Resiliency In The Face Adversity

January 13, 2018

The Heart and Soul of French Canada – “Rocket” Richard

The face you see above is none other than the man I watched in 1958 (I was five) score an unassisted goal carrying two Maple Leaf defencemen on his back – Maurice “the Rocket” Richard. The Rocket was the first player in NHL history to score fifty goals in regular season play (1944-45) but what set him apart was that he did it in fifty games, a feat not repeated until Mike Bossy achieved it in 1980-81, a long thirty-five years later. Richard was a warrior of the first degree. He not only epitomized the red, white and blue of the Montreal Canadiens, he was the heart and soul of French Canada. One look into the eyes in the photo posted above and one understands very quickly why and how French Canadian culture has survived in the Anglo-dominated North American continent for over five hundred years.

As we head into the weekend with gold charging toward $1,340 and all of my beloved Gold Miners screaming northward, gold’s resiliency reminds me of Rocket Richard in his battles with anti-Francophone league officials, opponents, and politicians. In my younger days, I played quite a few games against Quebec-based teams, the most notable being in 1969-1970 while with the St. Catharines Black Hawks going up against Guy Lafleur and the Quebec Ramparts. Going up against French Canadian teams in the province of Quebec was more intense than watching Jamie Dimon discuss Bitcoin; they ALL had that “look” of total ferocity that you see in Rocket’s face and that is the same ferocity that I am witnessing in the gold and silver markets this week. No matter what they throw at it, gold shrugs it off and keeps on moving ahead. 

The action in the gold market caught me completely off-guard this week as it did the bullion banks. I learned a while ago that the only way to survive the countless criminal interventions in paper gold was to think and act like a Commercial. As much as I practice mimicry of these cretins, there is one major difference; I do not short gold or silver. In the past, once the Commercials reverse (as they did from buyers to sellers in late December), they stay in sell-mode mode for weeks and as I posted earlier this week, when the COT turns negative as RSI’s for the Gold Miner ETF’s exceeds 70, the next move is usually DOWN. Since the end of the COT week Tuesday at midnight, this Rocket-Richard-like gold market took one look at the opposing players and decided to carry both defencemen over the blue line and stuff the puck into the net. Adding $30 per ounce, SOMETHING or SOMEONE spooked the big money into ignoring the bullion bank shenanigans and take the gold market up to settle out the week a hair below $1,340, a mere $20 from my January forecast made back in December with gold at $1,280. I told you shortly after New Year’s Day that I was taking down half the call positions on the Senior and Junior Miner ETF and I did so at a double and while I was early, I am still quite long the calls despite selling a few more yesterday. 

As I have told you all many, many times, this market can continue to advance and the gold bugs will be shouting “Short Squeeze!!” and rubbing their hands together with absolute glee but the reality is that since the banks NEVER get a margin call these days (the last one was in 2008 after which they begged Congress for a bailout), don’t expect them to do anything but increase the aggregate short position to somewhere north of 300,000 contracts before the next turn comes. As the froth at the side of the mouths intensifies and the furrowed brows glare down at the thought of bankers slowly turning on a spit, cries of agony filling the halls, we all know that the Day of Reckoning for the Interventionalists is somewhere out into the future. While 2018 will prove to be a solid year for the precious metals, trading WITH the Commercials as opposed to AGAINST them has proven consistently to be the smart move. And it works ONLY when the set up is long to flat and NEVER long to flat to short – not in the early stages of a new bull market.

The move in gold this week was so extraordinary that I had to phone Bill Murphy (of GATA fame) to get his thoughts on the strength because we BOTH fully-expected the usual nonsense from the manipulators that has reached down into both of our pockets and liberated us from of a great deal of a) money b) pride and c) credibility over the past few years. I have a great deal of respect for Murph’s opinions and when it comes to “clarity” in the precious metals arena, if Bill says that the move this week is something of a “watershed”, I simply shut up and listen. The Commercials don’t usually get it wrong so when something goes contrary to what has been beaten into our collective psyche’s by intervention, criminal collusion, and manipulation, the antennae perk up and the old hockey and football injuries start to twitch. SOMETHING changed this week – something BIG – and while it will take many trading sessions for the truth to percolate up to the surface, I advise everyone to review portfolio allocations and, after talking to your “advisor”, insist that they allocate at least something – anything – to gold and/or silver.

The really good news is that I have yet to hear anyone talking about a “technical breakout” for gold and the MSM (especially Canada’s BNN) are so enthralled with marijuana, blockchain, and blue-chip stocks that they refuse to acknowledge that gold or silver even exist as an “asset class”. In fact, one of the BNN stalwarts remarked this week that Bitcoin and its blockchain brethren were more of an “asset class” than gold or silver. Well, when you consider that the BNN “guest” was maybe five years older than the female anchor, whose Barbie-like features are analogous to a porcelain doll in a storefront window, it is no wonder that precious metals are being treated like the drunken uncle at the family reunion.

I posted a chart last weekend that showed the history of the NUGT after two events transpire: 1. Commercials move from buyers to sellers and 2. RSI moves above 70. I also showed you that after the Gold Miners bottomed on January 19th 2016 with the HUI under 100, the ensuing advance lasted for months with RSI wobbled between 50 and 75 and the best NUGT could do was a sideways consolidation. Despite the recent toppy action, RSI has now turned up along with price and has closed above the January 2nd top – a VERY bullish configuration.

The denouement of the January action in Gold and Gold Miners is that all we really need now is for the Silver:Gold ratio to begin to sink (implying outperformance by silver versus gold) vaulting us to “ALL SYSTEMS GO” status. In the interim, I will hold the remaining calls (now on the books at a negative ACB) for NUGT $36 and hopefully $44 before expiry in February.

It has been quite a while since we have seen the tape dancing like this on what is still paltry volume and since volume precedes price, I need a big volume surge to accompany further price strength to confirm the integrity of this move and it has to arrive early next week. All in all it was a superb week for the sector and important to remember that something very big has transpired that has changed the landscape, at least in the very short term.

This weekend will be spent indoors with the return of sub-arctic weather after three days of balmy breezes and massive snow melt. Fido took off after a chipmunk yesterday while on the leash and with the road leading to our house now a veritable hockey rink, I was unable to secure even a snowbank with which to secure my footing. Hence, I was forced to spread my legs and half-skate, half-ski down the road, screaming my lungs out for Fido to “Stop! Sit! Heel!”  until finally we got to the boat ramp which was a total sheet of ice. Since it was every man (or canine) for himself, I let go of the leash and went arse over teakettle into a mound of powder as Fido went racing off down the ramp in search of Alvin the Terrible.

Man’s Best Friend, my arse…

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Disclaimer

This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in Marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

A medical study in France during the early twentieth century suggests that gold is an effective treatment for rheumatoid arthritis.