Market Observations for the Coming Week: We believe that a 50-wk cycle bottomed on 6/27 with the post-Brexit low and that puts the SPX into a bullish phase (perhaps a melt up phase) into August 2016 - this is the 34-year step out from the historically important August 1982 low and that could mark an important trading top. Global capital flows are flooding the USA in the post-Brexit era. We are bullish the SPX and looking for SPX 2300-2400 by Aug/Sept - we are looking to buy dips here this week in biotech stocks and gold stocks.
7/28/16 (Commentary for Thursday) The SPX has been coiling for ten days and is building cause for an upside breakout to 2300-2400 into August. We are focused on our favored groups: biotech, FANG, precious metals, and semiconductors. The NDX is being lead higher by AAPL, the FANG stocks, semi-conductors and now biotech (in BREAKOUT mode after a two day close above IBB 285) - we plan to buy dips in these stocks. We bought weakness in AMGN, AGN and CELG today as the key biotech index, IBB, made a two-day close above 285. Earlier this week, GILD plunged on its post-earnings guidance and gave us an entry point for a long-term hold. Crude oil tested $41 and scared the market for a plunge to the 30's - we added to calls on our oil stocks. An oversupply of gasoline in storage and a strong USD has pressured oil here going into August. We are still looking for the SPX to test 2300-2400 by September and we want to be long the strongest groups: FANG, gold mining, semiconductors and biotech. The NDX is leading the market higher - led by AAPL, MSFT, FB, QCOM, GOOG and CISCO - we intend to add to these stocks on dips. The DJIA and SPX has made new all-time highs and we expect the NDX to join them soon with help from AAPL and FB. The book-to-bill ratio is strengthening and the earnings beat from QCOM is being echoed throughout the chip sector - see the earnings beat from TXN. The NYSE Advance/Decline line has lead this market higher - BULLISH! Our main count on the SPX has us making a wave 1 high on 6/8 from the 2/11 low and a wave 2 low on 6/27 (50-wk cycle low) - the rally from 6/27 looks like the start of a 3rd wave higher to much higher targets - so the pullbacks should be minimal in time and price. 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". Silver and gold spiked early today and then sold off - we may have finished a "minimal B-Wave rally" off of Monday's low - we lightened up on our GLD, SLV and GDX calls for August and plan to buy then back by 8/9. We are still bullish silver for a test of $25 by September, but we may see a pullback into next week first. We are viewing the 6/3 low in gold as a major Wave 2 low (on the New Moon Timing Window and 1 day shy of the 34-day Fibonacci step out) and the 7/6 high at $1377 as a Wave 1 of 3 wave peak higher from the December low - gold may still need a 50% retrace of the rally from 6/3 to $1290 before a rally to test $1390-$1400, the .382 retracement of the bear market decline from 2011. The IBB rallied in 5-waves off the low on 6/27, consolidated briefly, and now has broken out above IBB 285 - we feel that this sector has rotated back into a leadership position. We consider large-cap bio-tech companies (AGN, AMGN, BIIB, CELG and GILD) excellent long-term buys on dips. We feel that the bio-techs will be much higher by September and plan to add to these stocks on dips. The big picture remains clear to us: the SPX has rallied in 5-waves on the daily chart from 2/11 to 6/8 and completed an EW wave 2 correction going into the post-Brexit low on 6/27 - we plan to buy dips here for SPX 2300-2400 by September. With the 7-yr Shemittah cycle and the 3-yr commodity cycle bottoming on 2/11, our bias remains "bullish" despite the Brexit vote to leave the EU. We think that a major 4th wave correction ended on 2/11 and a major 5th wave higher to new all-time highs is in effect.
- Big Picture on Stocks (UPDATED) - The SPX finished a Wave 2 post-Brexit low on 6/27 - we have changed our EW wave count to reflect this - we are looking to buy dips here for a rally that could easily reach SPX 2300-2400 by September. The market is working off its oversold condition by a ten-day long sideways consolidation - we are looking for the NDX to make new all-time highs.
- Big Picture on PMs (UPDATED) – Gold and silver reversed sharply higher after the FOMC minutes but we may have peaked a B-Wave top early today - we lightened up on our GLD, GDX and SLV call position and are looking to repurchase by 8/9, the 34-day Fibonacci step out from 7/5.
- Stocks - The SPX continues to coil sideways - BULLISH! Our TRIN5 indicator gave us some oversold readings this week which is also BULLISH. The NDX is leading this market higher and we expect new all-time highs soon - we are buying dips in the QQQ and our favored sector groups.
- Gold - Gold and silver reversed sharply higher after the FOMC minutes - we may have seen a completed B-Wave this morning on gold, so we sold our GLD and GDX calls with the idea of repurchase by next week after a C-Wave down into 8/9, the 34-day Fibonacci step out from the $1377 high on 7/5.
- Silver – Silver has a stronger looking chart than gold and could make higher highs by the 8/2 New Moon, but we sold our SLV call position and are looking to repurchase next week.
- Crude Oil - Crude oil tested $41 as we approach August - we added to our oil stock position.
- Bonds - Bonds rallied hard after the "no-rate hike Fed decision" but pulled back today - we are standing aside.
- Dollar Index – The USD dropped hard after the FOMC and the Euro may have made an important low - we're looking to buy the FXE(Euro) on dips. A 5-wave decline on the USD hourly chart will be a sign that an important top is in.
TURNING POINT DAY
The turn window on 7/26-7/27 which includes the FOMC minutes 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 +.0090) – 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, $0.9325 -0.0011) - 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$2.88 -0.05) – 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, $3.2568 -0.1697) – 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.