The markets have a way of pushing you just beyond your limits, to get you to do the wrong thing at the wrong time before they reverse on a dime. The bearish sentiment from just a casual observation over the last few weeks has felt like there was no way the bulls could rally the PM sector higher unless there was a decent correction. During a new bull market the surprises usually come to the upside, not the downside.
The rally we’re currently experiencing in the PM complex, and especially the (NYSE:Junior Miners), is a potential once-in-a-lifetime event for most investors. Sometimes we get lucky and experience several of these kinds of bull markets over the course of a lifetime, but generally one's first experience is a learning experience if you can survive long enough to have learned something. I was lucky enough during the tech bubble in the 1990s to have had just enough experience to play the last five years well enough to be able to retire at 50 years of age. Had I not had any experience before the tech bubble burst I would have most likely not gotten out at the top and would have ridden the whole thing back down.
I didn’t become aware of the bull market in the PM sector until the spring of 2002. My whole focus up till then was the stock market. I still remember very clearly the first time I really looked at a chart for gold and recognized a beautiful inverse H&S bottom. I didn’t even know what a junior gold stock was back then because the PM sector was so far off my radar. I began to study everything I could about this, knowing that the Chartology would be just as clear about this sector as it was for the many different tech stocks I'd traded in the 1990s.
It didn’t take me long to find some junior PM stocks with really nice Chartology in order to start trading this new area (for me). I felt like I had died and gone to heaven again because I thought nothing could ever beat the tech stocks.The chart patterns the PM stocks were making were just as beautiful as the many different tech stocks I traded.
So I got lucky twice in my investing career by finding two great bull markets in which to invest. Now we have entered the third great bull market of my lifetime which is the bull market that started in the precious complex in January of 2016. To be able to get in on the ground floor of a brand new bull market is only a dream for most investors but to get in at the bottom with small cap junior PM stocks can change your life forever if you can trade accordingly, which is easier said than done as I know some of you are finding out.
It’s very easy to trade in hindsight when you look at a chart and see a top or bottom already in place, but operating day-by-day as a pattern builds out can be very challenging. It can take patience beyond what most have, tin order to sit tight and let the pattern mature. Particularly since sometimes—just to throw a curve ball—they can morph. Knowing what the big trend is that you’re trading in, whether a bull market or bear market, is the most important aspect of investing.
Rule #1 is don’t short a bull market; Rule #2 is always pay attention to rule #1. Let the bull market work for you. If you buy too early in a bull market you’ll be saved as the bull market progresses.
The first six months of our new bull market are now over and there is no way to get it back. Many have missed the bottom and have been waiting patiently for a pull-back to get in. This strategy is not working.
Many have tried to trade in and out of this new bull market and have been left standing at the train station waving goodbye as the train leaves. I sold my positions a few months back and quickly realized this was a mistake and have scrambled to buy them back at somewhat higher levels.
This is how a new bull market works taking as few along for the ride as it can. At some point there is going to be a correction which will end up forming some type of consolidation pattern which will be needed to get the overbought condition back to normal. However predicting when and how this will occur will prove to be very challenging.
I have a ton of charts I could post but I’m going to leave this just the way it is. This is the first time since we opened up our doors at Rambus Chartology in which I didn’t post a chart, which is weird for me. What is most important to understand is this new bull market, which is already six months old, isn’t waiting around for you to make up your mind if you want to participate or not.
Only you can determine for yourself how you want to play this new bull market in the precious metals stocks. For some it will be a life changing event and for others it will be a should-have or could-have kind of bull market. Take what you’ve learned during the first 10 years of the PM bull market and the recently completed 5 years of PM bear market and use that experience to guide you through this next leg of the secular bull market. As always, I will be right here analysing the Chartology of this most interesting, and frustrating, and exciting little market that we have all come to love / hate.