Market Observations for the Coming Week: The SPX made a B-Wave top at SPX 2193 on Tuesday and is declining in a C-Wave into Janet Yellen's Jackson Hole talk early Friday - this is bullish for a reversal higher on Friday. The GDX tested 32 on 8/12 (filling the 31-32 gap from 2013) and then started an EW a-b-c correction. Today we started screaming down in a 3rd wave of C that should bottom early Friday. The most likely time to look for a reversal higher in the PMs is during Yellen's speech Friday morning but NO LATER than 8/29, the 55-day Fibonacci step out from the high on 7/5.
8/24/16 (Commentary for Wednesday) The SPX and Russell 2000 both made intraday highs Tuesday in our 8/22-8/23 turn window, and the price patterns look EW a-b-c corrective from the 8/15 high - today we saw a C-wave down in the SPX that could test 2169 going into Janet Yellen's Jackson Hole address early Friday. We are impressed with the strength of the Russell 2000 here and the expansion of the New 52-Week High list on Tuesday and our bias is for an upside reversal early Friday. We have viewed this market as in the late stages of a blow off rally from the 6/27 post-Brexit low and have looked for a possible seasonal top in the 8/22-8/23 turn window - however, if all we get is a brief correction in the SPX this week, we are open to the idea that central bank money pumping could keep this rally going into October. The surprising rise in new home sales Tuesday, the pickup in the long dormant "US money velocity" and the pickup in July bank lending all point to an "improved economic activity" that could propel the market higher into our higher-range SPX 2300 target by October. Our thinking is that a rising oil sector will also help propel the SPX to this higher target range and we are looking to buy dips in our favorite oil stocks (XLE, SLB, CVX, and COP). Still, we're a little cautious here since one of our favorite sectors, biotech (IBB) is still in correction mode and getting negative headlines from the Epipen price increase (gouge). Since early this year, we have called for a stock blow off into August 2016 - the 34-year step out from August 1982 - similar to the 34-year step out blow off in US bonds into February 2015 - and we have gotten it. We are focused on our favored groups: energy, precious metals, and semiconductors but are getting a little cautious after a great post-Brexit run. Crude oil is still working on a 4th wave correction on the hourly chart and we could see more down into Friday. We feel strongly that global central bankers are doing their utmost to minimize the post-Brexit fallout and we won't fight "institutions with a printing press". The GDX printed a scary wave 3 of C down today and needs to reverse higher by Friday. Silver continued its selloff Wednesday and may have to test $18.00-$18.30 before we finish this correction going into Janet Yellen's talk on Friday. Biotech (IBB) is falling in a Wave C of an EW a-b-c correction that is correcting the move from 240 to 300 - we still like large-cap bio-tech companies (AGN, AMGN, BIIB, CELG and GILD) here - good long-term buys on dips. Still, the big picture is getting more defensive for us: the NYA (NYSE Composite Index)has already rallied in 5-waves on the daily chart from 1/20 to 8/15 and we are getting cautious. With the 7-yr Shemittah cycle and the 3-yr commodity cycle bottoming on 2/11, our bias remains "bullish but cautious" despite the Brexit vote to leave the EU. We think that a major 4th wave correction ended on 2/11 and a 5th wave higher to SPX 2200-2300 all-time highs is still in effect.
- Big Picture on Stocks (UPDATED) - The NYA (NYSE Composite) has finished an EW 5-wave rally from 1/20 to 8/15 and we made a B-Wave test of the highs today so we are a little cautious here for a pullback going into Friday. We still think that a SPX target-range of 2200-2300 ... more blow off ... is possible by Labor Day, but we are raising cash along the way.
- Big Picture on PMs (UPDATED) – The GDX finished an EW 5-wave rally into GDX 32 on 8/12 and filled the 31-32 gap from 2013. However, we are in an EW a-b-c correction that could retrace about 50%-62% of the rally from late May - maybe GDX 26-27 by Friday. We are looking for $25 silver and $1500 gold by October but today's scary pullback in GDX makes us cautious. We're in the most bullish seasonal time of the year for precious metals.
- Stocks - The SPX and NYA appear to have made a B-Wave test of the 8/15 high today and a C-Wave pullback into early Friday looks underway. Strength in the Russell 2000 keeps us bullish for a reversal higher by Friday.
- Gold - The GDX broke below 27 Tuesday and has retraced about 50% of the rally from late May - we may still test GDX 26 by Friday.
- Silver – Silver continued lower Wednesday and looks like it is targeting $18.00-$18.30 by Friday - weakness in silver stocks, SIL, gives us caution here.
- Crude Oil - Crude oil is still pulling back in a 4th wave - we're still looking for $60 by the end of September.
- Bonds - Bonds bounced hard again today and more upside is possible going into Thursday.
- Dollar Index – The USD is just tracing out on a 4th wave correction on the hourly chart and looks weak - the market does not believe in the possibility of a Fed rate before December - this is bullish for commodities.
TURNING POINT DAY
The turn window on 8/22-8/23 will be key for several markets this 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$0.0590 +.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, $0.9872 -0.0053) - 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$2.92 +0.08) – 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, $3.0328 -0.2172) – 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, $.0024 +.0000) - UPDATE: De-listed stock. Good asset but needs a cash infusion and maybe a partner. Good leverage to gold.