NEW!! Check out our new junior oil stock pick. Uranium and gold juniors have been breaking out.
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)
2/29/12 (Commentary for Wednesday) The SPX, NYSE and Nasdaq all gave us "key reversal" down days today as volume picked up – an impulsive move down on the 5-min chart is needed for confirmation. Bernanke's lack of formal commitment to a QE3 move by the Fed in the short-term took the wind out of the "market sails". Gold was savaged by the Bernanke's comments and fell $100 during the day – a correction low is expected by mid-March at the 12-wk cycle low. The fact that gold stopped way short of $1803 resistance before its plunge argues that the move off the December low is still part of a large corrective pattern. The failure of the HUI last week to take out it's 2/2 high was an early warning of today's carnage. A C-wave decline back to HUI=505 may be in the cards by mid-March. On the bullish note, our favorite "wall of worry" remains intact – bearishness still remains supreme at the Wall Street Investment Survey from 2/24 (bullish – 17%, bearish – 50%). The massive liquidity addition engineered by the ECB over a very short time to rescue European banks is still levitating the US and other foreign markets – and we got another another dose from the LTRO this week (~500 B Euros) - traditional market analysis needs to account for this impact. Our position is that the Bears have to prove themselves here by breaking ES=1338.65 support with good volume before we put on a bearish trade. The forces of MONETARY REFLATION – over 36 straight months of greater than 15% YOY increase in the True Money Supply of the US and vastly improved monetary growth in Europe is supporting markets worldwide – FOR NOW – the obviously slowing global economy will dominate the markets in the 2nd half of 2012. Earnings from IBM and INTC, a rough proxy for the economy, showed enough strength to rule out a US recession for probably the first three quarters of 2012 – this should allow stocks a chance to challenge and maybe exceed the 2011 highs. The DX reversed up hard after an EW 5-wave down pattern on the hourly chart – the DX should rally through mid-March.
Big Picture on Stocks – We bottomed the first phase of a global bear market on 10/4 and we are in a large corrective rally that is now testing the highs of 2011. The forces of monetary relation via the stealth QE3 from the US Fed and the LTRO facility in Europe are levitating markets in the short term and overriding the forces of economic contraction being seen around the globe – AT LEAST FOR THE FIRST HALF OF 2012. Looking for marginal new highs into March followed by a correction.
Big Picture on PMs – The daily chart of gold appears to have finished the Wave C of a large EW a-b-c corrective pattern from the September high on 12/29. Gold made a major low today at $1525 as the 12-wk cycle low bottomed in the 12/29-12/30 turn window. Looking for gold to test $1803 in the 2/27-2/28 turn window – a 12-wk cycle low is due in mid-March.
- Stocks – The SPX, NYSE, and Nasdaq are gave us "key reversal" days on heavy volume – looking for a 5-wave move down on the 5-min chart for confirmation.
- Gold – Gold failed to test $1803 before plunging $100 intra-day – looking for a bounce overnight/tomorrow to the Volume Point of Control on the hourly chart ($1722).
- Silver – Silver pulled back almost $4 intra-day – looking for a low around $32 by mid-March as the 12-wk cycle low bottoms.
- Bonds – The bonds continued a 4th wave correction on the hourly chart – also falling on the Fed's stingy QE3 remarks. Taking out 140 will argue for a correction into spring and a much higher than expected stock market.
- Crude oil – Oil may be close to finishing an EW a-b-c correction on the 5-min chart. This runaway market is fueled by global QE3 efforts by world central banks and an Iranian war premium.. Holding leap calls on UCO and ERX for a continued oil spike into spring. A target of $128 on WTI crude is possible by April.
- Dollar index – The DX finished a 5-wave decline on the hourly chart and reversed up hard – looking for strength into mid-March. Our target of .90 still appears to be farther off in time – perhaps in Q2 of 2012 as the next stage of the European debt crisis rears its head.
TURNING POINT DAY:
The turning point window on 2/27-2/28 should give us a short-term peak for gold and the ES – Tuesday's option expiration for gold and silver options on the Comex may give us a peak for the week on Tuesday.
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: The uranium sector (UEC, STM.TO, UEX.TO are breaking out from a depressed level – buy these stocks on dips) is breaking out from a big washout in 2011 – many good-looking charts. The gold juniors (EVG.TO and ICI.TO should play catch up with gold this year). Coal stocks have been really beaten down but PRPCF is a special situation stock that is trading at a substantial discount to core assets – buy on dips.
- NEW PICK - Aroway Energy (ARW.V, C$0.87 -.04) – 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 1000 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$0.38 +.01) – The stock price fell back to the level of the recent private placement – drill results coming out soon could confirm a world-class find in the Carlin trend – this stock is a buy here. 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.
- Uranium Energy (UEC, $3.75 -.16) - The uranium supply/demand story still has legs despite the Japanese disaster. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer. Adding on weakness.
- Strathmore Mining (STM.TO, C$.51 -.02) – 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, $0.488 -.03) 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/October. 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, $.160 -.005) - 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.
