Market Observations for the Coming Week: We're on Crash Alert - the Tuesday 10/14 price action activated a "crash pattern" in our work and we did get a "flash crash" on Wednesday 10/15 but a deeper correction into mid-November is still possible. The SPX reversed down at the .618 retracement today in the New Moon Timing Window and Wave B may have completed - we're now looking for Wave C down to take out 1820 soon. Rallying past the New Moon and well past the .618 retracement of the decline will argue that another up leg to new highs is underway.
Check out my talk on the "potential crash pattern" that was activated on Tuesday 10/14 and argues for a steep decline into the 55-day step out from 9/19 on 11/14 after a Wave B bounce into the 10/24 New Moon:
Here are some charts from Trader Jim of Anchorage, Alaska with his proprietary momentum indicators:
10/21/14 (Commentary for Tuesday) The SPX found resistance at the .618 retracement today and Wave B may have topped out - we're now looking for Wave C to take out last week's low at 1820. Our bias is that the SPX just finished Wave B of a potential EW A-B-C crash pattern with a top due by the 10/23 New Moon/solar eclipse - but a rally past the 10/23 New Moon and well past the .618 retracement will argue that the "crash pattern" has been invalidated and an up leg to new highs is underway. Our thinking is that we bottomed Wave A of an EW A-B-C crash pattern on 10/15 and we topped Wave B. This 5+ year old bull market needs a good scare here and that could take us down 20% or so in the SPX before this correction runs its course and a holiday rally begins. Now, if we rally past the New Moon on 10/23, that might be an indication that the "crash pattern" has been invalidated. Either way, prudent investors should create a shopping list here among some beaten down sectors (oil stocks, tech stocks ...) that should be bought into mid-November. Everybody claims that they want a market pullback in order to buy, but when the time comes they are too scared to pull trigger. From a big picture point of view, we do think that a scary SPX correction is likely into 11/13 but this should not derail the long-term bull market in our opinion and we are expecting the bull market to extend into 2015. Gold appears to be pulling back today in an EW a-b-c correction into the New Moon - but gold stocks looked very weak and may be trying to lead the broad market down. The weakness in oil and commodities is drawing comparisons to September 2008 before the big plunge in stocks - oil tends to lead the stock market and oil's reversal down today led stocks. We got a $60 rally in gold from the pivot-reversal up on 10/5 - gold is catching some flight to quality money and is showing relative strength with other commodities. The Euro continues to weaken here and threatens to leave just an EW a-b-c bounce on the charts. Crude oil broke below $81 and revved up deflation fears - taking out last week's low will be bearish for stocks. Bonds may have finished an EW a-b-c correction on the hourly.
- Big Picture on Stocks (UPDATED) - The SPX may have completed Wave B of a potential crash pattern at the .618 retracement today - we're now looking for a Wave C down to take out 1820 by early November.
- Big Picture on PMs (UPDATED) – Gold is declining in an EW a-b-c correction on the hourly into the New Moon - looking for a rally to $1300 by early November.
- Stocks – The SPX topped Wave B at the .618 retracement in the New Moon Timing Window - we're looking for a Wave C down to take out 1820 by early November.
- Gold - Gold is pulling back correctively into the New Moon - looking for a reversal up by Friday.
- Silver – Silver is pulling back into the New Moon - looking for a bounce by Friday.
- Bonds - Bonds look like they are declining correctively - looking for a test of the highs.
- Crude Oil – Crude oil led the market down today - looking for a break of last week's low.
- Dollar Index – The Euro is breaking down here and has left just a corrective bounce on the chart.
TURNING POINT DAY:
The turn window for this week is the 10/22-10/23 time zone defined by the 34-day Fibonacci step out from the 9/19 all-time high which hits on 10/23 and the 10/23 New Moon/solar eclipse.
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$0.175 +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 (EVG.TO, C$0.010 -.00) - 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, $1.07 -.10) - 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$6.73 -.17) – 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, $0.059 +.005) – 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, $.030 -.002) - 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.