Sentiment before the open 7-1-2022 reminds me of the COVID Crash Bottom of March 2020. In 2020 we had a massive V bottom. After my accounts had a bad Q1, they ended that year with a 289% gain for my accounts.
People generally think we are going into a recession now, just like they did in April 2020. Indeed, we went into one then and likely will this year too.
After thinking about this before the open on Friday 7-1, mining stocks put in huge reversal signals by the end of the day. This possible V bottom may apply to gold, silver, uranium, copper and other miners plus oil/gas stocks and value biotech stocks, but do not think that the Beyond Meat, Peloton, Bitcoin and other former highflyer types will do nearly as well.
Friday morning (7-1), pre bell, a strange thought popped into my mind. Is this like the 2020 low for mining stocks? 2022 Q1 was great for me but Q2 was bad. The last bad Q have had in the market was the 2020 Q1 a 30% loss. After that just wanted to survive the year and would have been thrilled to break even.
That did not happen, had best year ever +289%. The last time saw charts that look like today's ones, was in April 2020. Right now, no one is calling for a V bottom. In April 2020 with COVID and hyper high values in stocks, things looked bad, and we did go into a recession. Gold miners and oils were killed. When I look at 25 year charts the last time we had a drop like this, was 2020, prior to that 2008.
Could we have another V bottom here on gold miners, oil/gas, and miners of all kinds? Remember how bleak it was in April 2020? It was terrible and BTW you might die on top of the bad economy. Everyone was under near home arrest.
And then stocks took off like crazy!
Did we really expect that? No. It was shocking. From being down 30% ended up 289% in 8 months. That is a 5.5 bagger on all my stocks combined in 8 months! Best results have ever had, and I have had some great runs before. My 3-year CAGR 2019 to 2021 was 97.4% and 2005-2007 it was a 59% CAGR.
On precious metal miners they will likely get afterburners from inflation. The last time we had inflation like this was the 1970s and gold miners soared and in fact became fad/cult stocks. If you buy stocks dirt cheap that later become fad stocks, that is about as good as it gets. Fortunes were made in the 1970s through to 1980 on PM miners. In 2020 gold and gold miners had to compete with crypto for money. In 2022 massive money is leaving crypto, with a likely destination being going into gold stocks.
My take is the Pelotons and Netflix's and Beyond Meats and Bitcoin types will not V bottom this time, even though they did in 2020. The reason is inflation did not kick in then, and we did not have the massive money printing we did in 2020 and 2021. That money printing went into fad stocks and now we do not have that. Instead, the inflation hangover from it. Am thinking we will see a shift to undervalued stocks instead of unsound and unprofitable fad stocks that lose money. Miners and oil/gas and sound biotechs will do well because they are at way below normal valuation metrics today, and the miners do great with inflation. On miners even the multibillion-dollar Lundin Mining is down 50% in 2 months!! It fell more this time than in 2020 and is now < 3 EV/EBITDA. Is Lundin really worth $5 billion less than it was 2 months ago? I do not think so.
Some more thoughts. This may be the best time to buy U stocks in about a year. CCJ is the biggest U stock. It is not a great value; it is 63 Allen EV/EBITDA and 20 X CFO. BUT it is the elephant in the room for U stocks. They can increase production. The best 2-day signal have ever seen is a red hammer followed by a green engulfing candle. Friday CCJ did that and the URA ETF also did it. It often occurs at market bottoms, a super reversal signal.
When it last did that was 8-20-2021 and it was the very best day to buy CCJ in the last year, the first day up from the very bottom. AND the best indicator-based reversal pattern has seen is the MFI (Money Flow Index) going under 20 then over. On Friday CCJ did that too. It was only under 20 for one day. The prior 2 times it did that? 8-20-2021 the 1 year low and 5-12-22 the 6 month low, both fantastic entry points. And throw in that when I woke up Friday the crazy idea that miners may have bottomed without looking at the charts, just struck me. The emotional negativity of investors that day was so similar to the 2020 bottom negativity.
Quite the combo as an entry point. I have CCJ options and URA ones, and plan to add on Monday. Uranium itself, SRUUF, was also up Friday, and the MFI is at 18 so will go over 20 almost for sure Monday. It is on triple 1 year bottom on Friday.
There is more, GDXJ was up huge on Friday. It never got to 20 MFI but is the lowest it has been since the 2020 crash. And it did a complete big green candle engulfing of a big red candle signal on Friday on higher volume, check out a 5-year chart on it too.
And XOP is at 26 MFI, which is a typical reversal point for it in its huge current bull market. It did put up a candle reversal signal, but not as pretty as CCJ did.
Copper? Copper Mountain did my fav 2-day candle reversal even prettier than CCJ did, and a 20 MFI reversal too. And on a double bottom, all on Friday 7-1-2022.
As crazy and counter sentiment as it sounds, it looks like a great place for miners to have put in their bottoms on Friday. Both investor sentiment and consumer sentiment has crashed to even lower levels than in 2020.
Investor and Consumer Sentiment
Seasonality? August and September are the two best months for gold stocks. So, a tailwind likely soon on them.
How am I playing this? This is a partial list of my larger positions.
For miners: ARREF, ATCMF, CCJ, DRD, CPPMF, FCX, GDXJ, GFGSF, GGGOF, GLBXF, LUNFF, MGAFF, OREAF (speculative as mine not permitted yet), SPOFF, STRFF, TPRFF, URA.
For oil/gas: BNEFF, CPG, CRLFF, CVE, DECPF, EGY, FECFF, IPOOF, OBE, PTRUF, RECAF, SPGYF, TGA, YGRAF.
For biotech/drug stocks: ACXP and NGENF.
Note: many of these stocks are Canadian and on TSX but have used the USA OTC mirror stock symbols.
What do you think? Do you think a bottom is plausible here? Please share your ideas. Calling a bottom on the same day as it occurs is as hard as it gets, but there are lots of reasons to think Friday is a plausible candidate.