Market Observations for Coming Week: Silver dropped 10% at the start of electronic trading Sunday evening and then proceeded to RETRACE THE ENTIRE DECLINE AND MORE - Monday we saw key Reversal Days in gold, silver and the HUI - we may have seen a very important intermediate low in the PM sector. We got our ideal trading setup Monday: silver below $22 while gold holds above $1321 - we are now looking for a rally going into the Full Moon on May 24. The SPX could top by Tuesday/Wednesday and then give us a quick sell off - however, we are not getting any major sell signals and will look for new highs by June. Despite current weakness across the board in commodities, the great 60 year cycle does forecast an inflationary cycle that is due in late 2013- early 2014.
5/23/13 (Commentary for Thursday) The SPX gapped down at the open to complete a 5-wave decline on the hourly - this suggests at least another leg down after the corrective bounce that started today runs its course. An early bounce on Friday should be shorted for another impulse leg down. Gold broke to the upside today before consolidating late in the day - we're looking for further rally into Friday's Full Moon. Crude oil pulled back in an EW a-b-c correction on the hourly - we're looking for a reversal up on the Full Moon. Though the SPX continues to trend higher, the potential for a multi-day pullback is present - the margin debt of the NYSE is at all-time highs, mutual fund cash is close to all-time lows, and the big spec long interest on the S&P500 futures is the highest in history. The bonds are struggling to rally in a C-Wave of an EW a-b-c decline.
- Big Picture on Stocks (UPDATED) – The SPX gapped down Thursday morning at the open and finished an EW 5-wave decline on the hourly - we're looking for more bounce into Friday before another leg down. Our bias is that the SPX will make its high for the year in the July-August timeframe.
- Big Picture on PMs (UPDATED) – Silver declined a quick 10% in Sunday evening trading on May 19 (to $20.25) and then reversed up to RETRACE THE ENTIRE DECLINE. The 34-Day Fibonacci step out from April 17 gave us an important turn date on Monday. Gold and silver made 5th wave highs today on the hourly chart - looking for a spike up into the Full Moon.
- Stocks – The SPX gapped down on the open today to finish a 5-wave down decline on the hourly chart - looking for more corrective bounce into early Friday before the next leg down.
- Gold – Gold spiked to a 5th wave above Monday's high and then pulled back correctively - looking for a spike up into Friday's Full Moon.
- Silver – Silver spiked up to take out Monday's high and then pulled back correctively - looking for a rally into Friday's Full Moon.
- Bonds – Bonds are breaking down and confirming that a major top is in place - sell corrective bounces on Friday.
- Crude Oil – Crude oil pulled back hard today - looking for a reversal up by Friday.
- Dollar Index – The USD declined hard on Thursday - looking for more reversal up on Friday.
TURNING POINT DAY:
We have two turn windows for this week - May 20 (gold and silver) and May 24 (gold, silver & 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: The junior PM sector was a WASTELAND in 2012 and the metal of PM junior investors has been sorely tested in the past year ….. BUT …. as Deep Contrarian Investors we will continue to hold our PM juniors (the Hulbert sentiment readings from PM newsletter writers are giving a Major Contrarian Buy Signal in December 2012) but we will not add anymore until the 50 day MA crosses decisively up through the 200 day MA on the CDNX chart. It may take gold making a daily close above $1800 to catalyze this sector.
- NEW PICK – Aroway Energy (ARW.V, C$0.320 -.00) – 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$0.075 -.00) A world-class deposit in Wyoming (Rattlesnake) and a potentially huge find on the Carlin Trend in NV argue that this stock will be a big winner. Goldcorp took a 15% interest and that says it all.
- Uranium Energy (UEC, $1.98 +.10) - The uranium supply/demand story still has legs despite the Japanese disaster. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer. Adding on weakness.
- Strathmore Mining (STM.TO, C$.180 -.005) – Very undervalued uranium stock with huge reserves (+100 M lbs of relatively high grade), lots of cash and production prospects by 2013.
- Prophecy Coal (PRPCF, $0.1479 -.000) – John Lee is determined to drive this emerging coal producer in Mongolia into an international mining powerhouse. Started production last fall with a favorable off-take agreement. Very aggressive business plan in place to make it a billion dollar company. Following the path that Robert Friedland took with South Gobi. This stock has obvious 10-20 bagger potential.
- Gryphon Gold (GYPH, $.028 -.004) - Got plan from management to begin phased production by early 2011 - financing details have yet to be announced. Has >1M oz AU proven, mining permits and a highly prospective land package. 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 50% 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.