Market Observations for the Coming Week: The NDX made all-time highs last week but the SPX and DJIA were not even close - this is a case of inter-market bearish divergence which gave us a correction into Tuesday. We're inclined to buy early weakness Thursday in the QQQ and GDX and look for a rally into Friday.
9/28/16 (Commentary for Wednesday) The OPEC production cap agreement gave us the big reversal higher in crude oil that we were looking for - we plan to buy the oil drillers(OIH) on dips. The oil sector boosted the SPX into a late day rally while the biotech sector stayed down. Solar-lunar cycles argued for a wide-range reversal day today and we got that in crude oil, oil stocks and gold stocks. Oil stocks could rise much higher going into October - we like the OIH stocks here on dips. We are planning to buy early weakness Thursday in QQQ and GDX for a rally into Friday. In GDX, we may have seen the end of a EW a-b-c correction from 9/7, and the gold stocks reversed sharply higher from early weakness - we may just have seen a major low this morning in the PM sector - we need to see confirmation on Thursday. Led by all-time highs in AMZN, the NDX reversed higher from early weakness - we are looking to buy dips in the QQQ. We raised a lot of cash on Friday and put a lot of it to work today in gold stocks, oil stocks and biotech - we got in CVX, SLB and COP before the big surge higher. Crude oil rocketed higher after news of the OPEC production cap plan which caught the market napping - money flow from underperforming hedge funds should drive oil stocks higher here into October. Gold gave us that "one last leg down" into today's Comex option expiration and we are looking for a big reversal into Friday. Biotech (IBB) finished a 5-wave advance on the hourly into early Friday and we pulled back into early Wednesday - we still like large-cap bio-tech companies (AGN, AMGN, BIIB, CELG and GILD) on dips early Thursday. With the 7-yr Shemittah cycle and the 3-yr commodity cycle bottoming on 2/11, our bias remains "bullish but short-term cautious" despite the Brexit vote to leave the EU and all the "crash talk" that permeates social media currently. We think that a major 4th wave correction ended on 2/11 and a 5th wave higher in the SPX is still in effect.
- Big Picture on Stocks (UPDATED) - The OPEC production cap plan could boost the SPX to a test of 2195 by October led by the oil sector.
- Big Picture on PMs (UPDATED) – The GDX declined in EW 5-waves on the hourly from early 9/22 into early today - this could be the end of an EW a-b-c decline from 9/7 - we are looking for a big reversal higher into Friday. With big negative sentiment from gold newsletter writers, we may have seen a major low in the PM sector.
- Stocks - The OPEC production cap deal allowed the energy sector to boost the SPX higher - we plan to buy dips in the OIH stocks.
- Gold - The GDX gave us a 5-wave decline on the hourly chart into early today and reversed strongly higher - we need to see a strong move higher in gold Thursday to confirm an important low.
- Silver – Many silver stocks finished 5-waves down into today before a strong reversal higher - we plan to buy dips for a rally into Friday.
- Crude Oil - Crude oil reversed sharply higher as expected after the OPEC production cap - we plan to buy dips in the OIH stocks for more rally into October.
- Bonds - Bonds sold off late as stocks surged - we are flat bonds here.
- Dollar Index – The USD finished an EW a-b-c bounce on the hourly today and reversed down - we are looking for a big bounce in gold and oil into Friday.
TURNING POINT DAY
The turn window on 9/26-9/27 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$0.0650 -.0079) – 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, $1.01 -0.00) - 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$2.04 +0.03) – 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, $2.653 -0.0000) – 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, $.0018 +.0008) - UPDATE: De-listed stock. Good asset but needs a cash infusion and maybe a partner. Good leverage to gold.