Far East Capital Newsletter
The rally has found a new burst of oxygen
23 May 2020

In This Issue


The rally has found a new burst of oxygen

After a lacklustre performance in the previous week, last week opened up with a real bang. The bull market in gold and iron ore producers moved into a higher gear on the back of higher commodity prices. The northern hemisphere equity markets then opened very strongly on optimism regarding a virus vaccination, but the gold price suffered from selling as other commodities strengthened. One would be justified for thinking that the bull was back, though there seems to be little fundamental justification. The week ended quietly.

The strength in the mining sector, including the juniors has been absolutely amazing. It is as though the market is oblivious to the coronavirus turmoil and the dark clouds on the horizon. The level of speculation has to be seen to be believed. One reader proffered the view that the small end was being fuelled by people receiving government money, being stuck at home with no horses to bet on, so they are punting the market. Maybe, and it is paying dividends so they continue to trade. Maybe it is just that all the sellers were washed away in the meltdown, and now, with the market going higher, there is no urgent need to sell. Maybe it is a momentum play. Can anything upset this party? Well, maybe reality. Have a look at the Sentiment Oscillator. It is heading into territory that suggests that the market is “overbought.” 

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