Market Observations for the Coming Week: The SPX price action on Wednesday argues that an important low was made on 6/27 (as we originally postulated on Monday) and we may have already finished an EW a-b-c (post-Brexit) correction. We are bullish on the SPX and are looking to buy dips for a test of 2134 by mid-July. We are favoring gold/silver stocks (ABX, NEM, SLW) on dips and biotech stocks (AGN, CELG, GILD).
6/29/16 (Commentary for Wednesday) The SPX may have finished the post-Brexit correction on Monday and we are aggressive buyers of gold/silver stocks and biotech stocks. We are cautious because of today's low volume rally and the fact that we never got a TRIN5 reading > 6.0 or a VIX > 30, but we feel strongly that global central bankers and our Fed are doing their utmost to minimize the post-Brexit fallout and we won't fight "institutions with a printing press". Silver's BREAKOUT today is SEMINAL for the PM market - silver is trying to lead gold and the mining stocks higher here and that makes perfect sense to us since the uncertainties springing from the post-Brexit world should light a fire under the PM sector. We saw more consolidation in the GDX on Wednesday, but the chart looks to us like a "coiling spring" - still, we need a high-volume break out above GDX 28 to confirm the next leg higher. We remain bullish on the SPX in the intermediate-term and we will be looking to buy weakness going into 6/30 - especially in gold stocks and oil stocks like CVX and SLB. 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 6/16 high at $1318 as a Wave 1 peak of a 3rd wave higher from the December low - we got a Wave 2 correction into the 6/24-6/27 turn window which included the 6/25 55-day Fibonacci step out from the 5/2 high - we view gold currently in a wave 3 of 3 higher where declines should be minimal - buy dips for a test of $1390. Crude oil has a bullish feel higher and should be bought on dips - we are looking for a break above $52 by next week - we still favor the OIH stocks like HAL and SLB on weakness. Bio-tech rebounded well on Wednesday and we added to our CELG and GILD call positions. 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. The IBB still needs to clear 285 on a closing basis to confirm a rotation back into a leadership position. The big picture remains clear to us: the SPX has rallied in 5-waves on the daily chart from 2/11 to 4/20 and may be completing a complex wave 2 correction going into 6/30 - we plan to buy dips by 6/30 that should lead to a rally to test SPX 2134 by mid-July. 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 may have finished a Wave 2 low on 6/27 - we changed our EW wave count to reflect this - we are looking for a rally to exceed SPX 2134 by mid-July.
Big Picture on PMs (UPDATED) – Silver broke out today and is trying to lead the PM sector higher - this is very bullish. Looking for a quick run in gold to test $1390. Buy dips in gold and silver for a big rally into Aug/Sept.
- Stocks - We may have seen a major Wave 2 low on 6/27 in the SPX from the February low - we added to our call positions in bio-tech(CELG, GILD) and gold/silver stocks (ABX, SLW, SLV). We sold our calls in SLB and CVX but are looking to buy them back on any weakness going into 6/30.
- Gold - Gold held up well during the SPX rally today - we added to our GLD calls with the breakout in silver. We're looking for a quick run to $1390. We need a high volume break out above GDX 28 to confirm the next leg higher in gold stocks.
- Silver – Silver broke out today and tested $18.50 - a daily close above $18.5 would be very bullish for the PM sector - we added to our SLV call position today.
- Bonds - Bonds sold off into the close today as post-Brexit fears subsided. This is a great time to refinance mortgage rates.
- Dollar Index – The USD pulled back again today as the rally continued in the global stock markets. An EW 5-wave down move on the daily chart would confirm an important top.
TURNING POINT DAY
The turn date on 6/27-6/28 looked like an important low in stocks - we are looking for a strong rally into the New Moon (July 4) next 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$0.0535 -.0035) – 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, $0.85 +0.03) - 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$2.95 +0.02) – 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, $0.0150 -.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, $.0024 +.0000) - UPDATE: De-listed stock. Good asset but needs a cash infusion and maybe a partner. Good leverage to gold.