Market Observations for This Week: The PMs may have made a short-term top on Feb 7 – Feb 8 but the ES could still power higher into expiration. We are expecting a low in the PMs going into the Feb 15 turn window – this could be the major low that is due by the first week of March. 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 starting 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.
02/13/13 (Commentary for Wednesday) The ES took out 1520 but still wants to grind higher lead by GS and the financials. The ES appears to be doing a sideways to up consolidation with internal rotation among various stock sectors. Excessive put buying is supporting this market (7 puts for every call was traded on IWM today) – short bets should not be entertained unless 1502 is taken out. The HUI took out Tuesday's low and appears to be declining impulsively – looking for the Feb 15 turn window as a possible low in the PM complex – in any case we're expecting an end to the great PM consolidation by the first week of March. 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 looking supportive of gold and silver. The HUI is our key timing measure for the end of the great PM consolidation. Another leg down on the daily to test the July low around 382 could finish a large corrective pattern and lead to a big reversal up – the last week in February is the most likely time window for the low.
- Stocks – The ES took out 1520 on a consolidation day – looking for higher targets going into expiration - taking out 1502 would imply a move down to 1470.
- Gold – Gold continues down in an impulse wave that could test the Jan 4 lows – we're looking at Feb 15 as a potential low. We want to see the HUI ideally spike to below the July lows at 382.
- Silver – Silver also is declining impulsively – looking for a low by Feb 15.
- Bonds – Bonds fell today making the case for a strong bounce on the hourly chart weaker – could still see a bounce to 143'18 – bonds were unable to take out the previous 4th wave on the hourly chart – a sign of weakness.
- Crude Oil – Oil pulled back in 3-waves on the hourly chart – looking bullish.
- Dollar Index – The DX backed away from 81 – should make at least one more rally attempt.
TURNING POINT DAY:
We probably made a short-term peak going into the Feb 7 – Feb 8 turn window for the PMs – the high-energy turn window on Feb 15 could mark a high for the ES as the New moon falls on the weekend.
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. It may take gold to make a daily close above $1800 to catalyze this sector.
- NEW PICK – Aroway Energy (ARW.V, C$0.51 -.09) – 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$0.135 -.00) 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, $2.50 -.06) - The uranium supply/demand story still has legs despite the Japanese disaster. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer. Adding on weakness.
- Strathmore Mining (STM.TO, C$.245 -.01) – 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, $0.17 +.027) 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, $.048 +.00) - 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.