R. I. P
Robert Gerald De Veaux
Beloved brother, beloved friend
Note: We'll be traveling for a funeral from Wednesday to Friday – so no updates until Sunday
Market Observations for This Week: The HUI tested the May lows (381) as silver impulse down below its Jan 4 lows – we're looking for an important low by Feb 25. Scaling into the GDX in stages going into the end of February makes sense to us. 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.
02/19/13 (Commentary for Monday) The financials led the ES higher today as the market took out last week's highs and appear ready to challenge the 1550 level – the market is scaling a "wall of worry" which is accentuated by large put option volume. Excessive put buying has been a mainstay of this market rally. The HUI tested the May low as silver took out its Jan 4 lows – we should be making an important low going into the Feb 25 turn window. We would scale in gradually into GDX through into Feb 25. In any case, we're expecting an end to the great PM consolidation by the first week of March. It is still possible to see lower lows in gold and silver going into month's end so we are focused on the GDX and GDXJ which should lead the rally. 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. We took out the July low on Feb 15 and the HUI may have made a low – need to see an impulsive rally up to confirm a low.
- Stocks – The ES took out Wednesday's highs and appears ready to challenge 1550 – the financials led by GS keep powering higher.
- Gold – The HUI tested but did not take out the May low at 381 – going sideways into the Full Moon on Feb 25 would be ideal but a break of 358 would argue for a huge washout.
- Silver – Silver sliced below its Jan 4 lows – lower lows are likely going into Feb 25.
- Bonds – Bonds are setting up for a bounce here – the Fed minutes on Wednesday could be a catalyst.
- Crude Oil – Oil has almost completed an EW a-b-c correction on the hourly chart – looking for more rally.
- Dollar Index – The DX backed away from 81 – should make at least one more rally attempt before a reversal down.
TURNING POINT DAY:
Feb 25 is setting up as an important turn window for the PM sector – Full Moon, Comex option expiration, Mercury retrograde, proprietary cycle low, etc – looking for an important trading low.
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$0.495 +.035) – 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$0.120 -.01) 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, $2.56 +.02) - The uranium supply/demand story still has legs despite the Japanese disaster. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer. Adding on weakness.
- Strathmore Mining (STM.TO, C$.255 -.005) – 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, $0.1454 -.0116) 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, $.0366 -.0064) - 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.