Market Observations for the Coming Week: The SPX is near the end of the Wave 2 correction of the rally from 2/11. Our ideal symmetry target is SPX 2015 by early Tuesday. If we get a spike in the VIX, we will be adding SPY calls for a rally into June that will test the SPX 2134 high.
5/22/16 (Commentary for Sunday) The Option Premium Ratio rallied from 1.10 to 1.14 and implies a sell off into Tuesday. We may have seen the correction low at SPX 2025 on Thursday but we're still open for a test of 2015 by Tuesday morning since the VIX has not given us a "fear spike". A low by 5/24 would be important in our work and lead to a summer rally into June. The market is discounting a Fed rate hike by July and is holding up well. We would be aggressive buyers of a dip into SPX 2015 by Tuesday morning. The Tuesday after a monthly expiration often gives us an important turn in the SPX. US Treasury bonds are declining impulsively and trying to discount higher rates - bearish. The USD is holding above 95 and looks like it wants to move higher but we are looking for an important low in the Euro by Tuesday. Gold looks to be declining into our $1240 symmetry target into the 5/20-5/21 Full Moon Timing Window - we're looking for a low on Monday and then a bounce. Crude oil is correcting into the Full Moon Timing Window - we're looking for a run to over $50 early this week. Money is flowing into bio-tech (IBB) and we consider large-cap bio-tech companies (AMGN, BIIB, CELG and GILD) as excellent long-term buys on dips here, but the IBB needs to get above 285 to get this sector going. The big picture remains clear to us: the SPX has rallied in 5-waves on the daily chart from 2/11 to 5/2 and is now consolidating this advance in a wave 2 with a target of SPX 2015. With the 7-yr Shemittah cycle and the 3-yr commodity cycle bottoming on 2/11, our bias has shifted to bullish and we do not expect another bear leg down.
Big Picture on Stocks (UPDATED) - The SPX has rallied in an EW 5-waves up from the 2/11 low and has found horizontal resistance at SPX 2110 - we have a B-Wave peak at SPX 2085 which should lead to a C-Wave target of 2015 by 5/24.
Big Picture on PMs (UPDATED) – Gold tested $1290 Monday morning before being slammed down by a large paper gold sell in London - we have a symmetry target of $1240 as we enter the Full Moon Timing Window.
- Stocks - The SPX rallied Friday but a decline to SPX 2015 by Tuesday is still a possibility. If we reach SPX 2015 with a spike in the VIX, we would have an ideal entry point for SPY calls.
- Gold - Gold corrected into the Full Moon Time Window - we're looking for a bounce on Monday.
- Silver – Silver also looks to make a low below $16.4. We're looking for a bounce by Monday.
- Bonds - Bonds are declining in 5-waves on the hourly chart into Monday - we are looking for a bounce. Bonds are discounting the next Fed rate hike.
- Dollar Index – The USD is holding firm above 95 as we enter monthly expiration but we're looking for a low in the Euro by 5/23.
TURNING POINT DAY
The Tuesday after a monthly expiration, 5/24, is a turn date in our work - we're expecting tradable low.
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$0.0550 -.0000) – 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 O-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, $.7200 -.0021) - 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$2.88 -0.04) – 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, $0.0190 +.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, $.0025 +.0001) - UPDATE: De-listed stock. Good asset but needs a cash infusion and maybe a partner. Good leverage to gold.