Market Observations for the Coming Week: The NDX took out Friday's low this morning so we have activated our bearish trade. We're looking for a quick decline to SPX 2100 after the New Moon/solar eclipse tomorrow - this should just be a head fake and a setup for a breakout to higher highs in September. The GDX is close to finishing an EW a-b-c decline into Thursday's New Moon/solar eclipse. We have stink bids in for October calls on SIL, CDE and SLW.
8/31/16 (Commentary for Wednesday) The financials (XLF) finished strong today as we enter the New Moon Timing Window, but the NDX took out Friday's low and activated our bear trade. We're looking for a quick decline to SPX 2100 by Friday that will set the stage for another rally phase into September. We are still hedged against a possible "market scare" in the near term and we should see some increased market volatility after the passing of the New Moon/solar eclipse early tomorrow. There is a lot of "crash talk" floating around and this could feed on itself during any market selloff this week as we approach the NFP jobs report on Friday. The SPX could actually use a "market scare" here to prime the pump for the next run up in stocks. We added some put hedges late Friday and continue to hold them into Thursday. We have viewed this market as in the late stages of a blow off rally from the 6/27 post-Brexit low and had looked for a possible seasonal top in the 8/22-8/23 turn window (got one on 8/23) - however, all we expect here this week is a brief pullback in the SPX (2100?), since our bias is that central bank money pumping could keep this rally going into October. The surprising rise in new home sales 8/23, the pickup in the long dormant "US money velocity" and the pickup in July bank lending all point to an "improved economic activity" that could propel the market higher into our higher-range SPX 2300 target by October - closing above SPX 2195 will be a sign that this move is underway. Our thinking is that a rising oil sector will also help propel the SPX to this higher target range and we are looking to buy dips in our favorite oil stocks (XLE, SLB, CVX, and COP) going into the New Moon Timing Window Thursday. Still, we're a little cautious here since one of our favorite sectors, biotech (IBB) is still in correction mode and getting negative headlines from the Epipen price increase (gouge). Since early this year, we have called for a stock blow off into August 2016 - the 34-year step out from August 1982 - similar to the 34-year step out blow off in US bonds into February 2015 - and we have already gotten it by most measures. We are focused on our favored groups: energy, precious metals, and semiconductors but are getting a little cautious after a great post-Brexit run. Crude oil looks like it is close to completing a Wave C down into the New Moon Timing Window today. We feel strongly that global central bankers are doing their utmost to minimize the post-Brexit fallout and we won't fight "institutions with a printing press". The GDX looks close to finishing a final 5th wave down as we approach the New Moon/solar eclipse. Silver still looks like it needs to test $18.30 early Thursday. Biotech (IBB) is falling in a Wave C of an EW a-b-c correction that is correcting the move from 240 to 300 - we still like large-cap bio-tech companies (AGN, AMGN, BIIB, CELG and GILD) here - good long-term buys on dips. Still, the short-term picture is getting more defensive for us this week: the NYA (NYSE Composite Index)has already rallied in 5-waves on the daily chart from 1/20 to 8/15 and we are wary of a sharp pullback after the 9/1 New Moon/solar eclipse . With the 7-yr Shemittah cycle and the 3-yr commodity cycle bottoming on 2/11, our bias remains "bullish but cautious" despite the Brexit vote to leave the EU. We think that a major 4th wave correction ended on 2/11 and a 5th wave higher to SPX 2200-2300 all-time highs is still in effect.
- Big Picture on Stocks (UPDATED) - The NYA (NYSE Composite) has finished an EW 5-wave rally from 1/20 to 8/15 and we made a B-Wave test of the highs on 8/23 (in our seasonal time target) - the IMPULSIVE REVERSAL DOWN after Yellen's remarks on Friday has turned us cautious this week. We think that a quick move down to SPX 2100 is possible after the 9/1 New Moon/solar eclipse but taking out Friday's high will turn us bullish. We still think that a SPX target-range of 2200-2300 is possible by October, but the market may need a good scare here to set us up for a good buying opportunity.
- Big Picture on PMs (UPDATED) – The GDX finished an EW 5-wave rally into GDX 32 on 8/12 and filled the 31-32 gap from 2013. However, the GDX is pulling back to test the .382 retrace of this year's rally from GDX 12.4 to GDX 32. We are looking for a reversal higher in gold, silver and the GDX early on Thursday after the New Moon/solar eclipse.
- Stocks - The SPX pulled back again Wednesday and more importantly, the NDX took out Friday's low activating our bear trade. We need to see the SPX break below 2160.44 to confirm that a test of 2100 is in play. A scary head fake down for the SPX this week would be good for the market.
- Gold - The GDX continues to make a 5th wave down into the New Moon/solar eclipse - looking for gold and the GDX to reverse up by early Thursday.
- Silver – Silver is still working a 5th wave down to $18.00 - $18.30 as we enter the 9/1 New Moon/solar eclipse early Thursday - we're looking for a reversal higher.
- Crude Oil - Crude oil is close to finishing a Wave C down to $44-$45 as we approach the New Moon/solar eclipse.
- Bonds - Bonds got a bid on weakness in the SPX today - still looking for more bounce after the NFP jobs report.
- Dollar Index – The USD reversed up after Yellen's comments and appears to be rallying in a wave C of 4 as we approach the New Moon/solar eclipse.
TURNING POINT DAY
The turn window on 8/29-9/1 will be key for several markets this week and also includes the 9/1 New Moon/solar eclipse.
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: Update for 7/05/15: The CDNX remains mired in a deep, historic bear market since the April 2011 which led the turn down in the gold and silver market by a few months. To us, junior mining stocks are just trading affairs unless the 50-day MA crosses up through the 200-day MA. In our best guess, we feel that the CDNX and the gold mining juniors could bottom by October in advance of our target of April 2016 for a final low in gold and silver - typically the gold mining stocks bottom 6-9 months before final lows in gold and silver. We have read that up to 45% of junior gold/silver stocks only have enough cash on hand to continue operations for the next quarter. Many recent equity-based financing are small and done just to keep the lights on. Until the CDNX turns up , it is best just to focus on well-financed juniors with great assets and positive cash flow. Now is the time to follow these stories since we are in the late stages of this brutal bear market.
- Great Lakes Mining (GLKIF, C$0.0590 +.0000) – NEW Recommendation 7/5/15 - This is a unique situation in the high-end graphite market. This company is scheduled to open a factory to upgrade graphite for specialty applications by O-October. This vertical integration business model adds a new dimension to this company and is worth following.
- Aroway Energy (ARW.V, C$0.010 +0.000) – 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 (EVGD.TO, C$0.0358 -.0000) - UPDATE: This stock has two world-class finds in Wyoming (Rattlesnake) and a potentially huge find on the Carlin Trend in NV. The problem is t-hat the company needs a financing and could be forced to sell a world-class asset for pennies on the dollar.
- Uranium Energy (UEC, $1.01 -0.01) - UPDATE: Uranium prices are recovering and the fundamentals are getting a perfect storm. Favoring the near-term producers here like UEC - the fundamentals are much more dramatic that the typical emerging gold producer.
- Energy Fuels (EFR.TO, C$2.95 +0.04) – Finished acquisition of STM.TO in early September - building up a position as a strong US producer of uranium in a tight market.
- Prophecy Coal (PRPCF, $3.1997 -0.1194) – UPDATE: This stock needs to get its Mongolian coal mine into a positive cash-flow situation to support its power plant project and other endeavors without diluting the common shareholder to zero.
- Gryphon Gold (GYPHQ, $.0024 +.0000) - UPDATE: De-listed stock. Good asset but needs a cash infusion and maybe a partner. Good leverage to gold.