Market Observations for the Coming Week: The banks and technology stocks continue to lead the SPX down. The market is very oversold but cannot sustain rally attempts.
2/11/16 (Commentary for Thursday) The SPX took out the 2/8 low in the New Moon Timing Window and appears to be bouncing correctively Thursday evening - this is bearish for more decline into next week. The spot VIX exceeded the April VX futures contract by 5 points Thursday afternoon and that gave the SPX a bounce. This rally was lead by a bounce in crude oil and oil stocks which rallied on another hope of a Saudi led production cut. The SPX still seeks a high-volume capitulation and we may see this early next week. Janet Yellen did not give the market what it wanted today - a promise not to raise rates in March. It was do or die today for the SPX but the market continues to decline lead by the banks and technology stocks for the SPX - it needs to rally hard Thursday or suffer a decline to below 1812 into next week. The 7-yr Shemittah cycle is still trying to bottom and a break to 1600 still looks in the cards and some point into the spring. The large basing pattern in the Option Premium Ratio around the 1.50 does imply a larger rally soon - similar in size to the 8/24 - 9/29 rally leg that could run to 2/24 or so for the SPX. There are some key signs of bottoms in commodities - (1) the 3 X Inverse Crude Oil fun, DWTI saw a $600 million dollar sale on 2/2 as smart money liquidated en mass - this could imply a low in oil prices soon, (2) copper declined in an EW 5-wave pattern on the daily into 1/15 - this could be a sign that global growth has bottomed out and (3) the HUI (gold shares) have rallied impulsively by >50% since 1/20 and is trying to lead the market higher. Crude oil tested the important support line at $25.80 but is only bouncing correctively Thursday evening - plunging crude prices have made some carefully selected uranium stocks and energy MLPs the buy of the decade - do your homework carefully. Gold shares soared ahead after a 3-wave pullback into Wednesday and gold rallied above $1260 as the fear trade intensified. The Japanese Yen continues to spike as the USD sells off - this is an ideal environment for commodities to rally.
Big Picture on Stocks (UPDATED) - The SPX tried to bottom in the 2/8 New Moon Timing Widow but is only bouncing correctively - this is bearish for another leg down below SPX 1812. A move own to test SPX 1600 is likely going into the spring.
- Big Picture on PMs (UPDATED) – Gold stocks have been in a buying stampede and has pulled gold higher. From the historically oversold level of HUI 100, we could see a 50%-75% rally before a substantial correction. In the short-term, the gold stocks have been exploding up into the New Moon Timing Window on Monday - just a quick corrective pullback here should be bought for a continued thrust into 2/24.
- Stocks - The SPX only gave us a corrective bounce late Thursday - this implies more selling into next week.
- Gold - Gold rallied over $50 as the global fear trade intensifies and the HUI continues a buying stampede.
- Silver – Silver stocks are leading the PM complex higher - bullish. We are following SLW for trend changes in the PM complex.
- Bonds - Bonds continue to power to new all-time highs on a global fear trade - a testimony to intense global deflationary forces.
- Crude Oil – Crude oil tested the key $25.80 support level but only appears to be bouncing correctively.
- Dollar Index – The USD bounced correctively from the 2/5 NFP jobs report - we're seeing another leg down into Friday.
TURNING POINT DAY
The 2/8 geo-cosmic turn window which includes the New Moon is our main focus for the week.
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$0.0710 +.0110) – NEW Recommendation 7/5/15 - 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$0.010 +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$0.0358 -.0000)- 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 t-hat the company needs a financing and could be forced to sell a world-class asset for pennies on the dollar.
- Uranium Energy (UEC, $.8177 -.0422) - 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$2.84 -0.02) – Finished acquisition of STM.TO in early September - buil0ding up a position as a strong US producer of uranium in a tight market.
- Prophecy Coal (PRPCF, $0.0121 -.0003) – 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, $.0030 +.0000) - UPDATE: De-listed stock. Good asset but needs a cash infusion and maybe a partner. Good leverage to gold.