September 24, 2021

Canadian investors need to prepare for at least 2 more years, maybe 4 more years, of federal government economic mismanagement and woke progressivism (look on the bright side – there will be plenty of money-making opportunities as a result).

Monday’s Canadian federal election, in our view, is not as close as the polls would suggest. Conservative supporters across Canada should be incensed as their party has once again snatched defeat from the jaws of victory (indeed, many staunch conservatives are furious, and a growing number of them are turning toward the People’s Party for a loud protest vote against not only the government but Erin O’Toole).

Tone deaf to a lot of things including basic marketing truisms, O’Toole has conducted a horrendous campaign that has done serious brand damage to the Conservatives. He has turned the “Conservative” Party back into the “Progressive” Conservative Party with a disastrous strategy that misread the reasons for the party’s loss in 2019 and foolishly ignored how Trump beat Clinton and American progressives in 2016. This is a real shame because the opportunity for a huge Conservative victory in this pandemic election was profound given that Canadians have a very strong appetite for change and fresh leadership after 6 years of incompetent Liberal management (new polling by Ipsos shows nearly half of Canadians are not fans of any of the federal parties, showing the big opening that exists).

Unfortunately, most conservatives in Canada (unlike the situation in the U.S.) have become afraid of their own shadow. Until they overcome that fear, and aggressively and effectively stand up for what they believe in and make convincing arguments to Canadians, they will never win power again at the national level. For now they have lost the battle for ideas, for a vision. In the last couple of years in particular they’ve allowed Trudeau and other so-called “progressives” to spook them into a serious identity crisis (how “progressive” is it, by the way, to operate an under-performing economy and saddle your children with enormous debt? “Progressivism” needs to be exposed as the failure and false hope that it is). Andrew Scheer had the right policies in 2019 but he was a poor messenger (it’s not just the message – the messenger is critical and must inspire). A bold and populist conservative agenda of real change/economic revitalization delivered by a charismatic leader would take the country by storm, but who will that person be and when will he/she emerge?

O’Toole’s bizarre idea of how to win this election was to be more like Trudeau, albeit a less repulsive version of him, and this included an unimaginative, wishy-washy, don’t offend anyone, vanilla policy platform in an attempt to sway “middle-of-the-road” voters (especially in Ontario, Quebec and Atlantic Canada) who were looking instead for something creative and bold. A large swath of the Canadian electorate, more than enough for a populist right-of-center party to win a majority government, is fed up with Trudeau and his woke progressivism backed by the NDP, so why would O’Toole try to be more like him? By doing so, O’Toole also showed he can’t be trusted because this is not how he campaigned to win the Conservative leadership. He vigorously advertised himself as a “True Blue” conservative, courted social conservatives and attacked Peter McKay for being too liberal. Then he pulled a “bait and switch” on Conservative members.

As he unwisely morphed into something very different for the national campaign and flip-flopped on some key policies, O’Toole undermined his own case for replacing Trudeau (voters will go for the devil they know as opposed to the devil they don’t know, and it’s hard to tell what O’Toole really stands for as he constantly gauges which direction the wind is blowing – that’s not leadership).

If there is anything voters are tired of these days, it’s politicians who are not genuine. Maxime Bernier hit O’Toole with a zinger Friday: “It’s time to bring back principles and consistency in politics. If you’ve had enough of these turncoat politicians, there’s only one option: PPC…There’s only three days left. Talk to your friends, family, and neighbours. Show your colours. We will shock the nation on Monday evening!” Bernier may be the only one who wins a seat for his party, but the PPC will play the role of spoiler in multiple ridings where Conservative support will bleed and allow a Liberal or NDP candidate to get elected. O’Toole’s failed approach has helped set up that dynamic, so don’t blame PPC voters (60% of whom are estimated to be disaffected Conservatives).

It’s impossible to win an election if you can’t energize your base. For the reasons cited above, O’Toole has been unable to excite Conservatives, let alone non-Conservatives across the political spectrum. Recent polls showed that within his own party, O’Toole’s support was languishing around 70% – an astonishingly weak number that is probably even lower now.

A sharp high-school debater could have given a damning prosecution of the Trudeau record over the last 6 years. O’Toole hasn’t delivered on that front, either. He also foolishly made this campaign all about himself, rather than promoting the fact he has a strong cabinet-in-waiting team that could bring competence to governing.

This all adds up to a very disappointing night for the Conservatives tomorrow and a looming internal party war that will leave Justin Trudeau and all “progressives” smiling, including Obama and Clinton who are encouraging Canadians to back their progressive friend whose policies are destroying our country, and wacky socialist Senator Sanders who has tweeted his support for the NDP (back in the day, if high ranking Republicans endorsed a Conservative for PM, the Liberals and the NDP would explode into anti-American rants).

If there’s anything real conservatives can take comfort from, it’s that Trudeau will be forced to try to fix the incredible mess he has created including more than $400 million a day just to pay the interest on the national debt. When he finally drives the nation into an economic and national unity crisis, which he will surely do over the next few years, real change in this country may finally come – assuming conservatives can get their act together by then.

The Week In Commodities

It was another rough week for Gold as a stronger dollar put more pressure on the yellow metal, driving it down $33 an ounce to $1,754 ahead of the Fed’s 2-day policy meeting this coming Tuesday and Wednesday. The 2-week loss is 4% or $74. Dollar strength remains Gold’s biggest immediate nemesis. Until the greenback tops out, at least temporarily, bullion bears will be in control. As we showed in 2 charts yesterday, though, this challenging period for Gold is occurring within the context of a continuing primary bull market. Even another $100 to the downside wouldn’t change that.

At 93.25, the Dollar Index has technical momentum entering the new week. However, strong resistance is evident at the March and August highs (93.47 and 93.75, respectively). Those highs also corresponded with important lows in Gold this year, so it’s reasonable to expect a bullion turnaround shortly on a Dollar Index reaction in a range between current levels and Fib. resistance at 94.36.

Gold, off 1.8%, was actually the best performing precious metal again last week as Silver (down $1.32 an ounce or 5.6% to $22.36), Platinum (down $18 or 1.9% to $1,950) and Palladium (down $120 or 5.8% to $934) experienced continued selling pressure.

Platinum, Palladium and Rhodium – used in pollution-cutting catalytic converters – have all suffered sharp drops in recent weeks as carmakers shutter plants and trim output guidance due to supply chain disruptions. The price slump is a big contrast with the booming performance earlier in the pandemic. Rhodium, the most expensive precious metal, has suffered the most as its demand comes almost entirely from the auto sector. Palladium isn’t far behind, having dropped below $2,000 an ounce for the 1st time since July 2020.

Base Metals + Cobalt

Base metals backed off modestly last week with Copper, Nickel and Zinc down 9 cents, 33 cents and 1 cent, respectively ($4.22, $8.93 and $1.39), while Cobalt climbed 29 cents to $23.19.

Crude Oil

Crude Oil added $2.85 a barrel last week, closing at $71.96.

The world’s thirst for Oil will exceed pre-pandemic levels next year, with improving vaccination rates and increasing public confidence in governments’ management of COVID-19 spurring a recovery in travel, OPEC stated last Monday.

In its closely watched monthly market report, OPEC raised its forecast for global Oil demand for 2022 by just under a million barrels a day to 100.8 million bpd, higher than 2019’s demand level of 100.3 million barrels. OPEC had previously forecast a return to 2019 demand levels in the 2nd half of next year, but Monday’s report was the first time the cartel said it expects demand to beat pre-COVID-19 levels for the full year.

OPEC’s forecast that Oil demand next year will be even higher than before the pandemic comes despite efforts by governments and companies to slash fossil-fuel usage to hit net-zero emission targets.

Other Commodity Highlights

The best performing commodity for the week was Uranium, up 12.6%. According to Bloomberg, top Uranium miner Kazatomprom said it may supply the metal to Sprott Inc., the investment firm whose aggressive bets on the market have helped drive a surge in prices;
The price of metallurgical Coal continues to rise sharply due largely to a decrease in supply in China and environmental regulations;
Natural Gas markets continue to spike higher. So far in 2021, producer discipline has left supply relatively stagnant while rising exports (liquefied Natural Gas and the pipeline to Mexico) have led to higher demand. This has driven Henry Hub over $5, the highest seasonal price since 2008;
The worst performing commodity for the week was Iron Ore, falling 11.9%. S&P Global Platts notes that Chinese steel production cuts have picked up in September. Using previous downturns as a guide, $70 to $85 per ton is the level where the Iron Ore market should start to re-balance, as higher-cost producers are squeezed, according to T. Rowe Price’s investment analyst Tom Shelmerdine;
The Chilean Copper Commission Cochilco has revised its average Copper price projection to $4.20 per pound for 2021, according to a presentation last week. This is lower than its previous prediction in May when it put the average at $4.30 per pound. The forecast for 2022 remains at $3.95 per pound. Cohilco said the slowdown in the Chinese economy and growing expectations that the Federal Reserve will soon begin to withdraw stimulus measures were negative price factors behind the revision;
The Baltic Dry Index, which tracks the cost to ship major raw materials including Coal and Iron ore by sea, has climbed to its highest level since late 2009. The index has been rising since bottoming out in mid-2020 due to strong demand on increased consumer spending, as well as supply constraints related to COVID-19 and a lack of investment in new capacity following the last down cycle, states The Economist. While the strong demand is a positive signal for metals end-use, rising shipping prices and constraints could signal that further logistical challenges and cost inflation are on the horizon. Spot rates for container ships to move finished products have surged for the last 20 weeks and now stand 731% over their seasonal average of the last 5 years, according to Drewry Shipping.

Equity Markets/Economy – Weekly Highlights

The Dow slipped less than 0.1% last week for its 3rd straight week of declines. The Dow has not had a 3-week losing streak since September of last year. The S&P 500 fell nearly 0.6% for its 2nd straight week of losses while the NASDAQ was off 0.5%. In Toronto, the TSX was off 143 points for the week at 20,490 while the Venture fell 16 points to 887;
For the month, stocks are also trading in negative territory. The Dow is down about 2.2% in September. The S&P 500 is off by nearly 2% this month but still just 2.5% from its all-time high. The NASDAQ has lost 1.4% this month. The Venture is beating Wall Street (good sign), down just 1.1% despite a big drop in precious metals, while the TSX has eased off less than 1%;
History is not on the market’s side with the S&P 500 averaging a 0.4% decline for September, the worst of any month, according to the Stock Trader’s Almanac. Those September losses have typically come during the last half of the month;
According to FactSet, earnings revision momentum is stalling, but earnings estimates for the 3rd quarter are still up considerably. The bottom-up S&P 500 earnings per share estimate for the 3rd quarter has increased 3.7% over the course of the quarter. This compares to the 5-year average decline of 2.9%. In addition, S&P 500 earnings are expected to increase about 28% year-over-year in the 3rd quarter, more than 20% in the 4th quarter and more than 40% for 2021 overall;
The Food and Drug Administration advisory committee on Friday rejected a plan to administer booster shots of Pfizer (PFE, NYSE) and BioNTech’s (BNTX, NASDAQ) COVID-19 vaccine to the general public. Pfizer fell 1.3% and BioNTech dropped 3.6%. Moderna (MRNA, NASDAQ) lost 2.4%;
The Federal Reserve meets for 2 days this week and on Wednesday is expected to give further clues as to when it may start to slow its $120 billion in monthly bond purchases that have supported the recovery;
The U.S. consumer price index (CPI) rose 0.3% in August from July, below consensus estimates of 0.4% and the smallest gain in 7 months. Annualized inflation was reported at 5.3%, in line with consensus, down from prior 5.4% and the lowest since May. Core inflation was reported at 0.1%, below consensus estimates of 0.3%, down from July’s 0.3%, and the smallest increase since February;
The National Federation of Independent Business (NFIB) Small Business Optimism Index increased slightly in August to 100.1, but 50% of small business owners still have job openings they cannot fill. “As the economy moves into the 4th quarter, small business owners are losing confidence in the strength of future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The biggest problems facing small employers right now is finding enough labor to meet their demand and for many, managing supply chain disruptions”;
The Preliminary September Manufacturing Purchasing Managers’ Index (PMI) will be released this week and, most likely, the reading will remain well above the 50 level that separates growth from contraction. The Service PMI should remain strong, too, due to increased travel and economic activity following the end of the summer months;
The U.S. has fallen to the bottom of a list of the world’s 7 leading economies when it comes to vaccination against COVID, analysis has shown, in what is another warning sign for embattled President Joe Biden. According to figures from Our World In Data at the University of Oxford, the U.S. has reported that 62.3% of its population has now been vaccinated. The data includes all those with at least a single dose. This has occurred after the U.S. had a dramatic head start under President Trump through mid-January;
Southeast Asia, which in August had the world’s worst COVID-19 death rates, has seen its cases begin to decline. Daily cases have dropped 30% from the peak seen a month and a half ago and fatalities have fallen below 14,400 patients a day, half of their highest level, according to analysis of 7-day averages based on data from Johns Hopkins University. Some of the countries in the region started to lift restrictions and open their economies;
As if a botched Afghanistan withdrawal wasn’t enough, President Biden’s drone strike against an alleged ISIS-K terrorist in Kabul last month killed only innocent civilians including children, as the Pentagon admitted in a Friday afternoon news dump. An investigation by Central Command determined that the August 29 strike, which Joint Chief Chairman General Mark Milley previously described as a “righteous strike”, killed an innocent aid worker – identified by friends and colleagues as Zemerai Ahmadi – and as many as 9 of his family members, including up to 7 children;
Europe is experiencing a major power crisis. Natural Gas and electricity prices are setting record highs virtually every day. Businesses and households who are seeing their bills explode can thank climate change extremists in Germany and elsewhere around Europe who have a hate-on for nuclear power and Coal power. Getting rid of Coal and nukes while gambling that the wind will always blow and the sun will always shine is insanity. Pursuing renewable energy strategies makes sense, but there must also be a plan to ensure reliable and affordable power until a bigger switch to renewables can occur;
Europe’s energy crisis is now spreading to the fertilizer industry which has ramifications to produce meat, vegetables and grains, which likely means higher prices for these essential staples;
Bitcoin has now traded above $10,000 an entire year. On September 9, 2020, Bitcoin had slowly edged into the $10,000 zone and hasn’t returned since in over a year. In fact, by the 4th quarter of 2020, Bitcoin was trading at $28,000 – a 180% increase in value. Some cryptocurrency enthusiasts expect Bitcoin to repeat itself again this year with a 180% increase to $135,000 by the start of 2022;
China released weaker economic data last week. Money supply growth slowed further, to 4.2% year-over-year in August from 4.9% in July. Retail sales grew by 2.5% in August on a year-over-year basis below the expected 7%. Industrial production increased in August by 5.3% year-over-year versus the expected 5.8%;
Chinese women will be the main drivers of an expected $5.3 trillion boom in consumer spending over the next 2 decades as their income rises, UBS Group AG said. Consumption growth through 2030 will be 80% driven by expansion in women’s income. This should benefit international companies in luxury, cosmetic, sportswear, auto, travel, lodging and leisure;
AngloGold (ANG, JSE) announced that it has entered a definitive agreement to acquire Corvus Gold (KOR, TSX) following the proposal announced on July 13. Under the agreement, AngloGold will pay $4.10 CDN per share in cash for the 80.5% of the shares it does not already own in a deal worth $370 million. The offer price is at a 59% premium to the share price on May 5, the day before AngloGold entered a $20 million unsecured loan facility and a 90-day exclusivity period.

Venture Update

After climbing in 10 out of 11 sessions to enter the Labor Day long weekend at 923, the Venture has fallen in 8 out of the last 9 sessions after closing Friday at 887. For the month of September so far, the Index is down only 10 points or 1.1% – a rather impressive performance, actually, considering the rather sharp decline in precious metals and weakness on Wall Street.

Very significant support exists between 875 and the rising 300-day EMA at 860.

The Index faces a stiff resistance band that ranges from 915 into the 930’s. A breakout above this band would be extremely significant from a technical point of view and could lead to a rapid acceleration that takes the Venture back above 1,000 for the first time since Q1.

This summer’s pullback shared similarities to the 2010 market when the Index carved out a bottom during the middle of a nearly 2-and-a-half year bull cycle, and then rocketed higher into early 2011.

There is plenty of cash on the sidelines to give this market a big jolt on 1 or more major catalysts.

Venture Continues To Set The Pace

Just like it did after the 2008 Crash, the Venture has generally been leading markets higher since the Corona Crash (fulfilling its role as a reliable leading indicator). The Venture has significantly outperformed every other major market since early spring 2020, though it has been in a consolidation pattern since the early spring of this year (mid-cycle correction).

Specifically, despite current weakness, we believe the Venture continues to signal constructive markets into at least early next year.

Venture Long-Term Chart

What’s highly significant at the moment on the Venture long-term chart is the possibility of a breakout above both the downtrend line from the February multi-year high and a key Fib. level in the 930’s at some point before year-end. This would mark the start of the 3rd leg of the Venture bull market.

The 1st leg of the new Venture and commodities bull market began at the end of March last year and peaked in late July/early August, 2020. For about 4 months (August through November 2020) the Venture was in a consolidation phase. The 2nd leg of the bull market, powered mostly by cryptocurrencies, technology, gaming, renewable energy, and health care stocks, drove the Index to a new multi-year high above 1,100 in February. This was followed by another consolidation over several months that appears to have concluded August 19 with a possible double summer bottom around 860.

The obvious target in a 3rd leg is measured Fib. just above 1,300.

Very strong new support in the low 900’s and at long-term moving averages immediately below that (200-day EMA is 897 while the 300-day EMA is 860 on the 5-year weekly)
Key resistance on the 5-year weekly is 932 – a breakout above this level, and the short-term downtrend line from the February high, would be extremely bullish
Note the 3 RSI(14) extreme lows (late 2015, late 2018 and the early spring of last year)
High extreme -DI in March 2020 signalled a major bottom
Buy pressure (CMF) has been prevalent since early 2019 and is holding steady
Temporarily extreme RSI(14) levels early this year have been cleansed
1,000-day EMA (not shown on this chart) is rising, now above 700, confirming we’re in a continuing bull market
The rising 200 and 300-day moving averages (SMA’s) help underpin this market

Daily Gold Chart

The big drop in Gold in overnight trading 6 weeks ago (Aug. 8) was exciting to see as a “Flash Crash” such as that often signals a bottom in a market, and indeed bullion rallied back strongly during that week with a powerful close Friday, August 16, at $1,780. Gold held those gains the following week, despite strength in the dollar/cryptocurrencies and a big drop in Oil, and then jumped another $36 an ounce the week of August 23 to finish at $1,817. Gold built on those gains during the week of August 30 with a strong performance Friday, September 3, to finish at $1,828, above key resistance at $1,820. However, the momentum was short-lived as Gold tumbled $74 over the past 2 weeks to $1,754.

Various charts have highlighted $1,820 as the “KEY” resistance for Gold – bullion has got to overcome this area which it has turned back from on multiple occasions over the past 2 months
Buy pressure (CMF) has eased off to very low levels
ADX indicator shows a recent bearish -DI/+DI cross (-DI peaked early last month)
Fresh resistance at the declining EMA-8 and EMA-20, currently $1,782 and $1,792
RSI(2) has plunged to 6%, its lowest level since the early August “Flash Crash”

TSX Gold Index

The TSX Gold Index closed at 274 Friday for a 7-point weekly loss.

Strong support is evident between Fib. 279 and the rising 1,000-day moving average (EMA), currently 269.

The Gold Index remains in a down channel with key resistance ranging from the declining 50 and 200-day EMA’s in the low 290’s and 308, respectively (not shown on the chart below), with the 200-day EMA roughly coinciding with the top of the down channel indicated on the 5-year weekly.

Silver Update

Silver has been a big disappointment so far this year, but we can say with 100% confidence that the metal is in the midst of 1 of its greatest upside moves ever after bottoming just below $12 during the Corona Crash.

If the percentage gain is similar to the 2008-2011 period, Silver will reach the $70’s ($78 is measured Fib. resistance on the long-term chart) during this cycle.

Spot Silver closed at $22.36 Friday, a loss of $1.32 for the week. Silver has now broken below the short-term uptrend from early August and can be expected to test nearest support at $21.70.

RSI(14) is currently at 31%, a level at which previous rallies have formed.

Silver Long-Term Chart

Note the price support band between $15 and $12.80 which has held since the depths of the commodity bear market in 2015.

RSI(14) support is also exceptionally strong at 35% going back more than 20 years. Plunging prices in March did not take RSI(14) below that level.

Very early in 2019 we saw growing evidence on the long-term chart of a new bull market developing in Silver which could ultimately take the metal to a record high near $80 by the early part of the decade. Indeed, the first wave of that new bull cycle started in the late spring of 2019 and quickly took Silver up 50%.

Charts can give valuable clues about future trends, minus key catalysts. What nobody knew a year ago was the “WHY” part of John’s TA conclusion. Now we know the “WHY” – massive government deficits, unprecedented Federal Reserve actions, a radical green agenda, and the growing likelihood of inflationary pressures by 2022.

The Corona Crash was the genesis of what will ultimately become the most spectacular price move in Silver history, taking the metal to all-time new highs above $70 an ounce. At the same time, Gold will blast beyond $2,500 to perhaps $3,000 an ounce or higher, driving down the still historically high Gold-Silver ratio (currently 75.5 based on Spot market prices).

The Big Wave 5 Move Is Underway!

Buy pressure (CMF) exploded to multi-year highs last year and should rebuild going into 2022
RSI(14), at 50%, should remain at elevated levels with exceptional support at 50% based on previous bull market patterns
Lots of room for bullish trend (ADX indicator) to strengthen
Volume has been at record levels the last couple of years
Looking for a return to a period of intense buy pressure

Greenback Update

The Dollar Index was hot again last week, gaining more than half a point to finish at 93.25 in a breakout above its 50-day SMA.

This chart suggests the greenback is likely to make more immediate gains but strong resistance is evident at the March and August highs (93.47 and 93.75, respectively). Those highs also corresponded with important lows in Gold.

Long-Term Dollar Index Chart

A key feature in this long-term chart is the bearish breakdown below the 10-year uptrend line currently cutting through about 95.5 (major new resistance). Another key feature is the RSI(14) downtrend line since historically extreme overbought conditions in late 2014/early 2015.

Within the context of the above, a rally has been occurring in the Dollar Index this year, taking it from a low of 89.17 to a recent high of 93.75.

Our take is that the greenback is in trouble, that the primary bearish trend will prevent any rally from overcoming the ~95 level in the immediate vicinity of the broken uptrend line. At the same time, RSI(14) faces huge resistance at the 50% level which it maintained for a 2-year period between early 2018 and early 2020.

A higher dollar would help ease inflationary concerns. However, it’s hard to imagine a sustainable strong dollar environment under the current Biden administration and Federal Reserve.

Cannabis Update

The Canadian Marijuana Index (CMI), now known as the Canadian Cannabis LP Index, has been pummelled since February which helps explain the recent reconfiguration of the index. The pullback from February’s surge has been brutal with Canopy Growth (WEED, TSX; CGC, NYSE), for example, losing 74% of its value after tumbling from $71.60 to a new 18-month low of $18.40 this past Wednesday. WEED’s American THC aspirations won’t materialize in 2021 given an abundance of other political priorities and a divided U.S. Senate. Technically, though, it looks like WEED and perhaps the broader sector is well positioned for a potentially significant rally – watch for extreme oversold contains to emerge first, however.

The Cannabis Index was off 5 points last week to 281.

Venture/CSE Trading Tips

It’s imperative to regularly review some basic but essential rules (ignore them at your peril!) about investing in speculative stocks on the Venture and CSE in order to greatly improve your odds of success:

Always have cash on hand and maintain liquidity to take advantage of sudden pullbacks in the broader market or individual stocks, or great new opportunities that “pop out of nowhere” – that means selling some paper into strength on occasion;
Never buy on margin or invest more than you can afford to lose;
Let your winners run, but locking in some profits along the way is critical (as the saying goes, bulls and bears make money but pigs get slaughtered);
For the Venture, an ideal diversified portfolio would consist of about 10 stocks across some different sectors. Keep it simple – a portfolio that is too big is too hard to manage for most retail investors;
Always aim to make money serve you – not the other way around;
Never allow yourself to lose big on one stock – that means don’t be afraid to cut your losses short on a deal if it’s not working out the way it’s supposed to (you will always have some losses, limiting them is key);
Liquidity and the ability to quickly adapt to changing circumstances are really important;
When it comes to the Venture, long-term buy and hold strategies very seldom work – stay on top of each stock in your portfolio, technically and fundamentally – you do need to trade!
Be aware of “sector rotation” on the Venture – occurs regularly. If you can get in early on a particular sector that’s starting to heat up (like cryptocurrencies just recently), profits can be extraordinary;
The “Efficient-Market Hypothesis” (EMH) is a farce, certainly when it comes to juniors – a Venture stock is either undervalued or overvalued, and investors are making mistakes and overlooking things all the time. You can make a lot of money in this business through patience, discernment and “vision”, and when you remove emotion from your trading;
Most Venture companies (at least 80%) aren’t worth investing in – focus on the top 5% or 10% of companies who have strong management teams, high quality and exciting projects, and the ability to communicate and promote to the market!;
In a strong uptrend, always look for Venture support at the EMA(8) and EMA(20) – the same with many individual stocks (those short-term exponential moving averages, and the 50-day SMA, are great buying opportunities on pullbacks as long as they continue to rise). Likewise, during a downtrend, the EMA(8) and EMA(20) will act as resistance on rallies.

Factors That Will Influence The Venture

1. Gold and Silver continue to struggle but much of the broader metals and commodities sector features bullish short-term and longer-term chart patterns that point to significantly higher prices during this cycle. Uranium has been the leader in recent weeks, and a bull market in Uranium bodes well for the junior sector in general. Exact timing of moves is tricky at this time. We’re keeping a close eye on the greenback as its direction will be critical to the Venture and commodities in general through the balance of 2021 – they perform best when the dollar is under pressure;

2. Buyouts, exploration success and new discoveries are a must – some really exciting developments have been occurring on the exploration front, and Newmont’s (NGT, TSX; NEM, NYSE) buyout of GT Gold earlier this year at just over $450 million (CDN) is the type of activity that injects fresh fuel into a bull market. Just recently, AngloGold (ANG, JSE) decided to buy out Corvus Gold (KOR, TSX) for nearly $500 million (CDN) in cash;

3. There’s nothing like a rip-roaring area play to ignite the junior resource sector, especially an area play in Canada. That’s what’s beginning to emerge now in Newfoundland where NFG’s success in the Gander Gold Belt has literally fuelled a Gold Rush in this part of the country;

4. Healthcare, technology and renewable energy sectors are attractive, and the cannabis space may offer fresh opportunities in select situations after a very sharp pullback from February’s highs;

5. Venture’s long-term moving averages, including the 1,000-day EMA, are trending higher – as long as that continues, so does the bull market;

6. The Federal Reserve and governments continue to provide unprecedented stimulus measures. The White House aims to push through $4.5 trillion in 2 key spending programs before year-end;

7. President Trump, with a strong understanding of the markets, did an excellent job containing inflation during his term. A Biden-Harris administration, not nearly as competent on policy and execution, won’t be as successful in that regard while the Fed continues to throw gas on the fire. This means inflationary pressures aren’t likely just “transitory” and that the bull cycle in commodities (Venture bullish) will continue.

Picking The Right Stocks

It’s easy in a hot market to get greedy and start chasing stocks at levels you shouldn’t be chasing them at, and forgetting about the importance of “paying yourself” on occasion. Remember that, and pay close attention to TA and John’s charts – risk-reward ratios are defined through multiple indicators including key resistance and support levels. It’s astonishing how so many investors don’t believe TA applies to penny stocks. In reality, TA applies to anything that has volume. If you ignore TA, or don’t understand it very well, you are greatly reducing your odds of success in this business.

On the fundamental side, a company’s ability to communicate its message clearly is critical! Focus on companies who understand how to relate to investors, who can take something complicated and make it perfectly understandable for the layman! That’s one key ingredient we look for in companies we review and that helps explain our success ratio with stock selections.

Below is how we broadly look at Venture companies, and we put a heavy weighting on the communication side and stock behavior. Twenty percent or fewer of Venture companies will score really well on this test:

Management

Expertise and track records, ability to raise capital and execute, trustworthiness, skin in the game, market “friendliness”.

Finances

Working capital, monthly burn rate, transparency, outlook.

Projects

Sector, competitive advantages, scale, grade, conceptual strength, promotability, sizzle, anticipation/speculation potential, geological team, jurisdiction, exploration flow.

Branding/Communications

Effectiveness of “story” and overall brand development, quality of news releases, web site and promotional materials, quality of investor relations/promotion, third party endorsement.

Stock Behavior

Share structure, liquidity, technical strength and posture, short and longer-term price potential, retail backing.

Summary

As you can see above, we use a wide range of metrics to evaluate the prospects for any particular company but we do place a lot of emphasis on management teams that understand how investors think, how markets function, and what it takes to build shareholder value. It’s mystifying that so many CEO’s and management teams of companies listed on a publicly traded and speculative market like the Venture have no clue how to navigate within this sphere! In essence, they are destroyers of wealth, not creators of wealth. Those stocks are like landmines – they can blow up your portfolio in an instant if you’re not careful.

Additional Points About This Venture Market

1. The new bull cycle that started 5 years ago broadened out considerably in 2017 and led to a doubling of the Venture between January 2016 and January 2018. All of those gains were wiped out in the bear market from early 2018 to March of last year, but that’s not without precedent in this highly speculative and volatile market. The 1st leg of this very powerful new bull market (resource and non-resource driven) was born during the Corona Crash and the 2nd leg commenced in November. What we’ve seen since March appears to be a typical mid-cycle pause;

2. More than 1 major drilling discovery will occur during this cycle, producing massive profits with that money being recycled into the market. Newfoundland is super hot and could generate enormous wealth for investors;

3. Historically, a 40% decline in the Venture over a very short period (1 month or less as we saw during the “Corona Crash”) has always represented an extraordinary buying opportunity, often the start of a new bull market as we saw last year. The last 2 Venture bull markets (2016–2018 and 2009–2011) had lifespans of about 2 years;

4. Canada’s political environment has improved at the provincial level but overall we remain a country run by amateurs. The federal Liberals will continue to present risks to the resource sector, particularly Oil and gas, and Trudeau’s leftist urges will only be encouraged by the Biden administration. So-called “progressives” hold a strong majority in Canadian parliament and that will not change after the September 20 elections;

5. Always keep a close eye on China – not only did it gives us COVID-19, but it’s critical to the global economy, the commodities sector and markets in general;

6. Stay focused on the “market within a market” – on the resource side, this means sticking to big themes such as Newfoundland, high quality exploration plays in general, and companies with growing production profiles combined with bottom line success.

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