Since this site is open to new ideas here is one it appears to me is worth analyzing. I have directed a lot of writing towards the three phases of a bear market. Well, there are three phases in a bull market also. The first phase is the accumulation or stealth phase. Like the bears first phase the bulls first phase is very similar in that it is an undercover or stealth operation. In a bull markets first phase, informed investors, unknown to the masses or institutions, accumulate positions. The masses have no knowledge that the bull has actually begun. In fact any news of the sector is negative and is met with harsh skepticism. This is the atmosphere that surrounds the uranium sector today. There is no way I can declare the beginning of a bull at this time, however the tea leaves seem to be changing here and I have my antenna out. Obviously, the thinly capitalized players are still going down and hitting new lows, however the market seems to be undergoing classic bifurcation. The solvent players have quit going down on bad news and volume has dried up.
Interestingly, Rick Rule has recently panned the sector as not ready for prime time. Chalk this up as classic phase I commentary as all news is met with skepticism in the early part of phase I. Lets tale a look at uranium global demand projections. Now I will be the first to say that one can’t base their investments on strict supply and demand, because it never quite works out that way. But in the long term it helps to know it, so when the charts start to discount it then it starts meaning something.
So starting around the year 2018 we begin to get a supply shortage. Also by the year 2020 the Chinese will be plugging one new reactor into the grid per month. This will be a massive tug on the demand rope. And China’s recent announcement of shutting coal fired plants supports this premise. Here is a picture I took flying just north of Beijing. Look closely and you can see the streams of smoke from coal fired power plants. This is going to be replaced as it is absolutely killing this country. Note the stream in the lower right corner headed right towards the population center of Beijing. This is not morning fog or haze it is toxic poison.
So lets take a look at the big picture. This is what a secular bear market looks like. It appears that it has now accomplished its work by testing and retesting its lows. It now seems to be making advances although begrudgingly. Keep in mind this is under an atmosphere of either contempt or total indifference. (that’s what we like to see).
Of course CCJ is the big gorilla, however here are three of my favorites which are attempting to make a turn. UEC seems to be leading off the bottom:
DNN- the quality laggard