The Weekly JDV Market Timer – August 28, 2011

Depression Beater Portfolio: - see below for new updates on Junior Miner Favorites - (This portfolio is just a sample of my own portfolio - no recommendation to others is implied or intended)

   

8/28/11 (Commentary for Sunday) The ES bottomed a small degree 4^th wave early Friday and is rallying to finish Wave 4 on the daily by the turn window on 8/29. The Fibonacci 21-day step out from 8/8 also points to 8/29 as a potential high. The TRIN5 also hit an overbought reading of 3.91 on Friday that often leads to a market reversal. The rally pattern on the ES from early Friday is beginning to wedge and should lead to a top on Monday. Gold continued to bounce from Thursday's confirmed 1-Day Reversal Timing but the 3-wave bounce looks close to completion – a decline into September is then anticipated. Bonds are correcting as money comes out to chase stocks but we are close to finishing and EW a-b-c decline on the 5 min chart. The Dollar Index continues to base below .75 but the next ECB policy move (to quantitatively ease) will likely send a rush of capital into the US Dollar and drive it to .90 resistance on the weekly chart by the end of September. The blow off in the Swiss Franc argues for a dollar breakout soon to the upside.

 

Big Picture on Stocks (Updated) – The SPX made a B-Wave test of the 5/2 high that may have ended on 7/8/11. We only saw a 3-wave rally from the 6/16 low into the 7/8 high. Expecting an August/September correction in stocks after the 60-yr cycle peak in commodities topped out in May – stocks have been closely correlated with commodities since the blow off peak in commodities in July 2008 – the slowdown in China may have more teeth than analysts realize. We're looking for Wave C of 4 to peak around 8/29 and then a reversal down to test 8/8 lows in early September.

 

Big Picture on PMs (Updated) – Gold's summer break out to new highs in USD terms has very bullish ramifications. New buyers of gold and silver should wait until August cycle lows before making additional purchases. Gold stocks may have made a major low on 6/16 – 36-wk cycle lows may give us a buying opportunity into late August/early September.

 

• Stocks – The ES reversed down after a weak Wave C of 4 rally. The market appears to be in a 5^th Wave down to test the 8/9 lows.
• Gold – 1-Day Reversal Timing was confirmed today. This sharp and scary correction should bottom the 36-wk cycle low soon.
• Silver – Silver reversed up today but the rally may be corrective.
• Bonds – The bonds appear to have completed an EW a-b-c correction on the 5-min chart – looking for higher highs by early September.
• Crude oil – Crude oil is in the process of rallying in advance of the Fed announcement at Jackson Hole – ideas of QE3 are providing a bounce - should make lower lows going into early September.
• Dollar index – The DX continues to base below .75 – a breakout to .90 is expected going into September as the ECB is forced to choose a quantitative easing strategy to bail out Italy. The Bernanke statement at Jackson Hole on Friday could be the catalyst for the DX breakout to .90.

   

TURNING POINT DAY:

 

The 8/29 turning point day should top Wave C of 4 and lead to a reversal down to test the 8/8 lows.

 

Depression Beater Portfolio: (This portfolio this week is just a sample of my own portfolio - no recommendation to others is implied or intended) DELAY NEW PURCHASES UNTIL MID-SEPTEMBER – TIME TARGET FOR MARKET CORRECTION LOWS

 

• Evolving Gold (EVG.TO, C$0.60 +.00) - Lackluster management and marketing have kept this gem back during a period of speculative enthusiasm for PM junior miners. But a world-class deposit in Wyoming (Rattlesnake) and a potentially huge find on the Carlin Trend in NV argue that this stock will be a big winner. Goldcorp took a 15% interest and that says it all.  It is remarkable that this company with two rather obvious world-class deposits is failing to get any traction – this company is at the verge of a major rerating in price – recent drilling results from the Carlin trend, the JV with AEM at Rattlesnake Hills, and the refocusing of Quinton on the exploration effort are all very positive signs.
  • Uranium Energy (UEC, $3.20 -.05) – The uranium supply/demand story still has legs despite the Japanese disaster. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer. Adding on weakness.
  • Strathmore Mining (STM.TO, C$.61 +.05) – Very undervalued uranium stock with huge reserves (+100 M lbs of relatively high grade), lots of cash and production prospects by 2013. 
  • Prophecy Coal (PRPCF, $0.7180 +.0240)  The spinoff of the Prophecy Platinum Company (PNIKF) has galvanized this stock – look to buy at key chart support as the broad market corrects into September. John Lee is determined to drive this emerging coal producer in Mongolia into an international mining powerhouse. Started production last fall with a favorable off-take agreement. Very aggressive business plan in place to make it a billion dollar company. Following the path that Robert Friedland took with South Gobi. This stock has obvious 10-20 bagger potential.
  • Gryphon Gold (GYPH, $.2560 +.0085) - Got plan from management to begin phased production by early 2011 - financing details have yet to be announced.  Has >1M oz AU proven, mining permits and a highly prospective land package. 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 50% 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.



4) Sell half of position on a double.

   

5) In this speculative environment with many junior miners coming to life, put a TIME stop on your junior investment. If your position is DEAD MONEY, consider rotating it to a stock that has more favorable technicals - juniors should have a PERFECT STORM behind their back between now and April 2011 - it's a time to MAKE HAY.