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Guest Post: "Chart of the Month" TSX-V Speaks Volumes - Gold Mania Still Ahead
Submitted by Casey's International Speculator
Chart of the Month: TSX-V Speaks Volumes - Gold Mania Still Ahead
With the gold price hitting nominal highs last month, there is a lot of “mania” and “bubble” ranting going on in the gold community. Should we start selling?
A bull market typically progresses through 3 phases: the Stealth Phase, in which early adopters start buying; the Wall of Worry Phase (or Awareness Phase), when institutions begin buying and every significant fluctuation makes investors worry that the bull market is over; and the Mania Phase when the general public piles on, driving prices beyond reason or sustainability.
This is followed by the Blow-off Phase, when the bear takes over from the bull and the herd gets slaughtered. Judging by the volume on the TSX Venture Exchange (TSX-V), where a lot of gold juniors are listed, we conclude that the next phase of our current gold bull market, the Mania, still lies ahead.
Have a look at the chart below:
If a mania were unveiling now, we would expect to see a sharp increase in investment capital entering the TSX-V, driving its trading volume upward. Over the last few months, the TSX-V daily volume has spiked upward sharply, but as the chart clearly shows, short-term volume is extremely volatile, spikes are common, and equally large drops are just as common.
Stocks of junior exploration companies are leveraged to gold, meaning they rise or fall by a greater percentage than does the yellow metal itself. So a spike in volume should be expected in reaction to an ascending gold price. A more reliable barometer is volume’s 10-period moving average that removes interim market gyrations. Using this measure, the TSX-V’s volume looks like it has returned to a slope of ascent similar to before the 2008 market crash, and the longer-term trend is steadily upward – steady being the key word.
More investors are entering our market, but the pace is not yet accelerating greatly, as we’d expect in a true Mania Phase. In other words, an early indicator of the mania in this bull cycle will be a sustained parabolic move upwards in the TSX-V’s average volume. And that is not happening yet.
Our other volume indicator, the GLD gold ETF, behaves in an interesting manner: it frequently moves counter to the TSX-V. An explanation for this might be that GLD is considered a “blue-chip” stock; a safer haven for investors who actively trade on the TSX-V and park their cash in GLD during periods when they consider juniors overly risky.
The moving average of GLD’s volume remains on a moderate multi-year ascent but has turned down recently. However, its daily volume is up in recent trading. Given the observed correlation between trading volumes of the TSX-V and GLD, this may point to a cooling-down in TSX-V trading activity in the near term.
Finally, the ^HUI gold miners index has tracked TSX-V volume as well, also having resumed a slope of ascent similar to that of the years before the 2008 crash. We see this as another indication that we are in an accumulation phase of the bull market.
We will continue tracking these parameters and updates when we see significant changes. For now, the bottom line is that even with the gold price moving sharply higher, the mania remains an anticipated future event.
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to da moon (and first, Bitchez)
With never a shortage of chartists and fundamental evidence for this bull market here on zh... I offer anecdotal evidence that suggests we may just be entering an "awareness" phase... bitchez.
I reside in alexandria, virginia... those familiar would know this to be a government hub, located a stones throw away from the nations flagpole. A very close friend and morgan stanley money manager holds accounts for numerous wealthy Hill employees, lobbyists, and various other government officials on both sides of our political paradigm. In early 2008, when I closed my annuity, my MS buddy suggested I was overreating.
In late 2008 and following the metal correction, I went heavy into physical metals and my MS amigo said, "why would anyone want to own gold... I would never want to own gold... nor would I recommend metals to any of my clients." In mid 2009, a crack in his position developed, when he admitted to me one of his "healthier" clients insisted on a substantial move into GLD. I told him this would become a more consistent theme.
Two weeks ago, and after a few beers, MS (ill now refer to him as), asked me to explain my rationale for metal investing, the differences between the paper market and the physical, and why it is that I seemingly "want" inflation to come. Of course, I quickly interjected and said I don't "want" inflation, I am just protecting myself against something I view as "inevitable". I wondered why he had such a new interest... and he told me that the last 6 months he has seen a significant number of his larger and more "governmentally" important clients move money into the paper gold and silver market. This includes a congressman (a move that actually made MS personally nervous) divulge that he had a floor safe with a significant amount of physical. MS said he personally should have taken heed when that original client made his initial move into GLD.
The most significant moment in the conversation, to me, was his claim that many of these clients that have moved money into metals don't know why they are doing it. They don't understand the reasons for their reallocations, yet they are insistent on doing it. Now, these are his "larger" and more important clients... still the majority of his accounts hold no positions in metals, and minimal exposure to commodities in general. I told him this would become a more consistent theme and would eventually begin to include his "smaller" clients.
What's the lesson? MS is a smart dude... but until recently remained ignorant to "money supply", the fed, printing presses and inflation. Morgan Stanley has no interest in money managers who speak to their clients in terms of DXY, or measure equity rises and falls in terms of gold. Speaking to MS in the past was like speaking to CNBC... willfully ignorant. The majority of his clients (to include many who have new exposure to metals) still don't know why they even want the exposure. They are making these moves simply at the insistence of others they trust who work in even closer proximity to the "flagpole"...
To me, the 2nd tier metal move suggested by this author is here... but it is in its infancy.... "Awareness" has barely reared its head. When those heftier clients realize "why" metals move, this 2nd stage will become even more healthy for some, and scary for others. So our last little "silver correction" last week prompted MS to buy his first ever 20 silver rounds... He said, "just so I can have some interest in watching the movement." I told him this will become a more consistent theme in our near future. Cheers.
Excellent post! I love anecdotal evidence.
me, too. great story.
Thanks for that first-hand account. It's in the personal stories that the saga evolves -- not charts. Not to say I don't appreciate this main article. It is informative and rounds out some "concepts" with numbers. That's always a good thing. Seeing one's suspicions and gut-feelings on "paper" is some confirmation bias I can live with.
TSX V to 4000.
The HUI has been a laggard,clearly underperforming AU.
C'mon,get going.....move dammit.
I totally disagree with this article. The increase of gold price is by no means a bull market. What we see is in fact the collapse of the fiat money system.
agree with you there, eigen. and as far as the blow-off stage being even remotely close...hell, most people in this country have no clue about the inflation tsunami about to hit us....
Exactly. Most people here perhaps pay little attention to the weather in the south hemisphere. A flood has just struck Australia and harmed the wheat crop. A drought seems developing in Brazil and Argentina. The current grain shortage may become much worse next year.
Same in Canada. Everyone talking deflation cause socks are cheap at Wal - Mart. However there was a piece on CBC radio this morning about the cotton spike. People have no idea what they are in for.
Big Jim posted this as a friendly reminder.
http://www.youtube.com/watch?v=aMp22y9OUHA&feature=player_embedded
You could, however, argue that an ounce of gold buys more than it did ten years ago. If so, then it is a bull market (and the fiat collapse).
Gold prices right now have nothing to do with current inflation, and everything to do with this:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/gono...
That *is* the fundamental basis for gold (and to a certain extent other commodities).
right_the fiat collapse is driving gold.
mania's will come and go. tulipmania
comes to mind.
among humans, gold is the default store of value.
among politicians, paper_perhaps.
The fact that you identify the reason, does not alter the fact that gold is, and has been for several years, in a bull market.
agreed. its a fiat paper bubble that is collapsing. http://www.zerohedge.com/forum/fiat-paper-bubble-run-your-lives
Gold and Silver looking good this morning!
It looks like when TSX-V volume spikes gold underperforms
I'd also note that institutional investing, while picking up, is still very low. We are still in phase two and probably early in that stage.
Gold and Silver off toa great start this week. Next break out starts today?
http://www.kitco.com/ind/Wieg_cor/roger_dec102010.html
detroit mayor wants to cut all services to 20% of the city ..and that's a democrat.
bailing wire and spit are holding it together
gold and silver will attract more investment as
our world becomes more unstable..food inflation will be the key to bring more of the less informed into the PM's as they see the dollar value melting away.
The bernak will be found hanging from a silver dog leash if there is any justice.
Gold Silver and justice such a 18th century concepts..
I buy more ...the more CNBC trashes PM´s...inverse propaganda curve...
no paper ponzi, no CNBC. 'nuff said.
If Harvey Organ is even remotely close in his assessment of what the bankers are short this market in silver and gold derivatives, we are looking at an unbelievable transfer of wealth coming up.
"
The BIS lists options at 46 billion dollars with an average price of 17.00 dollars or 2.7 billion oz of puts and calls.
To get at the shortfall here, the BIS nets out longs vs shorts at the bank level. However it is does net out speculators like myself. Let us say that I sold calls on silver and the bankers took the
buy side. The BIS would include that in its option figures. If Bank X did a buy and Bank Y underwrote the call, then the BIS nets it out.
So let us conservatively say 10-15% is non bank calls and puts. So we can safely subtract 15% of the options total of 2.7 billion oz to give us a risk factor of 2.3 billion oz of silver that the bankers are
at risk for in the options department.
Thus the total risk in ounces from all our bankers is:
4.6 billion oz (forwards and swaps--true short position of physical) + 2.3 billion (options like puts and calls)= 6.9 billion oz.
The OCC report lists the 5 major usa banks that are at risk with JPMorgan HSBC, Citibank, Wells Fargo, and Bank of America the named parties. The total risk that the Comptroller monitors
of these banks is 13.577 billion dollars. With an average price of 17.00 dollars, then in ounces, the approximate total risk is 800 million oz."
http://harveyorgan.blogspot.com/
$14b ? Thats just a rounding error for the bernank. Hell, he gave GE $16b and they are just the propaganda outlet.
He can give lots of dollars, but not silver. The only way he can deliver silver is to bid it to the moon. This means it's either a case of a JPM default, which sends silver and gold to the moon, or a bailout and a scramble for physical with freshly printed dollars, which sends silver and gold to the moon.
Checkmate in two.
I believe tmosley summed that up very nicely.
You could just memorize what he wrote and spout it off to anyone you know who has questions on gold and silver.
Uh, that is, if you even KNOW anyone who cares...
GLD and ETFs may have a blowout phase in general.
I'm not sure the public has the funds to drive up a huge bubble, since they are all pulling their retirement to eat and play while they don't pay their mortgage.
The only bubble left is fiat printing by ben and company. IMHO.
Who needs jq public when you've got the goons at the prop desk playing with free bernank bucks.
"An explanation for this might be that GLD is considered a “blue-chip” stock; a safer haven for investors who actively trade on the TSX-V and park their cash in GLD during periods when they consider juniors overly risky."
a fund that has so much conflict of interest embedded in it that it is likely nothing more than a vehicle to shoot yourself in the foot "blue-chip"?
Just my opinion, natch.
Regards
Adam Hamilton is the best source for three-stage bull markets theory. He maintains that we are in stage II for the bullion markets. Very likely Casey research borrows from Hamilton to put it politely:
http://www.safehaven.com/article/19284/gold-stocks-still-cheap-2
Probably the best long term forecast for gold prices is Dax In Gold
http://www.realterm.de/DAXinGold.php
Can be translated using babelfish.
A snickers bar used to cost me two and a half dimes in the mid 70's. Today it takes nine of these dimes to purchase the same candy bar. I do, however, have two and a half dimes that will purchase not one but five snickers bars. It was minted prior to 1964.
Definitely food for thought, even if not all that nutritious.
Bernie be very clevah. Raise cost of commodities and drive up bod yields - yah? So? Well - so we gets to figger out whether euroland or China or Japan folds first as bond yield rise. Just a leetle stress test for the wurld.
Simple rule. When you can get 13% on a 3-5yr cd, sell a little if you need the money.
Yah, and by that time it won't take too many of my pre-1964 dimes to purchase a $1000 CD.
We are far from a bubble, not one of my friends, family or neighbors owns any gold or silver. I get this blank stare all the time. And only one other investor, trader that I know owns gold. On my trading blog I would guess 2 have some exposure.
long way to go.
Same here, for the most part. I do have a couple of relatives with gold, but the vast majority of people:
- Don't have it.
- Wish they did.
- Think it's too late to get in.
Here's the problem though - unlike many other things like real estate, cars, and to a certain extent stocks and bonds - Joe 6 Pack doesn't have a clue how to really value gold, in terms of it's relationship to inflation expectations. For that matter none of us really do either - all we know is it's very valuable when the SHTF. Anyhow - that's why the average person will not buy gold regardless of how it looks like a good investment. At least with real estate people *thought* they knew it - they felt a lot more comfortable handling it.
GLD actually is the big game-changer. That's the one case where people are more comfortable trading it (assuming there's something real behind it). That's the thing to watch - when everyone and their neighbor has GLD in their 401k's and IRA's, then it's a bubble. We're getting there, but not there yet IMO.
Reg'lar folks don't want to know. It requires about 8th grade math so most are not qualified to play anyhow.
JPM et.al. better hope that the Gold market(s) doesn't enter the mania stage, they would NOT survive it. If deez guyz are talking about Gold stocks, ETFs, etc., then even those might drive up the price of Physical, again, NOT a win for JPM & crew.
In 1968 I use to buy a gallon of regular gas for 25 cents. Now a silver quarter is worth $5.35 and a gallon of gas is $3.09 here. My guess is gas will be going up because I don't think silver is going down.
Sooo......The drive to Walgreen's to get snickers bars is going to become an expensive proposition for some.
What ever became of the vote to raise the debt ceiling?
Given we are now at $13.86T and debt ceiling is $14.3 - this will need to be raised by Feb or March at latest. Can't believe the Dems are going to wait til next year to tackle this??? Repubs take over house Jan 3 - seems there isn't a concern in the world that this won't be raised? All it takes is one rep to filibuster and blam?
Really, no worries?
The bernank is not the only one with a quivering upper lip. Our incoming Speaker of the House has the same problem. Are they perhaps starting to see the light at the end of the tunnel and it is a train! In the latter case he did suggest that his staffing budget and that of the entire congress be cut immediately by 5%. Oh well, it's a start.
And BOOM goes the dynamite.
Quoteth Cleveland!
how come from the title alone you knew this was Casey....they always work the shallow end
Last week gold and silver got a hammering due to profit taking or new short positions. Seems that when silver goes above certain levels someone is getting nervous.
could it be.....SATAN??!!
How can we be in the blow-off phase when gold is $50 off its high?
Parabolic = Blowoff
Gold is not parabolic. However, Turd would be quite pleased if Mandy were to give him a blowoff. Mmmmmmmandy....
The Turd has good taste.
But the question for Mandy would be: does the Turd taste good?
Jeez, guys. I'm having lunch here....
I like the parameters used. I don't worry about gold or silver here at all.
The dollar is the bubble. If China and India say gold is money then it is.
Yep, follow the government money trail to find the next bubble.
All my chess pieces have been in place on my junior miner chess board for over a year with a few adjustments. Having good success but physical has slightly out performed which is fine. I'm patiently waiting.
The good Doctor, I've tried to play the jr's with a little luck, I use gdxj when I'am lazy, I'am lazy alot!
You're not lazy. I use gdxj to hedge my mining portfolio against risk... about 15%. I also use PSLV to the the tune of 20% as another hedge. The rest are the high risk. I have a 3 bagger and some other good ones this past year as well as some dogs like everyone else but these past 10 years I've managed to kill the S&P with my anti-dollar plays. All's we can to is make the best decisions with the info we have from the people we trust.
You're not lazy. I use gdxj to hedge my mining portfolio against risk... about 15%. I also use PSLV to the the tune of 20% as another hedge. The rest are the high risk. I have a 3 bagger and some other good ones this past year as well as some dogs like everyone else but these past 10 years I've managed to kill the S&P with my anti-dollar plays. All's we can to is make the best decisions with the info we have from the people we trust. I'd
You're not lazy. I use gdxj to hedge my mining portfolio against risk... about 15%. I also use PSLV to the the tune of 20% as another hedge. The rest are the high risk. I have a 3 bagger and some other good ones this past year as well as some dogs like everyone else but these past 10 years I've managed to kill the S&P with my anti-dollar plays. All's we can to is make the best decisions with the info we have from the people we trust. I'd trust
The good Doctor, I've tried to play the jr's with a little luck, I use gdxj when I'am lazy, I'am lazy a lot!
If people did their analysis in real dollars I don't think they would even consider selling. Silver would have to be $75 for it to equal $30 in the 80s. Might even want to buy some food while you're at it.
I totally agree KickIce.
How can you value someone's analysis, especially a supposed professional, when they are using the bogus US CPI inflation numbers for their calculations. John William's shadowstats is not exactly unheard of.
Ah, the TSXV, my favorite playground here is a list of my pets:
AMC, AMG, AVL, AVR, EFR, GWG, IMN, IPT, KG, KS, NWM, ORV, PNP, PTQ, SLX, SRU, TRC, TVI, WAR, WM
On the AMEX:
CDY, DNN, GBG, GVCM, PZG, SFEG, TRGD, SWC
But my real baby is FRG (6000 shares at avg. of $3.50) up ~8% today at $11.50 these guys find gold like no other and they have a premier U property in Quebec
Do your research, all the above companies have one of more of the following:
1) Trading at discount to book
2) Rising Au production with new projects coming on line
3) High quality ores of Strategic metals
4) Joint ownership of a significant property with a senior producer.
5) A unique feature, e.g. EFR has the only Uranium milling permit issued in the last 30 years in the continental US
Sell your Gold,to buy what exactly ? Precisely.
The "pile on" phase is where I live.
Pile on bitchez - pile on
However, not to belittle the Casey guys, but you didn't even sniff the carnage in gold juniors in 08-09 so you may not be the best experts in the room.
We need two more obliterations before nervana, careful of rational exuberance it can get pretty rational
the trouble with normal is it always gets worse
Bruce Cockburn - 1980's
The new normal is the old normal in a new way
Mogul rider dec 2010
Lot's of folks are asking the same question (how high? when? etc). Much of the commentary is sheer promotion and some of it is pure BS. I think this is helpful:
http://edelweissfund.com/cmsfiles/deden-gold_aemp.pdf
I am increasingly finding all this talk of "Gold is in a bubble", or "Gold MAY eventually go into a bubble", or even that gold is in a "bull market", to be fallacious and/or disingenuous. So many investors of all stripes have become so inured to our unhealthy, manipulated, manic-depressive markets over the last decade (at least) that they now automatically keep looking for EVERYTHING to eventually enter a mania and a bubble. But is gold really in a bull market, or is it just undergoing a revaluation that was long overdue, after being held down by the central banking cabal for the better part of three decades?
My guess is that gold is NOT in fact in a bull market at all, but merely rising back to its "fair" and proper value after years of price suppression which is now failing to contain it. Further, there will be NO "mania phase" for gold, just a rising and eventually flattening price/value as gold is inevitably reincorporated into the worldwide monetary system.