Minimize

Welcome!

Erik Wetterling – Navigating The Sea Of Low Sentiment In Junior Mining Stocks

Shad Marquitz
September 16, 2022

Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to reflect on the sea of low sentiment in junior mining stocks and also provides some strategies and insights as to how he manages his portfolio in this type of environment.  One area reviewed is the more recent shift in his focus from Alpha mining stocks with  “probable growth” to the Beta mining stocks with more optionality when sentiment shifts back higher.  

 

We outline similar analogs when many other commodities resource stocks were down 80%-90% a few years back like oil, nat gas, uranium, lithium, palladium, and copper, but then had a huge reversal in trend and then the related resource stocks shot up 5x, 8x, 10x or more.   The best time to have been accumulating those sectors was when the outlook was most bleak, when sentiment was low, and frankly when some of those sectors were despised by investors assuming they’d stay down perpetually.

 

As an added bonus, (and because we ranted to each other for so long before starting the recording for the official podcast) we decided to include some of the pre-call banter and discussion on how we both approach investing in the resource stocks.  This is admittedly a more candid dialogue between two friends just talking the markets and what we have done and are doing with our money.   This is not to be viewed as investment advice, as investors should seek the guidance of financial professionals, know their own risk tolerance levels, and the included conversation is simply for entertainment purposes.

 

 

Click here to visit Erik’s site.

Discussion
30 Comments
    Sep 16, 2022 16:31 AM

    Gold Snaps Support As Treasury Yields Rise

    by @Goldfinger on 16 Sep 2022

    “The DSI for gold and silver both reached a 9 reading on the same day on the final day of August. Both metals proceeded to bounce for the next ten days with silver significantly outperforming gold. Since Tuesday’s CPI release in the US we have seen Treasury yields soar as the market prices in additional Fed rate hike expectations. This rise in yields, and real yields, has caused gold to crack major long term support near the $1680 level. The DSI for gold ended yesterday at a 7 reading, its lowest level since the summer of 2018 when the yellow metal was fumbling around near $1200/oz.”

    “To wit, the current macro backdrop is far from ideal for gold bulls; a super strong US dollar and rising real yields means that the price of the currency that all commodities are priced in rises, in turn dropping the nominal price of those commodities. In order for gold and commodities more generally to put in a sustainable bottom we will need to see yields at the long end of the Treasury curve (think 10s and 30s) begin to move lower, and for the US Dollar to show signs of rolling over.”

    “While my long term bias is undeniably bullish on gold and metals, I cannot ignore the technical implications of a break of a major long term support level and the 200-week moving average. There are still a few hours left in the week for bulls to orchestrate a stick-save and close gold back above $1680. However, the 5th test of the $1675-$1680 area in 18 months doesn’t inspire a great deal of confidence.”

    “It is ironic that hundreds of gold mining companies and investors spent most of this week gathered to discuss precious metals mining investments against a backdrop of a market that appears to be falling apart. At this point, the Fed is at risk of overtightening and causing deflation – the exact opposite mistake they made in 2021 when they were trying to spur some inflation, and instead helped to create a massive inflation overshoot to a 9% CPI. Most monetary policy has a lag effect of several months at minimum, which means that next week’s Fed rate hike won’t be fully felt until December or January. However, by January they may have hiked an additional 100 bps, sending the economy and markets into a full-fledged tail spin.”

    “As a long term investor one should be unmoved by such short-term gyrations in markets. In fact, lower prices should be welcome as an opportunity to accumulate and lower one’s cost basis. However, from a shorter term trading standpoint the shorter term trends cannot be ignored.”

    https://ceo.ca/@goldfinger/gold-snaps-support-as-treasury-yields-rise

    Reply
    Sep 16, 2022 16:37 AM

    Success is not final, failure is not final, it is the courage to continue that counts. Winston Churchill

    Reply
      Sep 16, 2022 16:40 AM

      Good point DT, and it takes a lot of courage indeed to play ball in these markets.

      Wishing everyone great prosperity in their trading, in health, and in life in these turbulent times.

      Reply
    Sep 16, 2022 16:45 AM

    whether the dollar cracks big at 113 area or retest of 121 area….my guess is you will need to purchase miners near the end of the day prior to that event…that will be one heck of a gap up next day, if that plays out….glta

    Reply
      Sep 16, 2022 16:53 AM

      Good thoughts Larry, and thanks for providing those resistance targets in the US Dollar, and yes, when the greenback does finally roll over in earnest, then it should be quite a boon to the commodities overall, the precious metals, and the mining stocks. Until then…. time to batten down the hatches…

      Reply
    Sep 16, 2022 16:57 AM

    day DXY..This should be the final AB=CD up for this run…Historic price resistance plus RSI divergences galore on day and week charts…..MACD on day is rolling over….It is holding its breath to the top IMHO

    https://tos.mx/GF9gPUi

    Reply
    Sep 16, 2022 16:18 AM

    Annual Gold Performance Since 2000 In Various World Currencies: (2000 – 2022)

    https://media1-production-mightynetworks.imgix.net/asset/45432822/image.png

    Reply
      Sep 16, 2022 16:21 AM

      It is interesting to note that the average annual return for gold in global currencies for the last 22 years have been about 8%-10% per year. Not too shabby!

      Reply
    Sep 16, 2022 16:42 AM

    As the PM mining stocks are correcting further today, I’ve decided to deploy some dry powder into a handful of gold and silver stocks. Some of the growth-oriented producers, developers, and even royalty companies are looking attractive again at current valuations.

    Reply
    BDC
    Sep 16, 2022 16:05 PM

    Very strong PM miners
    considering the Gold price.
    It may even finish above 1675.

    Reply
    Joe
    Sep 16, 2022 16:11 PM

    LOL
    Navigating a sea of icebergs is more like it, and PM investors have been the Titanic.
    Hitting them every time until they all sink, just like the PMs are doing.
    Glug, Glug, Glug…
    Down to the bottom they got.
    Newsletter writers make money on suckers… er, I mean subscribers.
    Hope you all took this little rally today to SELL, SELL, SELL!!!!
    Have a nice weekend.

    Reply
      BDC
      Sep 16, 2022 16:21 PM

      Joe the Tell, drop that Gun!
      https://tinyurl.com/b2r6duf6

      Reply
        BDC
        Sep 16, 2022 16:26 PM

        Quadraphonic!

        Reply
      Sep 16, 2022 16:35 PM

      It could be be that instead of icebergs that the mining stocks will turn out to be streamlined dolphins (or trading sardines as Erik calls them) ready to pop above the water for spectators on the sidelines of the ship. For those investors that use their cash to accumulate the lows in the mining stocks, and then hold on for the next 1-2 years, they could end up feeling the wind in their hair like the king of the world.

      https://youtu.be/oRl0BO0XTlY

      Reply
      Sep 17, 2022 17:54 PM

      Joe:
      Looking forward to your support on the upside…

      Reply
    Sep 16, 2022 16:57 PM

    That was entertaining. I am going after those down 90% as HH’s laugh sounded like those were the most fun. I guess it cut off because he is still laughing.

    added: kootenay was tanking all day. I should have bought more but elected to move it to my Stillwater Critical as it was tanking also. I will look to get Kootenay back down the road.

    Reply
      Sep 16, 2022 16:29 PM

      Yes, I cut it off there because he was still laughing… all the way to the bank, and because at that point we really needed to start the recording of the initial “official” podcast. 🙂

      Lakedweller2 – Yes agreed that optionality companies with ongoing drilling for expansion like Kootenay and Stillwater Critical Minerals will also be the kinds of “beta” plays that get rerated higher with sentiment in the sector, like Erik was discussing.

      I thought the inclusion of the pre-call ranting with Erik was particularly entertaining and hopefully insightful as well.

      Wishing you good trading!

      Reply
        Sep 16, 2022 16:41 PM

        Particularly insightful … when you guys free wheel, it is really informative to hear how you go about things and the logic employed. I don’t do things necessarily different but I don’t do them as well. It really helps. Thanks.

        Reply
          Sep 16, 2022 16:04 PM

          Thanks for that feedback Lakedweller2. I almost didn’t include the pre-call banter, but upon listening to it again, I figured, well what the heck, we tossed around a lot of ideas and thoughts on how we trade, and just hoped it may be helpful or at least an interesting discussion to post along with the main editorial.

          Reply
      Sep 17, 2022 17:07 PM

      I couldn’t resist rolling some money into KTN Friday also… great sale price!;-)

      https://schrts.co/bQXYvgCd

      Reply
    Sep 16, 2022 16:51 PM

    Hecla salvaged a great day with a surge in price and volume in the final minutes of the session…
    https://stockcharts.com/h-sc/ui?s=HL&p=D&yr=0&mn=11&dy=0&id=p15662459116&a=1174402329

    Reply
      Sep 16, 2022 16:50 PM

      One or two months ago someone here talked about waiting for HL to go under $3. I didn’t think that would happen and still don’t.

      Reply
      Sep 16, 2022 16:49 PM

      Matthew thanks for that HL chart. Yes, nice to see Hecla pull out a green day, along with many of the Silver stocks. The ETF SIL managed to close green as well, and SILJ closed flat (but was up in after hours trading).

      I was prepared for more turbulence and weakness than we actually got, but it was also nice to see Gold close the week above that $1673-$1675 support level (albeit it only closed at $1683 today).

      We’ll see next week when the Fed hikes (most likely 75 basis points) if that level gets breached again in Gold in a more severe move, and if that triggers sell stops. In that kind of a scenario that could drag down Silver in sympathy.

      Overall though, it was pretty nice to see the short-covering rally in Silver on Monday, and that in the last 2 weeks it went down and rebounded from the mid $17’s to the mid $19s. Some of the guests we had on this week, felt this was indicative of strength underlying the PMs, and that it was even possible that silver may have already bottomed ahead of gold.

      Reply
      Sep 17, 2022 17:56 AM

      I bought some HL Friday morning after you posted the chart a few days ago. Thanks Matthew!!

      Reply
    Sep 16, 2022 16:07 PM

    Gold 2013 All Over Again?

    Wayne Gordon / Dominic Schnider / Giovanni Staunovo — UBS – Sept 16, 2022

    https://media1-production-mightynetworks.imgix.net/asset/45449379/image.png

    Reply
      Sep 16, 2022 16:10 PM

      That was an interesting article from UBS research, as they didn’t feel it was the same macro backdrop as 2013, and pointed out a number of the differences.

      Craig Hemke & Jordan Roy-Bryne did the same thing, noting it is a different set up in PMs, global equities, central bank policy, how the central bank communicates today, the bond market, inflation, interest rates, etc… now compared to a decade ago.

      It seems ultimately that everyone is prepared for gold to correct a bit longer, but that they aren’t looking for as severe of a capitulation move down this time (barring an all out market crash).

      Reply
    Sep 18, 2022 18:04 PM

    Erik mentions a company called (something) (?) Metals. Anyone know which company he was referring to? Best…

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *