Market Observations for the Coming Week: We're looking for the SPX to test 2019 on Monday to finish a 5th wave down on the hourly before a retracement higher. Bonds are rallying in a 3rd wave of C early Monday.
07/05/15 (Commentary for Sunday) The SPX peaked early after the NFP jobs report and have started a 5th wave down on the hourly chart with a target of 2019. The persistent weakness in the gold stocks since last May led the broad market down like last summer. The ES closed below 2062 on 6/29 and that argues for a bigger correction in time going into mid-July. The ES could test 1950 here and still be bullish in our opinion. Bonds pulled back in a Wave 2 of C - we are breaking up in a 3rd wave of C on Sunday night. We breached our symmetry target of TLT 116 on 6/10 which argues that a much deeper correction lies ahead after this upside correction. The global bond markets are correcting in unison and we feel that TLT will be much lower by yearend and could create great stress in the world financial system. We still contend that the stock market needs a 10% correction to recharge the batteries for a run higher in the second half of 2015 - and we appear to be getting that now. With the global blow off in bond prices in March, the low in crude oil in January and the parabolic blow off in the USD in March, we feel that the subsequent sell off in bonds into yearend could be more chaotic than most analysts realize. One of the key fundamental triggers for this sell off is the "lack of liquidity" that has been reported for bond buyers which we look at as a "canary in the coal mine" - this lack of liquidity breeds volatility which could accelerate when the Fed raises rates sometime later in 2015. Gold reversed up on the Full Moon on 7/2 - we're looking for a post NFP jobs report rally. The USD is rallying Sunday night before the Greek vote. Oil pulled back into the Full Moon but we're expecting more down into Monday.
Big Picture on Stocks (UPDATED) - The SPX reversed up on the 6/16 New Moon but a washout into ES 1950 is underway. We may have correctively bounced into the Full Moon and should break down in a 5th wave by Monday.
- Big Picture on PMs (UPDATED) – Gold reversed up on the July 2 Full Moon and the HUI is defending is trying to defend the 146-150 support line. Were looking for a bounce on Monday.
- Stocks – The SPX just traced out a 4th wave bounce into this morning's NFP job report - we're now getting a 5th wave down into Monday with a target of SPX 2019.
- Gold - Gold reversed up on the Full Moon and looks set to rally higher - the HUI is trying to hold the HUI 146-150 key support. We need to see the HUI rally higher on Monday.
- Silver – Silver looks weak on Sunday night - we need to see silver stocks lead the PMs higher on Monday.
- Bonds - Bonds may have pulled back in a wave 2 of C higher - we're getting a 3rd wave higher early Monday.
- Crude Oil – Crude oil is following stocks lower early Monday.
- Dollar Index – The USD is rallying early Monday but we're looking to buy the Euro if we get the right setup.
TURNING POINT DAY
Our turn windows for this week are 7/6 and 7/10.
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 7/05/15: The CDNX remains mired in a deep, historic bear market since the April 2011 which led the turn down in the gold and silver market by a few months. To us, junior mining stocks are just trading affairs unless the 50-day MA crosses up through the 200-day MA. In our best guess, we feel that the CDNX and the gold mining juniors could bottom by October in advance of our target of April 2016 for a final low in gold and silver - typically the gold mining stocks bottom 6-9 months before final lows in gold and silver. We have read that up to 45% of junior gold/silver stocks only have enough cash on hand to continue operations for the next quarter. Many recent equity-based financing are small and done just to keep the lights on. Until the CDNX turns up , it is best just to focus on well-financed juniors with great assets and positive cash flow. Now is the time to follow these stories since we are in the late stages of this brutal bear market.
- Great Lakes Mining (GLKIF, C$0.065 -0.015) – NEW Recommendation 6/5/15 - This is a unique situation in the high-end graphite market. This company is scheduled to open a factory to upgrade graphite for specialty applications by October. This vertical integration business model adds a new dimension to this company and is worth following.
- Aroway Energy (ARW.V, C$0.025 -0.000) – 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 (EVGD.TO, C$0.0197 -.018) - 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, $1.41 -.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$5.51 +.20) – 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, $0.0548 -.0000) – 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 +.0050) - 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 5-10% 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.