Bear Market for Juniors at 22 Months, Reversal Near?

The political uncertainty in the US is another headwind. One way or another that is also likely to be resolved in a short time period.

Remarkably, the CDNX is currently trading at a level first reached in 2002, a decade ago, when gold traded below $350 the ounce and silver was under $5. With gold now in the $1,700 arena and silver with a $32 handle, we view the current level of the Venture Index as a psychological anomaly.


Note the gargantuan divergence which has opened up between gold (shown in green) and the level of the CDNX. That tells us that sentiment for the juniors is about as bad as we have ever seen it. Even worse in many respects than in 1998-2000 or in 2008 – early 2009.

Point 1: A great deal of price risk has been removed from the better junior miners and explorers. The sub-sector is a bargain target rich environment.

Point 2: Bear markets do not last forever. A 22-month bear is a very, very long period bear.

Point 3: The cure for negative liquidity is negative liquidity. Prices become so low that insiders, deep discount specialists and Vultures with long term time horizons are willing to accumulate in size. They believe that markets are cyclical and it is only a question of time before the better juniors once again become more popular.

Point Last: Tax loss selling and fiscal cliff worries are about to end very soon. Junior company prices are, in many cases, Ridiculous Cheap (a GGR technical term). Absent an unforeseen black swan event, the CDNX is primed for a major reversal of epic proportions in our view.

Possibly in line with or even exceeding the 2009-2010 bull which followed the 2008 Panic.

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