Why I Dig the Dog Days of December
A Monday Morning Musing from Mickey the Mercenary Geologist
Contact@MercenaryGeologist.com
December 22, 2014
We are in the dog days of
December. This is a phenomenon that occurs per annum in the junior resource
markets. To wit: there is a significant decline in stock valuations during the
middle of the final month of the year. These annual downticks are driven mainly
by tax-loss selling, but a contributing factor is an otherwise disinterested
investor base as folks ready for the gifting and party season.
In the series of Toronto Venture Exchange Index charts
that follow, I document these mid-December declines since a rising gold price
resurrected the junior resource market in 2003. Note that each chart covers a
period from November 20 to January 10, equaling 33 to 35 trading days:
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
The conclusion from these
charts is that a short-term low for the Toronto Venture Exchange almost always occurs
in mid-December. This is particularly so in bear market years, when tax-loss
selling is at its strongest and investor interest is at its lowest. Only one of
the past 11 years has bucked this trend and that happened during the raging
bull market of 2005-2006.
Finally, here’s the chart from November 20 to Thursday
December 18, 2014:
2014
Though the current chart is
incomplete, I will make some short-term predictions based on previous bear
market years:
·
The Toronto
Venture Exchange Index low for 2014 was likely hit on Tuesday, December 16.
·
The market will
probably recover a bit or flat line thru the end of this year.
·
There should be a
significant rally in junior resource stocks in the early days of 2015.
While hitting the late
afternoon holiday party scene in Vancouver’s financial district this week, I
have noticed markedly smaller crowds filled with many long faces and listened
to too many woeful tales regarding the state of the junior stock market.
Personally however, I dig the
dog days of December. We are now in the middle of a very short window of five
to ten trading days that presents the year’s best opportunity to bottom fish
for undervalued companies.
If chosen carefully using
strong due diligence and thorough research, these will be the stocks that lead
a typical rally into the New Year. If past is prologue, I can confidently
forecast that the fortunes in a fortnight will appear rosier for a number of
the best junior resource companies.
Whether the predicted rally in
early 2015 will have any sort of staying power in the current bear market is
equivocal. That may simply be a function of future commodities prices and in
particular, for gold, oil, and copper.
Ciao for now,
Mickey Fulp
Mercenary Geologist
Acknowledgment:
Gwen Preston is the editor of MercenaryGeologist.com.
The Mercenary
Geologist Michael S. “Mickey” Fulp
is a Certified Professional Geologist with a
B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology
from the University of New Mexico. Mickey has 35 years experience as an
exploration geologist and analyst searching for economic deposits of base and
precious metals, industrial minerals, uranium, coal, oil and gas, and water in
North and South America, Europe, and Asia.
Mickey worked for junior explorers, major
mining companies, private companies, and investors as a consulting economic
geologist for over 20 years, specializing in geological mapping, property
evaluation, and business development. In
addition to Mickey’s professional credentials and experience, he is
high-altitude proficient, and is bilingual in English and Spanish. From 2003 to
2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British
Columbia.
Mickey is well-known and highly respected throughout
the mining and exploration community due to his ongoing work as an analyst, writer,
and speaker.
Contact: Contact@MercenaryGeologist.com
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