Market Observations for the Coming Week: The SPX made a LOW into the New Moon Timing Window from 4/17-4/20 - this implies a rally into May that could make marginal new highs. Gold made a high into the New Moon and should be under pressure for an early May low.
04/23/15 (Commentary for Thursday) Strength in AAPL and other tech stocks like IBM propelled the Nasdaq to a 15-yr high today but other indices like the DJIA and SPX failed to make new highs. Also concerning was the lower volume on this retest of the 2/25 high. We could see higher highs on Friday for the NDX as the markets anticipate the earnings report from AAPL. The bonds may have made an important peak on 4/3 and may have formed a head and shoulders pattern on the daily chart. Gold and silver reversed up from an early session low as the PM stocks show resilience. The SPX and NDX look close to finishing an EW 5-waves up on the hourly chart and new highs are being targeted but we will be watching for bearish divergences between the indices. Our suspicion is that marginal new highs could be seen in several indices into next week but that a 10% correction looms on the horizon in early May. We expect that volatility in stocks, bonds and gold is right around the corner. Crude oil bounced in what looks to be a B-Wave test of the recent highs. Gold rallied and appears to have left just a 3-wave correction on the hourly chart in its wake - this is bullish. The New Moon/solar eclipse on 3/20 brought in $33B of new cash - one of the highest readings in years. This could be "exhaustion buying" that could leave a significant top in its wake - taking out the March highs in the market will be bullish overall, but it could peak a bearish rising diagonal pattern on the daily chart. The market is reacting to a number of economic indicators that are portraying a big slowdown in global trade and a slowing US economy - of course a bad winter accounts for some of the weakness but bigger factors may be at work which the market may try to discount in the May/June time window. US shale oil production appears to be leveling off which may give fundamental support as we enter spring but the Saudis have ramped their production to all-time highs and the market does not seem to be paying attention to this. The USD appears to want to roll over again.
Big Picture on Stocks (UPDATED) - The SPX may make a low early Monday in the New Moon Timing Window and this implies a rally to marginal new highs into early May.
- Big Picture on PMs (UPDATED) – Gold made a top into the New Moon Timing Window but has declined in just 3-waves on the hourly as gold stocks have firmed - this is short-term bullish.
- Stocks – The Nasdaq made a 15-yr high and the SPX missed making a closing high - still, we appear to have rallied in 5-waves on the hourly chart - bearish divergences with the DJIA are keeping us cautious. We feel that a 10% correction will greet us in May.
- Gold - Gold's rally today makes the decline from the New Moon look corrective - looking bullish.
- .Silver – SLW reversed from the opening and led silver higher. The SLV actually traded more puts than calls - contrary bullish.
- Bonds - Bonds are breaking down after forming a head and shoulders top on the daily chart. The 34-year Fibonacci step out from Feb 1981 does argue that the March highs could have been a final blow off.
- Crude Oil – Crude oil gave us a B-Wave test of the New Moon highs - looking for a C-Wave down.
- Dollar Index – The USD has failed to bounce much and looks ready for another leg down.
TURNING POINT DAY:
Our turn window for this week is 4/17 - and we may see an early low on Monday in the SPX.
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$0.035 -0.005) – 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 (EVGD.TO, C$0.0197 -.0009) - 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, $2.40 +.28) - 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$6.59 +.49) – 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, $0.0327 -.0051) – 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, $.0370 +.0000) - 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.