
Yes, while there has been both the tail-end of a big rally in March, there also has been a substantive pullback in gold, silver, and really across the board in commodities as well, as the market perception has been that things are deescalating in Ukraine. Keeping in mind there are still 2 more weeks in March where anything can happen, what is your outlook on Gold on the monthly charts if gold was to hang out basically where it’s been trading this week in the lower to mid $1900’s?
To me, the action since the 4th quarter of last year through present has been bullish and encouraging, but I know you’ve been watching the MACD and ADX on the monthly charts for the bigger picture and just wonder how you see things setting up for March and for the quarterly candle.
Ex, I just shorted the nasdaq a tad this morning—-the problem right now is if there was a peace agreement in Ukraine—the conventional markets could go nuts. However, we’ve had 4 straight days of higher closes in the conventional markets and are up against the 20 month MA of the Dow so I thought I could put on a small position. Of course, if the Ukraine thing was resolved, I believe the PMs could get whacked as well—I feel most of the move in gold was geo-political. Regardless, if we move down in the PMs again I feel we’re in great shape and the odds are we’ve seen the lows unless a miracle happens in the inflation area. I wouldn’t be surprised if we move somewhat lower in the rest of March with PMs but not a lot—-we could then bottom out and based on my technicals could have another move back up to the upper BB of the monthly chart in April. All I know is that there’s a beautiful gap to be filled at about 189 on the GLD. However, the BBs on the monthly chart are now turning laterally and I would have liked a closing higher for March for the PMs. It doesn’t appear as if that may happen—-when you get the picture we have with these BBs it could be we bounce around in their range for awhile. However, now that we’ve had a move toward the highs of August 2020, the next time it happens could be the real thing. All I know is that the next few weeks could be the best time to purchase as a lot of these stocks move back to their recent lows—–I especially like the juniors/explorers right now and will keep purchasing slowly. When all is said and done with them, I’ll have the lowest cost average I’ve ever had.
Good thoughts Doc, and thanks for sharing how you are looking at shorting the general markets. As we’ve discussed before, I’ve also shorted the general markets a few times over the last few years and done well on most of those for quick swing-trades, but got wrong-footed on one of the trades. However, I missed the opportunity to short the general US equites in Q4 of last year because I was so focused on using any dry powder to capitalize on oversold PM mining stocks.
As for Gold, Silver the PM miners, I’d submit that they started running out of the lows in September of last year, and really had been edging higher for the last 5-6 months, but the big escalation in late February into early March was to a great degree due to the geopolitical tensions in Ukraine. However, there was also the macroeconomic backdrop of pricing inflation readings surging even higher, the Fed wrapping up it’s accommodative bond purchasing with their “tapering” and the expectations of the first rate hikes on the table, so that may have still contributed to the recent move higher as a secondary driver in recent past, and longer term underpinning of higher metals prices. It’s been another strong Q1 Run once again kicking off the year, but as you mentioned, corrective moves in March are par for the course, and we have seen a correction as the month has unfolded, albeit from much higher levels.
Regardless of all the different factors acting on Gold, on a technical basis it did come very close to it’s all time high from 2020 earlier this month, which is pretty bullish. In addition, Silver was outperforming gold many days on a percentage basis, and the larger to mid-tier producers found in GDX, GDXJ, SIL, and SILJ were also ratcheting higher, which is the kind of sector-wide strength we want to see in a solid PM bull market.
Thanks for sharing your thoughts on the moving averages and BBs on the monthly charts, and the gap on GLD you are watching. I’d agree that any pullbacks or corrective action in the mining stocks should be a buy-the-dip moment moving forward, and personally trimmed back some of my positions that were moving upwards in late February and early March to raise more dry powder to be able to capitalize on any pullbacks. I got the dry powder up to 7% at one point, but have already starting nibbling and added in a few new names, so I’m already down to 4.5% funds remaining. I’m trying to be patient and wait for more short-term sector weakness before deploying much more of my remaining dry powder, but as stocks drop meaningfully below where I trimmed them it gets harder and harder to not jump on the deals. I’ve been keeping myself busy by focusing on Oil & Gas stocks that seem undervalued compared to peers, by continuing to build positions in Cannabis stocks, adding a bit to Copper explorers and developers & solidifying a few PGM stocks in the interim. Cheers!
Ex, time for me to take a position in KOOTENOY.
Nice Doc and good thought, especially with it doing over a 13% fishing line sell-off today for an ugly candle on really high volume.
Yeah, Kootenay is one I’ve been a long time supporter of, and have owned it off an on, trading it for many years, but ironically, with 19 silver stocks in the stable, it isn’t one I currently hold after selling it in December for a tax loss at a level 26% higher than where it has fallen to today. Just based on that reflection alone, it does have my interest again, as it’s at a far more attractive level for accumulation here than it was just a few months back, and it is a great optionality play on rising silver and base metals prices.
Kootenay is definitely on my silver miners shopping list along with a half dozen others, but I purposely divested a handful of underperforming silver stocks over the last few months to make the positions I do still hold a little bit more concentrated (as I had 24 silver stocks at one point and felt a bit too spread out). Kootenay was a bit of dog last year essentially getting chopped in half over the course of 2021, so it moved down my batting list by the end of the year, when other silver juniors were pulling back less or actually moving to higher highs at different points last year. Having said that, it is for those reasons that I believe the reverse could be true moving forward, and the tide is turning to where Kootenay will switch to outperforming once again.
There are actually 11 silver stocks that I previously owned over the last 2 years that I don’t currently have positions in, and Kootenay is just one of those. With the medium term environment in PMs shifting towards a more bullish setup once again, then some of the optionality plays are going to likely start to outperform on big moves higher, and KTN is in that camp. Good trading to you Doc and I may join you back in Kootenay at one point soon, but I need to clear out a few gold stocks first to free up funds to start a few more silver positions, because I like the other silver positions I hold at this point for various reasons.
I’ve been LT holder of KTN. Latest offering dilutes their share base. Patients…
Yes, all pre-production non-income generating companies must keep raising funds and diluting down existing shareholders. The strategy all such junior explorers and developers must deploy is to create more value with their work programs than the continual share dilution from ongoing capital raises.
KTN split off its Non core properties a few months ago into a new so far non listed entity and that accounts for some stock weakness but rewards long term shareholders with a new issue coming later this year. We shall have a new core position for free. Sorta.
Yes, that is Kootenay Resource Corp that they spun out, but I don’t think that has much to do with why the stock has been under pressure for over 2 years now, and they spun those assets out fairly recently specifically because they weren’t really getting much if any value in the primary company vehicle.
Kootenay is an explorer/developer optionality play on higher silver prices, and has mostly low-grade bulk tonnage ounces in the ground, although 2 of their properties are showing some high-grade areas that they are still defining.
It’s possible that some institutional funds, family offices, or larger individual investors have been exiting as well as we’ve seen some large volumes on some days. Regardless, while most of the Silver explorers and developers had some pressure over the last 2 years, since the August 2020 highs, Kootenay has underperformed many of their peers in this kind of market sentiment, so some may have just left to focus on companies that were performing better. As mentioned above, these optionality attributes are also why Kootenay will likely outperform many other peer companies as the bull market heats up later in the year and heading into next year.
Good Volatility Ahead
By Monica Kingsley – Stock Trading Signals – March 18, 2022
“S&P 500 extended gains, and the risk appetite in bonds carried over into value rising faster than tech. Given the TLT downswing though, it‘s all but rainbows and unicorns ahead today. Not only that quad witching would bring high volume and chop, VIX itself doesn‘t look to slide smoothly below 25 today. Friday‘s ride would be thus rocky, and affected by momentum stalling in both tech and value.”
“Real assets though can and will enjoy the deserved return into the spotlight. With much of the preceding downswing being based on deescalation hopes (that aren‘t materializing, still), the unfolding upswing in copper, oil and precious metals (no, they aren‘t to be spooked by the tough Fed tightening talk) would happen at a more measured pace than had been the case recently. Pay attention to the biting inflation, surrounding blame games hinting at no genuine respite – read through the rich captions of today‘s chart analyses, and think about reliable stores of real value.”