The US midterms are done, so where’s the rally everyone promised?

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Nearly everyone I spoke to during the last two months said:

“Our market should run after the US midterm elections are finished”

(because sentiment in the small end of the ASX is driven a lot by sentiment in the US markets)

The US markets generally run pretty hot after midterms, when certainty has returned for another two years.

I’d even looked up the historical “post midterm market performance” stats and shared them a few weeks ago:

(source - Our article from 2 weeks ago)

Also this guy made a nice image:

Well, the US midterms finished on Wednesday, our time.

TLDR - The Democratic party won in a landslide and got control of the House and Senate from the Republicans.

While obviously, Republican President Donald Trump is still in power, Democrats getting back control of the House and Senate makes it harder for the Republicans to pass new legislation.

And maybe a healthy tap on the brakes of the red hot AI rally.

But we are here to talk about small ASX stocks going up.

And for that it would help if the US markets had a run.

Even when the sitting President’s party loses the midterms (and it has happened a few times in the past), the market has still gone up after.

Sounds like it's more about certainty going forward than who is in power.

Markets love certainty.

With everyone in my personal echo chamber thinking the markets will run after the US midterms are done, does that mean it will?

Small cap market sentiment is basically the average of the collective emotions and mental state of hundreds of thousands of humans participating in the market.

So if everyone believes it, then acts on it - then it should happen, right?

...right?

For the last two months - I had been blaming the ASX small cap market horrors on things like Jim Chalmers blowing up the property market with his tax changes, interest rates, fear feeding fear etc etc.

And I had also been counting down to the US midterms being finished - would the collective hopes of us all make it so?

Well the midterms are done, we have seen two ASX trading days.

Here is what has happened so far:

Day 1 post US midterms: US markets rip (that means it went up) - ASX does too (our Thursday)

Here’s our Portfolio on that day:

What a great day that was - the last 8 weeks of pain in the rear view mirror...?

So far so good - time to pat myself on the back?

nope.

Day 2 post US midterms: US stocks crash - ASX did too (our Friday)

Well that sucks.

Solid USA ASX correlation though, let's see what the US did last night.

Day 3 post US midterms: - up a bit, probably neutral - lets see what the ASX does Monday.

...and what about beyond?

Is it even correlated?

What will happen next?

Will the USA deliver the statistically driven expectation of good times returning post midterms?

Dragging our beaten down small ASX stocks with it, as many are predicting?

OR will we instead get a statistical anomaly of more pain instead?

We’ll have to wait and see.

In the meantime, here is a visual representation of the last two months on the small end of the ASX:

We've got to stay optimistic.

So assuming that we get a nice little bounceback rally into Christmas...

Here is a list of our stocks that say they are going to announce something big BEFORE Christmas...

But before that, here’s one stock that ALREADY announced something on Tuesday.

and the share price actually went up.

on big volumes.

and then kept going up the next day:

BPM announced a pretty serious gold intercept on the first hole into its giant undrilled target in WA, a ~6km long ‘gold in soil’ anomaly.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

BPM’s target is giant - comparable to some of WA’s big discoveries:

(source)

Here is what we know and what we want to see next from BPM:

Read our full deep dive here: BPM: First result from giant WA gold prospect - 4m at 20.57g/t gold and 8m at 9.23g/t gold. Here’s what we want to see next.

What we don't know yet is IF BPM has hit isolated pockets of gold OR clipped the edge of something bigger.

We should find out inside the next few weeks though (assays are pending on 36 more holes right now).

A great start, still a lot of drilling and results to go though to see exactly what they've got.

And as we all know, the next drill holes could be a disappointment.

But if they are good, BPM might be on to a giant gold discovery.

Here is an example how a previous mega gold discovery unfolded after the first ever hit the company made:

Predictive Discovery (ASX: PDI) announced a gold intercept back in April 2020 - and proceeded to drill out a monster gold deposit over the coming years (we didn't and don't hold)

(The company is now called PDI Gold)

It went from ~2c pre discovery to ~$4.50 as of yesterday.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Here is PDI’s first hit from back in April 2020:

• 46m at 6.58g/t gold from just 4m downhole, to end of hole.
• Including 10m at 26.52g/t gold from 34m.

Here’s what that first drill hole looked like:

Now we zoom out a bit on that first ever hit (it’s on the top right):

Below is what it looked like after a couple of years of drilling.

The thin lines are drill holes and the big red blob is gold mineralisation:

Here’s a sped up, artists impression of the progress:

Again, PDI went from ~2c before the first hit to ~$4.50 yesterday.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Fun fact:

A big part of why we liked BPM’s targets going into this drill program was because they were mapped and interpreted by structural geologist Dr Barry Murphy.

(source)

Dr Murphy was behind Predictive Discovery’s monster find in Guinea...

BPM just announced their first gold hit on Tuesday.

Still a lot of work to do but it’s nice to have something exciting to follow that is actually going up:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

BPM is probably the most exciting thing going in our Portfolio at the moment.

It certainly wasn't always the case.

We have been in BPM since 2021, and watched it try (and fail) at FOUR other exploration projects during that time:

A good example of how in mineral exploration, a company usually has to try and fail at a bunch of projects over many years to finally get a drill hit the market cares about and is willing to put cash in to drill more.

How many times have we been smashed up by an exploration stock, and then they acquire a new project and try again.

And again and again.

Until they have either a Discovery OR 15 billion shares on issue

Then they consolidate the shares... and go again.

Most big discoveries in the market are usually after a few failed attempts - well done BPM.

Anyway,

Let’s assume the ASX small cap markets DO make a comeback in the post midterm prediction

Here is a list of catalysts before Christmas

1. BPM: Further gold assays expected - this is the big one... (Read our latest BPM article)
2. WCE: Updated silver resource estimate in WA - announcement now imminent (in trading halt for it right now). (Read our latest WCE article)
3. RCM: Gallium and germanium assays expected mid-November from its project in Canada. (Read our latest RCM article)
4. AW1: Assay results from its US indium project expected November through December. (Read our latest AW1 article)
5. IVZ: Drilling starts in November at its 1.2 Tcf gas, 73m barrel condensate target. (Read our latest IVZ article)
6. HVY: Final Investment Decision on garnet processing plant in South Australia (Read our latest HVY article)
7. LKY: Resource update for NSW copper projects. (Read our latest LKY article)
8. RML: Drill results from gold-tungsten project in Idaho, USA. (Read our latest RML article)
9. ILA: Marburg study dosing starts December. (Read our latest ILA article)
10. CND: Outcome from its application for a full oil and gas exploration license offshore Peru. (Read our latest CND article)
11. MNE: Farm-out of gas prospects in Perth basin, WA. (Read our latest MNE article)
12. AVM: Resource upgrade and further assays from silver project in Mexico expected by December. (Read our latest AVM article)
13. BKB: Maiden resource estimate from US silver project expected by end of December. (Read our latest BKB article)
14. HAR: Resource update from US gold project - hopefully growing the current 402k ounce number - due by December; could slip into January. (Read our latest HAR article)
15. SGQ: Maiden resource for new discovery east of its giant rare earth project and a first economic study due by December. (Read our latest SGQ article)
16. BUY: Deal close on its acquisition of an oil and gas project offshore Liberia - deal conditions due December. (Read our latest BUY article)

Have a great weekend.

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