Market Observations for the Coming Week: The ECB exceeded expectations for the size of their QE program and the SPX rallied hard - much of the liquidity of the ECB QE will find its way to US markets. European rates are getting compressed and that is pushing US rates lower.
01/29/15 (Commentary for Thursday) The SPX reversed up today as we expected and Friday looks higher as well but Monday is the 34-day Fibonacci step out from the high on 12/29 and this could reverse us down again. The SPX may be at the end of a bullish consolidation pattern or at the start of another leg down - how we trade through Monday will enlighten us. The TRIN5 is very oversold at 7.81 and put/call ratios look supportive of more rally on Friday, but how the price pattern evolves into Monday will be key - just a corrective bounce will get us defensive and we will expect another leg down. Our bias is that this January correction will be a place to add to the ongoing blow off in stocks into March/April but the possibility of a "higher degree" pullback is still present until we take out the December highs. Gold declined $30 today as suggested by the solar-lunar cycles in this time window - we unfortunately sold our GLD puts yesterday before the FOMC minutes. We've been focused on the negative seasonal from late January to early February but today's decline had us adding SLW and ABX calls for a reversal up tomorrow. The extremely oversold nature of gold stocks from tax loss selling propelled us into our swing trade into January but seasonal weakness is pulling us down into February. Gold continues to demonstrate that a 17-month and a 34-month low was made on 11/7 - a test of the $1480-$1500 break down point in 2013 looks likely this year. Crude oil made new lows today as supplies in storage increased beyond expectations.
Big Picture on Stocks (UPDATED) - The SPX reversed up today after the huge closing $TRIN (3.62) on Wednesday - the market looks resilient. If we can rally beyond the 34-day Fibonacci step out on Monday, the market can rally up to test highs.
- Big Picture on PMs (UPDATED) – Gold declined hard into the negative solar-lunar cycle low today but we are looking for a reversal up by the seasonal low on 2/3. A higher-degree rally appears to be underway that could test the $1480-$1500 area by spring.
- Stocks – The SPX rallied after the closing $TRIN of 3.62 on Wednesday and we are looking for more follow-through on Friday. The 34-day Fibonacci step out on 2/3 could turn us back down.
- Gold - Gold dropped $30 into a possible seasonal low today - we're looking for a reversal up by 2/3.
- Silver –Silver got a quick washout below $17.40 - we're looking for a reversal up by 2/3.
- Bonds - Bonds continue to grind higher from money flows from Europe.
- Crude Oil – Crude oil made new lows for its decline as crude oil going into storage increased more than expected.
- Dollar Index – The USD needs a leg down on Friday.
TURNING POINT DAY:
Our turn window for this week is 1/26 but volatility should be high all week with Mercury retrograde in effect.
Depression Beater Portfolio: (This portfolio this week is just a sample of my own portfolio - no recommendation to others is implied or intended)
WEEKLY COMMENTS: Update for 2/14/14: On the CDNX, the 50-day MA has crossed up through the 200-day MA giving us a buy signal on the junior resource sector. At this stage we would only focus on those stocks that were washed out in 2013 and have adequate financing to carry them through 2014 drilling activity.
- Aroway Energy (ARW.V, C$0.055 -0.010) – This western Canadian junior is part of a very sweet JV deal with a private partner in the Peace River basin – it's production share should climb from 669 BOE/day (75% black oil) to over 1200 BOE/day later in 2012 – management has selected a good slate of properties for drilling and it is bearing fruit. Buy on dips. Use a 20% stop from purchase price.
- Evolving Gold (EVG.TO, C$0.010 -.00) - UPDATE: This stock has two world-class finds in Wyoming (Rattlesnake) and a potentially huge find on the Carlin Trend in NV. The problem is that the company needs a financing and could be forced to sell a world-class asset for pennies on the dollar.
- Uranium Energy (UEC, $1.34 +.07) - UPDATE: Uranium prices are recovering and the fundamentals are getting a perfect storm. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer.
- Energy Fuels (EFR.TO, C$5.81 -0.00) – Finished acquisition of STM.TO in early September - building up a position as a strong US producer of uranium in a tight market.
- Prophecy Coal (PRPCF, $0.0534 -.0010) – UPDATE: This stock needs to get its Mongolian coal mine into a positive cash-flow situation to support its power plant project and other endeavors without diluting the common shareholder to zero.
- Gryphon Gold (GYPHQ, $.0300 +.0120) - UPDATE: De-listed stock. Good asset but needs a cash infusion and maybe a partner. Good leverage to gold.
JUNIOR MINING FAVORITES:
(These companies are speculative - best to keep them to 10% of a portfolio with 30% stops based on purchase price. Buy a basket to diversify risk)
RULES FOR JUNIOR MINING INVESTING:
1) Keep to 10% of a portfolio.
2) Due your own Due Diligence.
3) Maintain a price stop of 30% of purchase price or whatever your Technical Analysis suggests is prudent.