Market Observations for the Coming Week: The Nasdaq joined the SPX and DJIA in making a new all-time high on Wednesday and it did so in dramatic fashion - it gave us a Positive Volume Reversal Day which argues for higher highs into early June,
05/28/15 (Commentary for Thursday) The SPX and NDX pulled back today in a potential 4th wave pattern - we're looking for a 5th wave higher on Friday. Three consecutive readings of the ISEE call/put ratio below 100 argue for a rally Friday. The market appears to lack the energy to break out here in a substantial way and we are cautious as we enter a major turn window on 5/29-5/30. Takeover action supercharged the Nasdaq Wednesday and propelled it to a new high. Bonds finished a 5-wave down move on the hourly on 5/12 and the EW upward correction is still unfolding aided by positive inflows to the USD courtesy of the Greek default threat. Still, the bonds are just tracing out a sideways pattern which is bearish and argues for another leg down by mid-June. We have a symmetry target on TLT for 116 and we may see this target hit before a more substantial retracement rally. We still feel that the stock market needs a 10% correction to recharge the batteries for a run higher in the second half of 2015 but we might not get that until mid-June. With the global blow off in bond prices in March, the low in crude oil in January and the parabolic blow off in the USD in March, we feel that the subsequent sell off in bonds into year end could be more chaotic than most analysts realize. One of the key fundamental triggers for this sell off is the "lack of liquidity" that has been reported for bond buyers which we look at as a "canary in the coal mine" - this lack of liquidity breeds volatility which could accelerate when the sideways correction in bonds end. Gold found support at $1180 - but the reversal up has been modest so far. Crude oil bottomed early in the day and then rallied into the close.
Big Picture on Stocks (UPDATED) - The ES did top last week in the New Moon Timing Window but breaking above 2134 this week will argue for more gains into mid-June especially with the blow off in Chinese stocks.
- Big Picture on PMs (UPDATED) – Gold and silver also made highs in the New Moon Timing Window - but we're looking for a pullback into the 5/25-5/27 reversal window. Comex option expiration on 5/26 should bring volatility to gold.
- Stocks – It appears that the SPX and NDX pulled back in a 4th wave today - we're looking for a 5th wave higher on Friday.
- Gold - Gold found support at $1180 and reversed higher but gold stocks must lead the way higher.
- Silver – Silver reversed higher today but we need to see silver stocks accelerate higher.
- Bonds - Bonds continue to rally but the pattern still looks corrective. We're still looking for a target of TLT 116 by mid-June.
- Crude Oil – A soaring USD hit oil early Thursday but we should continue bouncing into Friday.
- Dollar Index – The USD should reverse higher by Monday.
TURNING POINT DAY:
Our turn window for this week is 5/25-5/27 for gold and 5/28-5/29 for the SPX.
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$0.030 -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$0.0241 +.0061) - 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, $2.90 +.20) - 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$5.57 -.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, $0.0348 +.0048) – 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, $.0283 -.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 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.