Market Observations for the Coming Week: The SPX gave us a minimal EW a-b-c correction from Wednesday into Friday's close but a break below SPX 2100 early Monday will see this correction extend down. A pullback into March 6 that holds above 2082 will be bullish for a strong rally into mid-March.
03/1/15 (Commentary for Sunday) The SPX sold off into Friday's close where we bounced but a decline below 2100 will see the correction extend into the 3/5-3/6 turn window. We need to see a decline early Monday to confirm a largervpullback into next week. The SPX has traced out an EW 5-wave rally from 2/20 and that puts us at risk of a pullback. The Option Premium Ratio continues to rally off the low at .56 last week and got to .71 on Friday - we consider that bearish. The reversal down late Wednesday may have started a correction that could last into next week. The SPX has been in blow-off mode since 2/2 but just a corrective pullback into the 34-day Fibonacci step out on 3/6 that holds 2082 would be bullish for a rally into mid-March. The stock market has been blowing off as the ECB/QE money flows have washed ashore to drive up US asset prices. Our inclination is to buy the SPX and financials on any pullback into the 3/5-3/6 turb window. The NYSE Daily A/D line is still leading the market higher - BULLISH - and this should minimize any short-term correction. Gold reversed up on Wednesday's 34-day Fibonacci step out from 1/22 - but we need to close above $1222 to avoid further downdrafts. Crude oil appears to lead another leg down. The USD may pull back a little as we enter the week.
Big Picture on Stocks (UPDATED) - Our view is that the SPX could pull back into the 3/5-3/6 turn window, which is the 34-day Fibonacci step out from 2/2, this could give us a strong reversal up into mid-March.
- Big Picture on PMs (UPDATED) – Gold needs a close above $1222 to propel a rally to $1255 by the Full Moon on 3/5.
- Stocks – The SPX bounced off of SPX 2100 near the close Friday - a break below 2100 would argue for more decline into the 3/5-3/6 turn window.
- Gold - Gold is fighting to close above $1222 which would argue for move to $1255.
- Silver – Silver stocks are trying to reverse higher giving hope of a larger bounce by the HUI.
- Bonds - Bonds pulled back today but TLT remains our favorite long trade here as ECB QE money keeps pouring ashore to boost US asset prices.
- Crude Oil – Crude oil argues for another leg down.
- Dollar Index – The USD may pullback early in the week.
TURNING POINT DAY:
Our turn window for this week is 3/5-3/6 which includes the Full Moon on 3/5 and the 34-day Fibonacci step out for the SPX from 2/2.
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$0.080 -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$0.026 +.011) - 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, $1.45 +.02) - 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$6.03 -.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, $0.0511 +.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, $.030 +.00) - 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.