Tag Archives: junior mining shares

GDXJ: Myth vs. Reality

Many of you have contacted me about the sell-off in GDXJ and upcoming re-balancing that will occur at the end of this week (I think). First of all, thank you for your inquiries and please feel free to email me with questions/ideas. The only “dumb” question regarding gold, silver and mining shares is, “should I own any?”

First I wanted to highlight the difference between fact and “propaganda.” The propaganda has led many to believe that the rebalancing of the GDXJ has exerted undue pressure on the mining stocks as a whole and on the GDXJ components specifically. However, a simple graphic analysis differentiates fact from fiction:

The graph above compares GDXJ, the HUI (green line) and GDX (purple line) since the GDXJ rebalancing was announced to the market on April 17th. As you can see, over the time since the GDXJ rebalance was announced, GDXJ has performed in-line with rest of the sector. I was a bit surprised when I ran that chart. In fact, on a YTD basis, GDXJ’s rate of return is almost identical to that of the HUI and GDX:

So where does this leave us? The entire sector has moved lower since early February. Maybe this was in anticipation of the GDXJ rebalancing “whispers” and maybe not. Often the miners will be hit before a manipulated take-down of the gold price is implemented. That narrative fits the chart above as well.

It’s important to distinguish the difference between the propaganda and truth, because that’s where money can be made in the markets. The truth is that the sector has sold off after a nice move from the mid-December 2016 low. But I also believe that the market is setting up for another big move into the 3rd and 4th quarters. It may take all summer for this to materialize, but the economic, financial and geopolitical fundamentals, as they are unfolding, weigh heavily in favor of big move higher in the precious metals sector.

One other point I would like to make – something that you WILL NOT HEAR from Wall Street or from Rickards or from the financial media: since bottoming in mid-December, the HUI is up 14.7%, GDX up 16.1% and GDXJ up 15.3% vs the S&P 500 which is up 7.7%. The mining stocks, since bottoming in mid-December, have outperformed the S&P 500 over the same time period through today (June 15, 2017).

Several of you have asked for ideas on the stocks in the GDXJ index that are “oversold” due to the rebalancing. As I’ve just demonstrated graphically and with ROR numbers, GDXJ has not really sold off since mid-April anymore than the larger-cap mining stocks in the HUI index and in GDX. Those are the numbers. I can’t make those up. It’s “narratives” that are fabricated.

Having said that, I did present two ideas in the Mining Stock Journal which happen to be in the GDXJ.  One is up 6% since May 4th – and it has a lot higher to move – and the other is up 20% since June 1st, with a lot more left in the move.

A subscriber told me yesterday that a well-known subscription service that costs $1500/year is promoting 3 ideas from GDXJ.  This is probably one of the services that is promoting the idea that the GDXJ has been hit unusually hard. I’ve shown above that idea is a false narrative.  The Mining Stock Journal is $20/month with no minimum commitment.  Subscriber turnover is exceptionally low for a reason.  You can find out more about it here:  MSJ Subscription Info.

No, The Junior Mining Stocks Are Not About To Implode

One of my subscribers sent an article to me that  had been linked on Goldseek.com.  The author laid out a case based on the recent events surrounding GDXJ and JNUG that the junior mining sector would likely “implode.”

I get suspicious about an article when the author repeatedly, with much bravado, makes the claim the he is laying out facts and challenges anyone to present challenges to those “facts.”  Typically that style of writing belies a conspicuous absence of facts.

The author bases his premise that the GDXJ rebalancing and the related suspension of JNUG shares would strangle money available to finance junior mining shares.  Nothing could be further from the truth.

To begin with,  investment capital does not flow into the juniors via GDXJ or JNUG.  GDXJ is a quasi-derivative security that buys the stocks it holds on the secondary market.  It is unequivocally not a capital raising mechanism for companies.   Money flows into juniors directly from investors who buy shares issued by the companies.   I’ve chatted with several junior mining stock CEO’s – true juniors – and they have all said one thing in common: there is a lot of money being made available to the junior mining companies by both large institutional investors and strategic investors.  The rebalancing of GDXJ and the share suspension of JNUG will have zero effect on this.

Too be sure, the author presents some interesting theories about what is happening with GDXJ and JNUG using some charts he presents.   But charts only show facts about the directional moves made by stocks.  They don’t explain why those moves occurred.  The author’s views on why the moves occurred are theories, not facts.   To compound the problem, the author uses a 5-day trading period with which  to draw conclusions.

The short term divergences shown in the chart comparing JNUG to the various leveraged miner ETFs is most likely explained by the fact that some hedge funds/traders got ahold of the GDXJ and JNUG news and decided to front-run the market. Any seasoned market veteran knows that you can’t use just 5 or 6 days of chart data to make inferences about what may or may not be going on behind the scenes with capital flows and trade strategies. The ONLY conclusion we can draw from that chart is that JNUG underperformed the other ETFs over a 5 day period. So what? There could be any number of reasons why this occurred. The front-running explanation is the most likely.

Finally, the author noted that the mining shares suspiciously diverged negatively from the price gains in gold and silver during a few days in February.  He claimed it was something he had never witnessed in 15 years of “pouring over gold, silver and mining charts on a near daily basis.”

Well, that’s the problem.  The author has his head buried in graphs.  He can’t see the forest through the trees.  There’s been several periods of time when the direction of the mining shares and gold/silver diverge over the past 16 years since the bull market in the precious metals sector began.   I have had discussions about this quite frequently with my colleagues over the past 16 years.  There’s any number of explanations for this occurrence. Furthermore,  this trading anomaly was occurring before the existence of any of the mining stock ETFs.

Alternatively, I presented an analysis of JNUG and explained why the suspension of share issuance might actually be a bullish signal for the junior miners in the most recent issue of the Mining Stock Journal.   Furthermore, the juniors remain exceedingly undervalued relative to the entire sector and big institutional investors and large-cap mining companies are validating this with ongoing large capital investments into these companies. Of course, this was the case when the bull market began in 2000/2001 as well – before mining stock ETFs were even in the planning stages…

“Huge Upside Idea” Update

(note:  This report was first published on June 25th.  Many of you have already purchased it.  This is an update/briefing on my breakfast meeting with the upper management yesterday – the bottom line is that this stock is an even stronger buy now than it was just 3 months ago based on the advancement of the project that the Company has achieved since mid-June).  I just added shares to my fund.

The company featured in the titled stock report was in town for the Denver Gold Forum.  I had a 1-on-1 breakfast this morning with the founder and Co-Chairman,  the President/CEO and the VP of Corporate Communications.

This Company is sitting on a massive deposit in a low-risk jurisdiction,  has plenty of cash and its Preliminary Economic Analysis shows that the NPV of the project is 5.7x greater than the current market cap.  It’s nearly 12x greater if you subtract out the cash.  The PEA assumes $1300 gold and $20 silver.   Imagine the NPV of this project when gold and silver move back up to their highs in 2011…

Furthermore, since I last visited with the Company back in June, they’ve identified ways to reduce the CAPEX number used in the PEA.  This would further boost the NPV.

This is a largely “de-risked” project and, with a deposit as enormous as the one this Company is sitting on, my bet is that – once the metals start moving a lot higher – it will be taken out by large mining company at a price that’s several multiples higher than where it trades now.

Finally, when I had this same breakfast last September, the founder/Co-Chair was boasting that he had purchased more stock at a lower price than any other insider.  With stock the having been beaten up since mid-July, I asked him if he was planning on buying more stocks.  Not only had he already added to his position this month, CEO had purchased shares yesterday and the VP was getting ready to buy more.  These people are buying open market shares with their own cash (unlike homebuilder executives, who exercise compensation options and dump them immediately).    I added today to the already heavily over-weighted position in the fund I manage.

If you already purchased this report, feel confident about adding to your position.  If you have not purchased this report, you can do so by clicking here:   Huge Upside Idea  or on this graphic:
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If you buy just 5,000 shares of this stock (well less than $5,000) and it goes up just a nickel, you will have already earned 10x your investment in my stock report.

Putting The Current Gold/Silver Market In Proper Perspective

Follow the money.   My friend and colleague, Nick of DenaliGuide’s Summit blog has done a short video to explain why the current trading action in gold and silver – although seems quite bearish – is really a non-event.   The goal is to help ease everyone of the oppressive negative sentiment the has engulfed the precious metals investing community.

Some Nick’s “hidden” talking points include the fact that:

1)   gold and silver bottomed in last June 2013
2)  June 1st this year:   gold is up almost 3%, silver is up just over 3%;  GDX is up almost 20%

Sure doesn’t feel like the precious metals sector has had positive returns this year, does it?

Please take 2 minutes to watch Nick’s informative video:  Market Sentiment Belies The Numbers.  (Samples of Nick’s T/A research, which I use, are linked at the top of the blog)

Perhaps what’s most interesting can be seen in this graph from Nick (click to enlarge):

STEALTHshockCNP (2)

This shows the GDX index since mid-June.  As we know, gold and silver rallied along with the GDX into mid-July and have largely retraced nearly back to their June 1 starting prices. BUT, the mining stocks have been marking time in a sideways pattern.  The black line on the graph shows the amount of “stealth” accumulation that is occurring on every down-tick in the mining shares.  I have noticed this as I watch the tape every day, but this graph illustrates it.  The message:  SMART MONEY IS ACCUMULATING MINING SHARES.

I have several mining stock ideas here:   IRD Research Reports

My “Huge Upside” idea has pulled back on zero news.  I added some to the fund I manage today.  My “Short Term Trade/Long Term Investment” idea is back above my recommendation level.  I expect it to outperform going forward, assuming the precious metals sector starts trending higher.

 

The U.S. Dollar Had To Use The Rest Room Today…

While gold, silver and mining shares catapulted from overnight and early attempts to manipulate them lower…(click on graphs to enlarge):

SeptDX

USDX

The U.S. dollar has lost the psychologically important 80-handle, it lost its 200 day moving average on Friday and its 50 dma today.  All of these are important technical levels.  The most interesting aspect of the graph on the bottom is the accumulation/distribution line.  This shows net dollars flowing either into or out of U.S. dollar futures.  As you can see, the dollar has experienced significant outflows since last July.  The outflows slowed down for a bit in early May but it appears as if the selling is gathering momentum again.

Can’t say I would be an anxious holder of U.S. dollar given our Government’s incompetent handling of its imperialistic affairs, the extreme fraud and corruption that has infested every corner of DC – including the Oval Office  – AND,of course, the declining wealth output as measured by the latest GDP reading.

 

New Research Report Is Up

This one is my best ideas right now and it’s probably the best risk/return junior mining stock play I’ve seen in over 13 years of following the precious metals and mining stock sector.

It’s certainly, by far, the most mis-priced junior mining stock in the sector.  This is also my most comprehensive and thorough report, including a glossary of mining terms and a two-page technical analysis that Nick/Denali Guide prepared specifically for this report.

You can access this report here:   Research Reports

FYI:  CNBC just posted its lowest viewer ratings since Q2 1997.  Cramer’s show is absolutely cratering:   CNBC/Cramer Crashing  It’s outright embarrassing to have worse ratings than Charles Payne on Fox News, as he’s has to be one of the dumbest “market experts” I’ve ever seen.

I remember thinking back in the early 2000’s, when CNBC was at its zenith, that we would see the Fed’s money printing-fueled stock bubble persist until CNBC ratings tanked and that the start of a serious bear market would begin when CNBC’s viewership headed to zero.  Looks like we’re almost there, baby!

Anyone see the 2yr Treasury auction today?  It was a disaster .  The low demand/poor auction results is being credited with triggering the big drop in stocks today.

Seriously, it’s time to get out of mainstream stocks, unload your bond funds and move your money into the safety of physical gold and silver.  You leverage your gold/silver holdings by buying good quality junior mining shares, like the one featured in my latest report.

 

Richard Russell: “Gold Is Again In A Bull Market”

The choices ahead are — the Fed will continue QE, or at some juncture ahead, all the smart boys will all rush for the exits at the same time. How this will all work out is a mystery to me. I’m just as happy to be out of common stocks and in the precious metals. (Richard Russell, King World News)

Since 2001, that I’m aware of, Richard Russell has been slowly and steadily increasing his recommended exposure to physical gold and silver.  Apparently, he’s now 100% in metals and completely out of the stock market except, I assume, some exposure to mining shares.

Chart of gold below. As I write an hour before the close, gold is up $41. Referring to the chart you can see this puts gold above its 50-day and 200-day moving averages. This should start squeezing the gold shorts. The bear market in gold is over, and gold again is in a bull market.

The stock market is now excessively overheating, especially in comparison to the underlying fundamentals. Even companies with reported net income growth are showing flat to down revenues.  Aside from the Fed intervention, stock prices are being fueled by corporate share buybacks.  In Q1, S&P 500 companies spent 93% of their net income on share buybacks and dividends.   Corporate insiders are dumping their shares in record amounts into their own companies’ buybacks – especially the homebuilders.

It’s time to get out of most stock and bond sectors and into physical gold/silver (NOT GLD or SLV) and junior mining shares.  As this bull market in gold advances, there will be a flurry of M&A activity at much higher price levels.

I have what I consider three superb risk/return junior mining plays in my research section:  LINK.  I’m currently getting ready to write up what I think is one of the best risk/return plays in the junior mining sector that I’ve seen in over 13 years of my involvement in this sector.

Comex Market Manipulation + Pilot Gold Update

With the U.S. geopolitical situation deteriorating rapidly on several “war” fronts, it seems that most of the world besides England and the U.S. have been stepping up its accumulation of gold, especially China and Russia.

Last night was a good example, as the price of gold jumped when the Comex Globex computer trading session opened at 6 p.m . EST and moved higher throughout the part of the global trading period in which the eastern hemisphere dominates (click to enlarge):

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Then, as is typical, once Shanghai closed for the day – and at the same time London opened – the price of gold sold off steadily before bouncing a little over an  hour before the Comex opens.  Then, as you can see on the above graph, the price of gold gets slammed exactly at the 8:20 a.m. EST Comex floor open (the graph is in MST time, 2 hours behind EST).  Another “flash crash” raid, with no apparent news or event triggers.  The only trigger, of course, is the Comex floor opening, which is when the big banks dump gold contracts.  This occurs at least 85% of the time when the Comex opens.

The manipulation has become blatant, with no attempt to hide it or even deny the allegations…It’s actually starting to smell like desperation.

I wanted to quickly update Pilot Gold, for which I’m offering a research report (link above). Pilot announced that is was acquiring Cadillac Mining on Friday in a stock for stock + warrants transaction.   PLG’s stock was slammed for about 11 cents (6.8%) on a day when the juniors were flat.

Every single time a mining company – any size – announces an acquisition, especially stock for stock, the market automatically slams the acquiring company’s (PLG in this case) shares.  It’s been like this for as long as I’ve been investing and researching the mining sector (2001).

Pilot is issuing 3.55 million shares – $5.67 million, roughly – of stock to acquire Cadillac, which has a property (Goldstrike) in Utah’s  section of the Great Basin gold producing region (Nevada/Utah).  It’s one of the most prolific gold producing regions in the world. This particular property produced over 200,000 ozs of gold and 197k ozs of silver in the late 1980’s/early 1990’s.  The recovered gold was produced from near-surface ore.

Pilot’s management team has a superb track record of finding significant gold discoveries in areas that have been overlooked by other companies.  It’s a very low-cost bet for Pilot to wager that their expertise and experience can be applied to this property to find a strike that will pay back the $5.6 million investment many times over.

I’ve got a research report available – LINK – which details Pilot’s previous successes.  This includes its Kinsley Mountain project, which was another former gold producing property that had been shuttered, and overlooked by others,  and for which now appears that Pilots’s exploration team has discovered what looks to be a “game-changer” gold strike.

With Pilot’s price down on this knee-jerk reaction by the market to PLG’s stock for stock deal, now’s a great time either add to your position or read my research and see why I think Pilot is a home run opportunity.

The Junior Mining Shares Are Being Accumulated

…Likely by smart money.  With hedge funds piling into the short side of gold and silver futures – and likely shorting and naked shorting junior mining shares aggressively – it “smells” like the smart money is starting to flow aggressively into the junior mining shares.

My colleagues and I have noticed over the last 10 or so trading days that more often than not, the leveraged mining stock trusts are trading higher in the last few minutes of trading on big volume spikes.  Today is a textbook example (click on the graph to enlarge):

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The graph above is a 1-minute chart of JNUG, which is 3x the GDXJ junior miner share trust.  You can see the big volume spikes and the move higher in the last 20 minutes, but especially the last couple of minutes.  I would surmise that the last few minutes included short-covering by the hedge funds.

I’ve also noticed that junior miners with very high short positions, Allied Nevada for instance, have been popping up on any given day with no related news or apparent fundamental reason.  Last Friday was Eurasian Minerals, EMXX.  This week there have been several.   This is both smart money accumulation and short-covering.

The junior mining stocks are the best stock market investment opportunity that I’ve witnessed in nearly 30 years of studying, researching, trading and investing in all of the markets.  Note:  I said “stock market” investment opportunity – clearly there’s been plenty of hard asset/business opportunities that have been way better than stocks.  Pilot Gold (research report available) announced superb drilling results on one of its projects in Turkey and the stock popped 5% today.

I have three stock ideas posted in my “Buy My Research” link.  I just added the DenaliGuide technical analysis (link above).  Nick is the best technical analyst I’ve come across in a long time.  He understands the fundamental side of the mining business, which is rare for a technical analyst.  His technical approach is no-nonsense – i.e. he doesn’t impose meaningless geometric shapes on chart patterns nor does he wax on about “waves” – “oh wow, this is a C-wave dude…”  He studies price/volume patterns and relationships and draws on similar analysis in related sectors like energy and commodities.  He also adds humor in his presentation.

Nick offered to provide technical analysis for the stocks on which I publish (buy or sell).   His work is completely independent of what I do and the conclusions I reach.   Currently we’ve posted his piece on Almaden Minerals (AAU).   At some point these technical “tear sheets” will only be available in my research reports.