Market Observations for the Coming Week: The SPX is rallying into the Apr 21-22 turn window - a high volume rally above SPX 1872 will argue for marginal all-time highs. 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 the grains and the break out in the PMs argue that some key commodities are turning up.
4/22/14 (Commentary for Tuesday) The markets rallied broadly and on improved volume today - the key point is that the NYSE Advance/Decline line is making new highs here and argues that the SPX and DJIA will make marginal new highs in the next week. Still, the markets appear to be on schedule to make a peak in late April (solar eclipse on April 29) and "market statistics" argue that this will be a "sell in May and go away year". We did expect a reversal down today and the market did sell off into the close, but we need to see the action early Wednesday to confirm any reversal. The action in the PMs was particularly interesting today - gold declined to take out its March low but silver and the GDX rallied in a bullish divergence. Gold declined below the recent low ($1277) to $1275 and then reversed up to over $1285 on the close of electronic trading - this could be a "pivot reversal" buy signal - we need to see the price action early Wednesday to confirm a short-term low. The GDX did reverse up on its 34-day Fibonacci step out from Mar 14 and extended its rally today with GDXJ actually leading into the close - this is bullish behavior. It's possible that the PM complex made an important trading low Monday and Tuesday - we need to see confirmation on Wednesday. The important geo-cosmic window - April 21-22 - may be giving us a high for the SPX and a low for the PMs. Bonds appear to be working on a 4th wave of an impulse leg down on the hourly chart - this argues for lower prices soon. The USD declined in 5-waves on the hourly chart and is giving us a 3-wave bounce that may have more to go.
- Big Picture on Stocks (UPDATED) - The SPX took out 1872 on good volume - may be heading for a new high by the solar eclipse on April 29.
- Big Picture on PMs (UPDATED) – The GDX made a short-term trading low on the 34-day Fibonacci step out on Monday and gold may have made a low on its 34-day step out Tuesday at $1275 - need to see confirmation on Wednesday.
- Stocks – The SPX took out 1272 on good volume - looking for marginal new highs by the solar eclipse on Apr 29.
- Gold – Gold may have made a "pivot reversal" up at $1275 - the GDX bottomed on its 34-day step out on Monday and the GDXJ is leading the complex up - bullish.
- Silver – Silver bullishly diverged as gold took out its March low - we're looking for a bounce here.
- Bonds - Bonds may be working on a 4th wave of an impulse leg down - looking for lower prices Wednesday.
- Crude Oil – Crude oil is close to finishing an EW zig-zag correction on the hourly chart.
- Dollar Index – The USD is giving us an EW a-b-c bounce on the hourly chart after 5-waves down.
TURNING POINT DAY:
We have a turn window on April 21-22 - the Tuesday after monthly expiration is a turn window for us - there is also a strong geo-cosmic window present.
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$0.275 -.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$0.015 +.005) - 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, $1.15 +.03) - 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$9.67 -.10) – 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, $0.0686 +.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, $.065 +.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.