Loading ...It Isn’t A Bear Market (Yet)
I wrote this early Saturday morning and was going to wait until Monday morning to post because I thought more people would respond during a day when the markets were open. After seeing the lively thread yesterday from Pidgeon and Plunger(I was out all day and didn’t read until last night) figured, why wait? Despite the insightful analysis by Sir Plunger, the gold and especially silver miners are not in a bear market. Yes, he showed a few ETF’s and miners that are clearly in bear markets. I can and will show a number of leading gold and silver stocks that are not. I have previously responded that both gold and silver (the actual metals are still in bull markets despite their year long correction). The same is true for a considerable number of mining stocks. I am not saying that Plunger hasn’t done a great job warning that things would get worse and that traders should stay in cash during this period, but we are not in a bear market, yet, and I am not just talking symantics. Look at the charts of: NEM,FNV,RGLD,KL for gold and MAG,HL,CDE,VLMGF for silver. I can even give you almost half of my Terrific Ten rocks and their charts are also not in bear markets. My point is, and I have stated before. Despite the year long correction and the devastating takedowns in gold and silver that have been occuring more frequently, lately, this is not a bear market, yet. The action is more indicative of a bull where it is trying(and apparently succeeding) in shaking as many out as possible. Again, if gold and silver start breaking below their lows from earlier in the correction and or the stocks above, as well as others that have not broken below their correction lows start to do so, I will relent and concede that I am wrong and we are in bear markets for the mining stocks. But unless and until that actually happens, the bull, though admitedly bloodied, is still intact. 
Just read this on Zerohedge, “…Sometimes an anecdote is as effective as a chart in making a point. Here we’ll offer both. Let’s start with the anecdote. Our fellow ZeroHedge contributing editor, Tim Knight, host of the Slope of Hope blog, goes to his local bullion dealer to sell some gold coins. The dealer won’t buy all of Tim’s coins, because he’s “almost out of cash from all the people who wanted OUT of precious metals”.”
Maybe, Pidgeon is correct. Sentiment seems pretty negative.
Thank you for your point of view, CM. I am following this debate with interest.
Yes, it is a good one. Both camps are able to find examples of charts to bolster their respective case. We will know when the market tells us.
Just a few comments. What I have been attempting to do is to ascertain the primary trend by observing the movement of the indexes (primarily GDX). In all bull and bear markets there is always a handful of stocks that perform opposite the primary trend. A good example of this would be FNV. From 2011-early 2016 the gold stock indexes lost 80-90% it was one of the most brutal bear markets of memory. During that blood letting FNV rose the entire time. Various reasons were the cause, point being it’s the indexes or the composite of the market that we use to assess the primary trend.
The charts above are indeed the quality issues of the industry, some have done exceptional jobs of managing their businesses, particularly NEM. My take on it is that this is a cyclical bear market within a secular bull market and the final outcome will not be that of full liquidation like we saw in 2011-2016. (speculation on my part) Despite an overall downtrend these issues stand out as the exceptions, they have managed to swim against the tide. But it is the indexes we turn to trying to ascertain the nature and character of the trend.
I have covered this already, that it is not just the lines on charts that have led me to assign bear market status to this sector. One of the primary drivers is the market dynamics and the observation of the progression of investor psychology marching itself progressively through the phases that lead to a bear market bottom . Said another way: if it looks like a duck, quacks like a duck… well.
There have been several tells in the price action that have contributed to my conclusions. I have mentioned this a few times, but I don’t get the sense that anyone is absorbing these comments. Two of these tells are the following. First is that the last cycle fulfilled all of the markers of a fully developed cyclical bull market having the characteristics of an early stage bull in a secular run. From 2018-2020 we witnessed a classic 2-year cyclical bull which ended in the typical silver blow off. That was the major clue that it was complete. It reached the highest Weekly RSI since 2011 and even 1980. It was done!.
The next thing that jumps off the page for me is the manor that these BMRs have unraveled since last August. They do so violently with no support. People are likely tired of me saying this, but they are exhibiting BEAR MARKET ACTION. Whether it’s the unraveling of the first mini BMR from late Nov 2020-early Jan 2021 or the big BMR from Mar-May 2021 they collapsed violently. Why? Because they were not organic rallies based on improving market conditions.. They were rallies based on resetting investor psychology so when they had run their course there was little offered support to stop the fall. Again this is characteristic of bear market price dynamics. Just looking at lines on charts does not reveal these signs.
So when does this all end and we can all join hands and embrace the bull market together? I don’t know but my expectations are that we will continue to witness the progression of psychology from what we saw in Aug 2020 to that of virtual full abandonment of the sector. Keep in mind that this site is composed of people considered to be “the remnant”. They will never abandon belief in the metal so don’t expect it to ever turn black bearish. It will always be populated by believers. (including myself)
Defend your capital!
Plunger, thanks for your usual, well presented comments. Not meaning to be doing a point, counter point but you articulated some points that I meant to address previously, but forgot. Agree that every bull and every bear always has a few stocks that go counter to the major trend. The few that I listed happen to be some that I own and or follow. I know that many Tenters bring up numerous others that I don’t follow or even know exist. My point is that it isn’t a majority that are in bear markets. Without doing any actual numerical analysis , I am willing to guess there is probably a breakdown somewhere in the neighborhood of 1/3 still in bull markets, 1/3 in neutral (correction) and 1/3 in bear markets. Since the bull market arguably started in March 2020, that leaves 2/3 still in either bull market or correction status. The second point is in “market action”. I believe the type of action you describe as violent drops to the downside,(I agree with that description) just not that is bearish behavior. It is bull markets where you have violent selloffs to shake people off the bull. Bear markets tend to be slow, low volume grinds that go on forever and bore investors to death. Appreciate your great commentary and you have definitely been more correct than I have over these last number of months.
These conversations are “sincere, enlightening and thoroughly enjoyable discussions” that I believe are extremely helpful to “the remnant”. Thank you both!