Far East Capital Newsletter
Looking at market cycles and where we are now
1 Nov 2020

In This Issue


Looking at market cycles and where we are now

The bull market in mining and exploration equities is continuing along its evolutionary path into the next phase. To begin with, starting with the low after the virus meltdown, there was a sense of relief and almost disbelief that the market could be so strong in the face of the impending economic disaster that was inevitable due to the government enforced lockdown.

We are led to believe that the lockdown actually boosted the number of traders playing the market as there was nothing else to do, and the liquidity injections from the Government added fuel to the fire. The strength of the gold price acted as a turbo charge.

Share prices ran higher and there was a shortage of scrip. Many company went to the market to raise funds and the appetite for shares was so strong that these equity issues were consumed with the appetite best described as ravenous, like piranhas in a pond. They did not dampen enthusiasm at all. Yet, as we all know, this type of market has a limited life span.

Calling the top of the market is not easy, but this is where the Sentiment Oscillator comes into play. It actually peaked in late July and that peak become more obvious as the sentiment began to fall in subsequent weeks. This coincided with the gold price peaking in the first few days in August. It is obvious in retrospect but at the time, the enthusiasm in the market had an overriding momentum that disguised the turning point. Many traders don’t like to acknowledge a peak in the market, preferring to see it as a pullback and an opportunity to buy on dips.
 

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