Market Observations for the Coming Week: The DJIA peaked on July 17 and the SPX and NDX peaked on July 24 in the New Moon Timing Window - we may be at a seasonal high in stocks and a low in gold. 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. The stock market may have a lot to deal with as we enter July.
7/30/14 (Commentary for Wednesday) The SPX and NDX opened higher on the initial Q2 GDP estimate of 4% but the SPX gave up most of those gains by the close - the market may be sub-dividing down in a deeper correction - taking out Wednesday's lows will imply a swift decline. The market rallied after the FOMC minutes but institutional buyers backed away leaving a mixed close with only the NDX substantially higher. We may have seen a July seasonal top - the breakdown in the XLI (industrials) and the SMH (semis) after earnings were released the past two weeks may be a harbinger of a here. Geo-political tensions and recent distribution days should give investors caution here. 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 - this may be a leading indicator of a summer top. Gold gave us an EW 5-waves up from Thursday into Monday and we are pulled back into the Fed minutes on Wednesday - we're looking for a strong reversal up by Friday. An impressive Fibonacci step out cluster on monthly, weekly and daily time scales targets late July for a major low in gold and we should see it by this week if the low is not already in. The GDX gave us an EW 5-waves up on the 5-min chart into Monday - and we got an EW a-b-c correction into today - the GDX reversed up and may be trying to lead the PMs higher. The bonds are pulling back after 5-waves up on the hourly.
- Big Picture on Stocks (UPDATED) - We're in the time window for a July seasonal top and the semis (SMH) and the industrials (XLI) are breaking down - looking for a pullback.
- Big Picture on PMs (UPDATED) – Gold has a 55-day Fibonacci step out on July 28 - and we are ideally expecting an important reversal up this week. An impressive Fibonacci step out cluster on a monthly, weekly and daily timescale argues for a major low in gold in late July.
- Stocks – The SPX may be about to decline aggressively - taking out Wednesday's low will bring a swift decline.
- Gold - Gold rallied in 5-waves up from Thursday on the hourly - a decline to $1280 by Friday should be bought. The GDX may have already bottomed and is reversing higher.
- Silver – Silver rallied in an EW 5-wave pattern on the hourly into Tuesday - we're looking for a reversal up by Friday
- Bonds - Bonds may have started a steep correction today.
- Crude Oil – Crude oil fell back below $100 but may be close to ending its correction.
- Dollar Index – The USD continues to rally as the Euro weakens - this is holding gold back in the short-term.
TURNING POINT DAY:
We have a turn windows coming this week on July 28 (New Moon Timing Window) and July 31-August 1.
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$0.2050 -.005) – 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, $1.71 -.03) - 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$8.16 +.13) – 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, $0.057 +.000) – 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, $.07 +.01) - 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.