The Death Cross
There are of course many financial news and information services. Too many. There are the boring, yet snooty macro ones, like Bloomberg or CNBC, that obsess about the yield curve, bond markets and economic stats. There are the ones that go for funds and investment trusts, arguably even more dull, and then the more populist types such as Fool.com.
At the end of the day, none of them give the investor what they really want: what happens next? We saw this with the recent tariffs inspired dive for the financial markets. The conventional view was that Trump would not shoot himself in the foot. He did and therefore most investors were topped and tailed on the whole episode. Caught long, and then caught out on the rebound. That said, the world’s most famous counter-indicator apparently proved to be correct again, getting the rebound after the Trump U turn wrong.
However, there is a source of financial insight which people perhaps forget: The Daily Mail. It is the ultimate source of mainstream media information, and as such whatever message it delivers, one should almost always assume the opposite. This week’s gem (we hope) was the Death Cross article. In this the Mail’s consumer editor said, “a rare ‘death cross’ appeared on the US stock market this week, sparking fears that further downturn is on the horizon. A death cross is when the 50-day moving average of an stock index drops below the 200-day average — indicating momentum is weakening.” Well, not quite. The key here is that a death cross here is when these two averages are both falling when they cross. If they are not both falling it is not a negative signal. But it is true there actually has been a death cross, and just for a change, it does look like an ominous one. That said, historically this indicator has been one where the success rate was no better than 50/50. Either the market had already fallen, and a rebound was overdue, or its presence was no more useful than not knowing about it at all.
In fact, looking at the chart of the S&P over the recent past, the killer for this market was when the 50 day moving average started to fall on February 21, in combination with the RSI index falling below neutral 50. This happened around the 6,000 level, with this sell signal eventually leading to a low so far on the move down at 4,835. As far as what happens next, we are waiting for a minimum of the RSI getting back above the neutral 50 level versus 41 at the moment. It could still be quite a wait.
Small Caps Rising
Over here in the UK we have actually had a decent week. The UK still appears to be the golden child in Europe, helped by a potentially softer US stance on our tariffs, as well as better growth and inflation figures than expected. The FTSE 100 ended the shortened holiday week up 4%, with the small caps up around 3.75%. Given the ever smaller playing field as far as AIM listings concerned, perhaps it is the weak hands continuing to leave which is actually helping matters. The negative poster child of this was news that Jarvis Securities is disposing of its retail execution-only brokerage business to Interactive Investor Services Limited for £11m. This is quite a result, given that in the current environment it could be said that Interactive Investor is paying precisely £11m too much. At the moment it would appear that retail execution-only brokerage is about as useful as driving around the North Pole with an ice cream van.
Stocks Rising On News
One of the main problem with many small cap gold mining companies has tended to be the rather irksome issue of them not really mining any gold. Therefore, it was clearly a winner when Alba Mineral Resources (ALBA) confirmed that, following the successful sale of the first of its limited edition 1oz Welsh gold coins, the second coin auction was held on Wednesday. Shares of ABA rocketed 80%. In a similar vein, Thor Explorations (THX) which certainly produces rather more than a few coins worth of gold, announced 22,790 ounces for Q1. The West Africa focused company announced bumper profits, leaving the shares at an all-time high at 35p. The market cap has soared nearly £100m in recent weeks to leave it at £228m.
What small caps always need in order to become large caps is knock the ball out of the park news. Ideally, this is on a national scale. In the case of Scancell (SCLP) the partnership announced with the NHS regarding a melanoma vaccine trial, certainly fitted the bill.
Also fitting the bill in terms of a company which is riding the AI zeitgeist was Catenai (CTAI). The group has played a blinder in the past couple of weeks, in getting back its Klarian cash, and then raising further cash to invest in Alludium, a software company which has developed a multi-agent artificial general intelligence platform. It would appear that with Thursday’s announcement of next month’s AGM leading to a 83% rise in the stock, the market is looking forward to further significant events at CTAI.
Stocks Rising On No New News
With Trump calling for the US to acquire Greenland, with or without money or military intervention, it has been a somewhat hairy time for UK listed companies with a foothold on the Denmark dependent territory. That said, in recent days we have seen stocks such as Amaroq (AMRQ), and GreenRoc (GROC) rebound well. While it is not perhaps clear whether they are rising off the back of their own mining merits, or hopes that Trump will go away, the 26% and 55% share price rises respectively suggest that investors are expecting the kind of U turn regarding Greenland, we have seen on tariffs.
It is always exciting as far as exploration plays are concerned when the shares rise on no fresh news. This tends to be a better scenario than when a company sets up the timeframe / result for such news. This concept comes to mind as far as helium play Helix Exploration (HEX). Interestingly, on April 10 HEX said it was drilling at Linda #1, and given the share price rise of 33% last week, the market has sniffed that the results could be very positive indeed. A win now, a year after the IPO would be a decent scenario for shareholders.
Team (TEAM) saw its shares up over 50% this week, with presumably the market really looking forward to the wealth, asset management and complementary financial services group’s rescheduled AGM on April 24. Earlier this month the company revealed a £60,000 equity subscription. One hopes TEAM is not going to announce something along the lines of going private? Who would want to leave the joys of being a listed stock market company?
Pantheon Resources
At the end of the week I was lucky enough to be invited to an investor call by Pantheon Resources (PANR). It has to be said that while some parts of the call would have been technical enough to make Red Adair scratch his head, in a way, the more detail on what has happened regarding Megrez-1, the better. Indeed, it was almost the case that the lack of hydrocarbons on that drill suggests there is more chance that the rest of its significant prospects will yield black gold. At least, that is the way that I would like to look at it. Given that the company already has some 1.5bn barrels under its belt, one could consider that whatever else it eventually finds will be the icing on the cake. This would suggest that the 30% fall for the shares in the aftermath of Megrez-1 was overdone.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
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