Market Observations for This Week: The PMs declined into the Jan 25-28 turn window which includes a Full Moon – we should make a short-term bottom here – looking for a bounce on Monday. The main theme here to be recognized is that the Gann 30-yr and 60-yr cycles are pointing hard up for several key commodities like soybeans, corn, oil and the PMs and a big "reflation trade" is about to ignite across the commodity board. The monetary actions of the US Fed, the BOJ and the ECB should augment these cycles in the spring. The new Japanese Prime Minster is determined to hyper inflate the Japanese economy and this should be a key factor in the inflationary cycle that is due in early 2013.
01/27/13 (Commentary for Sunday) The SPX continued to show resiliency in its rally into the weekend. Higher highs are possible going into Monday. The PMs declined into the Full Moon Timing Window – we should get a sharp bounce on Monday. The HUI got hammered again and broke the 418 level – this surprised us and undermines our intermediate outlook for gold stocks though we expect a bounce on Monday . A cluster of Fibonacci step outs pointed to January as an important reversal month for the PM complex – Jan 4 looks like the low for gold and silver. The reflation trade may be kicking in gear as crude oil continues to sub-divide higher on the hourly chart. A lot of sideline money may try to enter the market as the Fiscal Cliff gets "band aided over" for the short term. We favor PM stocks, financial stocks, energy stocks and Japanese export stocks as the reflation trade gets rolling.
- Big Picture on Stocks (UPDATED) – The large spike in new NYSE 52-wk highs on Jan 2 argues that we have started a rally leg that should make new highs despite the chicanery going on in Washington. Looking for new all time highs in the SPX and DJIA going into the spring.
- Big Picture on PMs (UPDATED) – Sentiment readings from Hulbert & whispernumber.com are finally looking supportive of gold and silver. Gold reached within $4 of our $1621 target on Jan 4 - this should be at least an important trading low and perhaps the low for the year. The PMs declined hard into the weekend's Full Moon Timing Window – looking for a bounce on Monday.
- Stocks – The SPX held up Friday – may grind higher into Monday. The breath continued to improve.
- Gold – Gold hit resistance at $1695 (the 50-day MA) in the Jan 20 – Jan 21 turn window which includes a Fibonacci 55-wk step out from 12/29/11 – looking for a pullback into this weekend's Full Moon. The HUI closed below 418 which weakened the intermediate term rally potential into April-May.
- Silver – Silver's Fibonacci 55-day step yesterday turned the PM complex down into the Jan 25 – Jan 28 + Full Moon turn window. Looking for a low Friday which should be bought.
- Bonds – Bonds could only manage a weak bounce from the Volume Point of Control (145'12) – a rally tomorrow should be shorted.
- Crude Oil – Oil is just moving sideways into this weekend's turn window - bullish.
- Dollar Index – The DX is declining once again into the Volume Point of Control (79.91) on the hourly chart – should be shorted after another bounce tomorrow.
TURNING POINT DAY:
We have a turn window on 1/25-1/28 for the PMs and broad market that includes a Full Moon on Jan 26 – looking for a bounce in the PMs Monday.
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 junior PM sector was a WASTELAND in 2012 and the metal of PM junior investors has been sorely tested in the past year ….. BUT …. as Deep Contrarian Investors we will continue to hold our PM juniors (the Hulbert sentiment readings from PM newsletter writers are giving a Major Contrarian Buy Signal in December 2012) but we will not add anymore until the 50 day MA crosses decisively up through the 200 day MA on the CDNX chart.
- NEW PICK – Aroway Energy (ARW.V, C$0.410 -.025) – 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 (EVG.TO, C$0.185 +.005) 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, $2.39 -.11) - The uranium supply/demand story still has legs despite the Japanese disaster. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer. Adding on weakness.
- Strathmore Mining (STM.TO, C$.240 -.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, $0.1563 -.0037) 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, $.066 -.004) - 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 January 2013 and June 2013 - it's a time to MAKE HAY.