Rick Rule Says PM Miners Are Headed Substantially Higher
Trader Scott’s Market Blog
March 4, 2017
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Rick Rule was interviewed at King World News, and it was a pretty good listen. Even though his partner is the PM permabull “Billionaire†(his new first name) Sprott, Mr. Rule is pretty sharp and had some interesting things to say. He believes the economy is showing a slight improvement, based on company debt situations. That may be true, but is it their balance sheets improving, or is it the low interest rates? If their debt isn’t looking better now, it never will. And specifically about miners, there are several things which he talked about. The big gold miners “learned their lesson†several years ago, and are running a much tighter ship. And their operations will be more strictly run, which would mean more free cash flow, better dividends? The horrible malinvestment by the miners in the bull market is very unlikely to be repeated for at least a few years. And a strong market for the big miners will help the smaller miners. He added that the miners are attractive now, but lower prices in the miners would offer excellent entry points. The entry point is by far the most important consideration for me. The probability of a very good outcome, and the risk profile, for any trade or investment is greatly enhanced by patiently waiting for the better/â€best†entry points. We have zero control over the outcome, only the entry point – meaning the much better outcome potential is enhanced. And I agree with Mr. Rule’s outlook for 2017 to be bullish on the $, but also on gold, but a major $ top would help gold substantially. And interestingly, he mentioned a momentum type of trade. If gold were to trade thru $1270, he would become more aggressive, otherwise it’s about accumulating into weakness.
My outlook remains that the December 2015 low in gold was the secular low, the selling wave into December 2016 was the retest at a higher low, and there will be more volatility in the first quarter of 2017. These are buying opportunities, not reasons to freak out. Some of the miners had big backups from the February 8th highs into the Friday lows after the stupid Yellen speech. I did the videos and left the comments about what I was waiting to see, and the miners of interest. The backups are opportunities to layer in, preparing for a more bullish second half of the year.
'Rick Rule Says PM Miners Are Headed Substantially Higher' have 38 comments
March 6, 2017 @ 9:28 am One Radio
The two mental stops for this AM regarding the two trades from Friday and in Friday’s comments – JNUG – Friday took 1/2 profits at 6.54. Today’s stop is at entry price – 6.04. Will update with an exit. The TBT short, stop is at entry 40.64.
March 6, 2017 @ 9:48 am Dmitrii
FCX fills november gap right now
March 6, 2017 @ 10:00 am One Radio
Correct Dmitrii, I’m being stubborn on that one – to the low end of the gap. Plus I have 3 more trades to deal with. Long JNUG, short TBT, long IWM calls.
March 6, 2017 @ 10:40 am One Radio
To what Dmitrii is talking about and this is my comment from Feb. 16th:
“FCX is a stock that’s bullish to me (big picture). Copper and the shares have had a big run. On a short term trading basis, there are supports, but bigger picture, 13.09 down to bottom of gap are spots I’m watching – chart”.
So here is today.
March 6, 2017 @ 11:06 am One Radio
Just cleared out of 2 trades not working – tbt at 40.60, jnug 6.04 – so basically scratch,scratch.
March 6, 2017 @ 1:09 pm One Radio
Just took profits and cleared out on the IWM long call position – did not like my entry point.
March 6, 2017 @ 11:16 am Easy Al
Calling Eric Sprott a billionaire is unlikely correct at the present time. The market cap of Sprott Inc is less than $440 M today. Unless Mr. Sprott has big investments in other areas (which would be inconsistent with his bullish in resource sector), he is nowhere close to being a “B”. Perhaps, he was a”B” 6-7 years ago when SPOXF was 5-6 times higher.
Having said that, purchasing some SPOXF in your tax-deferred accounts is probably a good indirect and conservative way to play into the resource sector. You are getting about 5.5% of dividend (which will be taxed by Canadian government unless it is held in a tax-deferred account) while you are waiting. I have a small position in a platinum miner, PLG, which borrowed money from Sprott Inc. In last 12 months, I saw how Sprott Inc. milked PLG for the latter’s failure to meet the operational performance specified in the terms of loans.
March 6, 2017 @ 12:59 pm Nico
I am holding mt CDE trade bought at 8.05 and will double down at the 7.40- 7.50 level…have no worries about this one.
In JNUG i just went long at 5.42 as I think we are overdone for the day…although stop in place at 5.11.
March 6, 2017 @ 3:46 pm David V
Boiled , baked and then fried and the metals haven’t even retested at their 50% retracement yet.
March 6, 2017 @ 4:26 pm One Radio
David if you remember in the second week of Feb., I was concerned about gold for that week. Gold did backup a bit that week $28 into 1216, but the miners have really backed up. And silver just kept chugging along. Until Thursday. It would have been much “better” for gold and silver to take a pause, and not go to new highs, but they could care less what I think. And silver got weird. So now, it brings into focus around the March Fed meeting to get concerned, instead of having a trading range, we went to new highs, so stretching this out. There’s going to be a nice second half 2017. More fear/volatility would be helpful before. So it’s just trading, no biases.
March 6, 2017 @ 2:26 pm Just a little guy
I see RJA at 6.6 usd. I’m suspecting that now is the opportunity to go long. The price is kind of low and I don’t see much room for a significant pullback. what’s your opinion?
March 6, 2017 @ 3:57 pm One Radio
First, I’m still working on that Q and A video, I apologize – right now I’m dealing with problems at two websites, but possibly tonight. Second, I started talking about ags in January ’16, my first big purchase of RJA was in March, took some profits on the rally, then starting adding on later in the summer. So right now we’re not that far from the recent highs. I’m not buying now certainly. And the way I do this business, I’d wait, but if you’re going to buy, keep it small and see about more weakness.
March 6, 2017 @ 4:27 pm Just a little guy
Nice on your part Thanks man!
March 6, 2017 @ 4:48 pm Easy Al
From the middle of November to middle of January, base metals strengthened with the dollar index. The inclusion of FCX in XAU index make it out-perform HUI index in the last 45 days of 2016. It appears that correlation between base metal and dollar index has weakened significantly.
March 6, 2017 @ 5:03 pm One Radio
Excellent comment Easy Al. And you see how these correlations randomly tossed around by most people are toxic. This business is darn hard, and requires work, work, work, and persistence, and more work,
March 6, 2017 @ 6:55 pm Easy Al
The miners, as represented by HUI and XAU, have declined to the level between December 30 and January 3. All the gains in this year have nearly disappeared. GLD lost 4.7 and 4 tonnes in last two days.
If we have the replays of the previous two rate hikes, miners should bottom on March 16. Strong miners, which had dropped less than others, started to decline more than others since middle of last week. It is one of the indicators that we are in the late stage of correction.
March 6, 2017 @ 7:17 pm Jon
The 16th would be the mid March low which occurs in PM bull markets. http://news.goldseek.com/Zealllc/1488560236.php
March 6, 2017 @ 8:34 pm Easy Al
Adam Hamilton is a very good thinker and writer in PM mine sector, although he tends to be a little bit too bullish to the PM and their miners.
In the Northern Hemisphere, the 2017 spring equinox occurs on Monday, March 20 at exactly 6:29 A.M. EDT. It will be interesting to see whether the opening of March 20 marks the low of this correction.
March 6, 2017 @ 8:39 pm David V
Right on time for the FOMC meeting
March 6, 2017 @ 7:27 pm David V
PAAS filled its gap today Easy. The Sector is continuing to get more emotional.
March 6, 2017 @ 8:26 pm Easy Al
SVMLF and PAAS are two of the strongest silver miners during this correction. SVMLF has a gap between $3.21 and $3.26 to be filled.
March 6, 2017 @ 8:53 pm Dmitrii
Scott, at which price would you prefer to buy MUX for long term investment?
March 6, 2017 @ 10:46 pm One Radio
For long term investments, layering in is my preference. I started buying last week, sold some on the 1st, and bought some more on Friday. The low 3’s is a good start to layer and give yourself a margin of error. The next rally in miners will likely still see another retest – into the second quarter. They’re not going to make it that easy to hold onto.
March 7, 2017 @ 8:17 am Nic
I agree with MUX…this is a quality miner and I will start to accumulate it at the 2.80-2.85 lever and layer in.
I should get my second tranche of CDE shortly between 7.30-7.50…as for JNUG Im in at 7.42 and will keep my stop at 7.11.
We are definitely short term oversold so a pop is due…maybe today. GL
March 7, 2017 @ 10:54 am traderscott
I don’t know if you do partial profits Nic, but good job on your JNUG.
March 7, 2017 @ 3:58 pm Nic
Scot…yes, I always take profits i the 3X…I sold 3/4 of position at 5.99…On MUX i may have got greedy with my limit of 2.85, as with CDE at 7.45…so I added some CDE just now at 7.60 and will add the second 50% of this tranche a bit lower at 7.35…this way if we rally, I least I have got some below 8.00.
I called for a 25-30% drop in miners a few weeks ago and was spot on…although I do not short….I sold a LOT.
Very unsure about direction at this point for short term.
March 7, 2017 @ 9:28 am traderscott
The seasonals in PMs don’t always “work”. In the major bottom in 1998-2002 – the track record is – 1998 worked, 1999 and 2000 it did not work well, but in the great low in 2001 and 2002 it worked awesomely. Others of note, in 2008 it worked horribly, 2009 didn’t really work, 2011 (the major top year) it worked well. In 2013-2014 worked horribly. In 2015, pretty good, 2016 was pretty good. So the track record ain’t great. But the problem with this seasonal analysis, is it doesn’y yake into account the 2 main factors – what is the overall trend. And if the trend is a trading range/sort of sideways – is it accumulation or distribution. Those are the main factors. So for gold now, my belief is we are still in accumulation combined with an uptrend – the upside part of the accumulation. And how does the market fit into all of that technical position-wise. So currently, it’s about if we can have a deep enough pullback, pre-FOMC. I am concerned about a bit of switching of seasonals. If the reaction is deep enough here, we can maintain some seasonals – so the price mixed with the timing are becoming important. In gold, below 1216 with EA would be an interesting potential. Silver is way overloaded with bulls, as I said in the weekend video. Why did so many people become bullish on silver right into 18.45 and we’re still hearing from people claiming silver was so bullish there.
March 7, 2017 @ 5:24 pm Easy Al
Silver Seasonality chart posted on KingWorldnews suggests more decline in silver:
http://kingworldnews.com/wp-content/uploads/2017/03/KWN-SentimenTrader-II-372017.jpg
March 7, 2017 @ 5:34 pm Easy Al
Scott.
Just noticed that you were posting both as Traderscott and Oneradio.
Testing if I can directly make the silver seasonality chart displayed in the comment here:
March 7, 2017 @ 6:11 pm traderscott
This website had a lot of problems the last few days, so I had to switch. It would be nice to have any charts you guys have to post directly. And it’s baffling to me why so many folks were saying how “strong” silver was at 18.45. And the problem is, now that silver is finally having a good backup, now the manipulation crowd is out. “Because” since silver was so obviously “strong” at the highs, well then of course the only way it could be selling off is because of nefarious reasons. Do these people not understand it is the backups in an uptrend, but certainly not a downtrend, which strengthens a market. The strongest a market ever is, is when it’s right at the lows. That’s exactly why it is a low. It’s surprising King World had a negative silver article, even tho I don’t actually use seasonals directly.
March 7, 2017 @ 10:04 am traderscott
And speaking about theories with horrible track records, you can throw in gold and the stock market always move in opposite directions. At times it works, at times it works horribly. It’s on an individual basis. And looking out into later 2017 and beyond, there will be no better places to be than in an equity market with a weak currency (most of them will be weak vs. gold), in commodities, and in PMs. It’s going to be interesting to watch the free cash flow which the big miners will be generating. Of course they’ll screw it up, but for awhile it will be a big plus.
March 7, 2017 @ 10:58 am David V
Miners like AEM are already looking to spend like drunken sailors in replenishing their reserves after cutting back all these years.
Looks like the big boys just called this a support here
March 7, 2017 @ 11:38 am Jon
Bought partial position in SVMLF at 3.345 and watching below the 3.21 gap. Also got filled on partial MUX position at 3.01. Hoping for lower..
March 7, 2017 @ 11:59 am traderscott
I like it, you’re looking to the lowest point in the gap around 3.21 – margin of error – like FCX situation. Another one is GSV.
March 7, 2017 @ 1:06 pm Easy Al
Until it is relisted in the US, SVMLF is probably not very good for short term trade. I have had nearly 20 trades placed through Fidelity on SVMLF in last 12 months. Nearly all my trades were routed to Citadel. Except for one trade, all others were made with limited order. On Feb. 22, I decided to sell 1000 shares with market order just to test the liquidity. Only the first 330 shares were sold at the bid price when I hit submit button. The rest 670 shares were split into 3 smaller blocks and were executed at 1-2 pennies below the price of the first 330 share. The volume on Feb 22 was actually above the average.
If you believe that PM is in the early stage of a bull market, SVMLF is one of the silver stock on which you ride. In late 2011, when it was under (false) attack by short sellers, an analyst at Casey Research wrote that the CEO of SVMLF flew economic class while traveling.
March 7, 2017 @ 3:24 pm David V
No thanks on the over the counter stuff Easy, hope it does well for you. If there comes a day when the masses jump in to PM market it will be the big names like FCX.
Gold almost at 1209 support, .5 retracement.
March 8, 2017 @ 12:15 am Easy Al
Mark Hanson, a noted housing expert, thinks that everything in housing sector has changed (read as peaked ?). The run up in the rate of the 10 year treasury, which, in turn, drives up the fixed mortgage rate has already or is soon going to cause troubles in the housing land. The raising of fed fund rate is not going to lower the 10 year treasury yield until the bond market senses recession. It means that the mortgage rate will likely move up in near term and will not reverse until the market sees a recession. Given the low fed fund rate, it is doubtful if we will see an inversion of yield curve within 12 months.
There are many political reasons for economic cycle to strongly correlates with presidential cycle. Since 1980, the recession has taken place in either the first or last year of a presidency. The two Bushes had bad luck in that they both had recession in the last year of their presidency. Mr. Clinton was lucky that recession did not happen in his 8 years. However, when he left the office, internet and high tech bubble had already burst, Nasdaq index declined greatly and the yield curve already inverted for a few months. It is to Mr. Trump’s advantage to have it to arrive in the first year. However, his big ego has caused him to boast too much about the strength of economy since his election, which will hunt him.
I do not think we will see many 25-basis-point hikes before the fed stops and then reverses the direction. Given the age of the expansion, it is not likely that the fed fund rate will reach 2.5%. If so, they will not have enough room to cut and they will have to try negative rate or large scale of QEs.
Zerohedge has a summary of Mr. Hanson’s column
http://www.zerohedge.com/news/2017-03-07/marc-hanson-everything-has-changed-housing
March 8, 2017 @ 1:24 am traderscott
Yes, I receive Mark’s missives – and agreed, the President whom I voted for, needs to quit bragging. The Fed and the government never see the downturn coming, ever. I wrote about the exact thought process going on right into the last 2 monster bubbles – click here. Everything was peachy (wonderful). And I just put up a new post about RE a few minutes ago.