Market Observations for the Coming Week: Five straight months of +200,000 jobs from the NFP report argue that the Q2 GDP will be a positive number but persistently high oil prices could impact Q3 GDP. This should be a year of mean reversion for both the SPX and the precious metals - looking for a year of multiple 10% corrections for the SPX and for some strong rallies in the precious metals. The 4th year of the decade tends be poor for the stock market according to the decennial cycle. With the latest downward revision of Q1 GDP to -2.9%, we now have at least one quarter of negative GDP that we've predicted for 2014 at the beginning of the year. We now feel that Q2 GDP could come in slightly negative as well and that would give us an "official recession". The stock market may have a lot to deal with as we enter July.
7/09/14 (Commentary for Wednesday) The great bull market from March 2009 is one of the longest on record and has our respect. With that said July can be a volatile month and we are expecting at least another leg down in the SPX into next week. The market gave us a low volume, corrective bounce into today's FOMC minutes which sets the stage for another leg down on Thursday. The market had an important turn window last week (July 1-2) and we may have reached a short-term top in the Russell 2000 which may have made a double-top formation on the daily chart. A July seasonal turn window in the July 16-20 time frame could give us an important turn - this week's market action suggests that it could be a market low. While the VIX, the volatility index based on the SPX, has confirmed the rally, the volatility index for the Russell 2000, the RVX, has not - it makes sense that the Russell 2000 peaked first on July 1 and as lead the market down. Gold gave us just an EW a-b-c correction into its 34-day Fibonacci step out Monday and we reversed up - gold continues to rise despite calls from many gold timers for a pullback here. A gold rally into the Full Moon on July 12 looks like the dominant trend in the near term. The GDXJ is busting out to new highs suggesting that this index may already be through with its correction. The GDX has completed a major low - we finished a 1-yr long inverse head and shoulders pattern on the gold stocks on May 28 - GDX made new highs for the move today one day after the 34-day Fibonacci step out on July 1 - this is a sign of strength. The bonds appear to be sub-dividing up for a bigger rally. The USD appears ready for a C-Wave bounce on the hourly chart.
- Big Picture on Stocks (UPDATED) - The Russell 2000 made a double-top on the daily chart on July 1 and has lead the market down on high volume - look to short a corrective bounce on July 9.
- Big Picture on PMs (UPDATED) – Gold consolidated into July 7 - the 34-day Fibonacci step out from June 3 and then reversed higher - any pullback below $1300 should be bought for a big rally into the Fall.
- Stocks – The IWM gave us a low volume, corrective rally today - we're looking for another leg down to start tomorrow.
- Gold – Gold rallied into the FOMC and looks intent on going higher into the Full moon on July 12.
- Silver – Silver grinded higher with gold today and continues to defy calls for a pullback.
- Bonds - Bonds appear to be sub-dividing up for a bigger rally.
- Crude Oil – Crude oil continues to sub-divide down on the hourly chart - the oil sector is wildly overbought.
- Dollar Index – The USD may be ready for a C-Wave rally on the hourly chart.
TURNING POINT DAY:
We have a turn window on July 7-8 and on the Full Moon on July 12.
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$0.210 +.00) – 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$0.015 +.000) - 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, $1.55 +.01) - 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$7.93 -.21) – 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, $0.0466 -.0074) – 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, $.0599 -.0081) - 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.