NFTRH; Logical Gold Stock Activity (medium priority)

They were firm when the stock market cratered and on a market recovery day they have decided to follow GG down, rather than AEM up (of course, AEM then reversed its early gains) after each released quarterly reports. I took the profit on AEM’s bounce along with a few other positions as noted this morning in the Trade Log. I plan to ride some or most of what I have left through tax loss season, which could add more pressure, especially to the little crappers (small juniors, exploration).

While I had hoped that it would not need to fill, it looks like we are going to fill the ‘18.50’ gap on GDX noted in yesterday’s update. But here is what to keep in mind about the gold stocks, fundamentally.

If the risk ‘on’ markets are taking on a bear phase (this market bounce should definitively answer that by whether or not it fails below certain points that we will manage along the way) that would be the preferred fundamental environment taking shape even as the sector is under pressure. Two things…

  1. All due words about it being a process, not an event.
  2. Just because we may see the fundamentals it does not mean that Algos and other casino patrons see or care about the fundamentals as they knee-jerk to sell the sector based on last quarter’s results.

So the point is that assuming the operational fundamentals are improving per the miners’ product (gold) rising vs. miners’ cost inputs that is not at all present in last quarter’s numbers. Those fundamentals sucked, frankly (both sector and macro); about as bad as it can get as the risk ‘on’ cyclical world went to higher highs and gold just sat there. I was actually pleasantly surprised that SSRM, KL and AEM, for example, have done as well as they have.

The machines and other casino patrons see GG’s lousy report and the stock market recovering and it’s a perfect knee jerk sell recipe. And if/when the macro resumes in the direction its been on for the last couple of weeks, the miners would be painting a buying opportunity (whether GDX 18.50 or otherwise) for those buying a combination of weak prices and what could be much improved funda next quarter, again assuming the Good Ship Lollypop (and risk ‘on’) do not take back the macro beyond a bounce.

As noted in the title, it’s logical.