Market Observations for the Coming Week: The NFP number on Friday should set the tone for stock market - looking for another leg up into the March 19 FOMC meeting. Overall though, we think that 2014 will be a sideways to down year for the stock market but more all-time highs in Q1 are possible. This should be a year of mean reversion for both the SPX and the PMs - looking for a year of multiple 10% corrections for the SPX and for some strong rallies in the PMs. The 4th year of the decade tends be poor for the stock market according to the decennial cycle - we're looking for a year similar to 1994 where the market went essentially sideways for most of the year as the economy caught up to it. Oct 9 was the theoretical low of the 60 yr commodity cycle according to some calculations and the persistent rally in crude and the break out in the PMs argue that some key commodities are turning up.
3/6/14 (Commentary for Thursday) Today's "low volume" on the SPX as it made a new closing high was a little troubling as the market has entered a final speculative phase in our opinion and rally days on declining volume should be suspect. Also, the market was split today with the SPX making new highs on the backs of the financials and the Nasdaq down for the day. The speculative undertone of the market argues for higher prices - some "retail trading friends" have just started trading some of the market darlings - the Nasdaq should blow off into April. Gold and silver are still correcting their rally into Monday - we should reverse up strong by Monday. If we get a leg down into Friday after the NFP number, we will buy the dip. After a 5-year bull market in stocks, 2014 should see the start of a bear market sometime in Q1, but not until after a final blow off into April. The GDX did take out today but the volume was unconvincing - a pullback to at least the symmetry target of 25.21 and perhaps down to fill in the gap at 24 would put us in a strong technical formation. Bigger picture, we believe that gold and silver are rallying in a 3rd wave on the daily chart from the 12/31 low which should give us a strong rally into March/April that targets the August highs. The USD broke below .80 today and this could light a fire under commodities.
- Big Picture on Stocks (UPDATED) - The NDX is leading the other indices higher and the NYSE Adv/Dec line is confirming. Tuesday's high volume relief rally argues for more blow off into April.
- Big Picture on PMs (UPDATED) – Gold rallied on geo-political concerns Monday and then consolidated - we're looking to buy dips in the GDX into the 24-25.21 zone if the market accommodates us.
- Stocks – The SPX closed at a new high but the volume was not convincing and the NDX closed down - the NFP number on Friday will set the tone for the market into the March 19 FOMC meeting.
- Gold – GDX broke above Monday's high but the volume was light - a pullback to GDX 24 is still possible.
- Silver – Looking weaker than gold - but we should see a reversal up by Monday.
- Bonds - Bonds are getting oversold - looking for reversal up by Friday.
- Crude Oil – Oil peaked in the New Moon Timing Window - we may have reversed back up today.
- Dollar Index – The USD closed below .80 and is in danger of more downdraft.
TURNING POINT DAY:
We have a geo-cosmic turn window on Feb 28 - Mar 3 (including the New Moon)- we're looking for market reversals on Monday.
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$0.295 +.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 (EVG.TO, C$0.030 -.010) - 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, $1.88 -.06) - 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$12.85 +.48) – 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, $0.0866 +.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, $.0350 +.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 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.