Market Observations for the Coming Week: WARNING: we are looking for the August-October period to be highly volatile for several markets. Several important stock market cycles are due to bottom: the Shemittah cycle (7-yr), the 4-yr cycle, and the 50-wk cycle. We should also see extreme volatility in gold, bonds and commodities. Holding a large position in cash as we enter this period is recommended. Our bias is for the SPX to bounce into the 8/14 New Moon.
08/10/15 (Commentary for Monday) The SPX rebounded hard from Friday's oversold condition but the volume was low. We're looking for a bounce into the 8/14 New Moon Timing Window. The Option Premium Ratio is leading the market higher here. The SPX, IWM and QQQ gave us an EW 5-wave down pattern on the hourly into Friday before reversing up - we're looking for a C-Wave rally into the 8/14 New Moon before the next leg down. The IWM made a weekly close below 121 but looks to bounce hard here. Bonds pulled back today as stocks rallied but more rally is likely after the New Moon. Gold broke higher but failed to close above $1106 - a rally to test $1120-$1130 may be underway into the New Moon - a close below $1080 will argue for a quick test of $1030. The global bond markets have been correcting in unison since April and the Shemittah cycle statistics that TLT will be much lower by October despite recent strength. We still contend that the stock market needs a 10% correction to recharge the batteries for a run higher into 2016 and we should get that in the Aug - Oct period. With the global blow off in bond prices in March, the low in crude oil in January and the parabolic blow off in the USD in March, we feel that the subsequent sell off in bonds into yearend could be more chaotic than most analysts realize. One of the key fundamental triggers for this sell off is the "lack of liquidity" that has been reported for high-yield bond sellers which we see as a "canary in the coal mine" - this lack of liquidity breeds volatility which could accelerate if the Fed raises rates sometime later in 2015 against the wishes of the IMF and other world central bankers. The USD reversed down after the NFP jobs report and the Euro and the commodity currencies are bouncing - this strengthens the short-term bullish case for gold. Oil reversed up today off the January low and should bounce into the New Moon. Oil led the CRB down to test the 2009 lows.
Big Picture on Stocks (UPDATED) - With China leading global markets down, commodities and commodity stocks are being pressured. We are expecting a big correction from August to October which could make a 4-yr cycle low and 7-year cycle low.
Big Picture on PMs (UPDATED) – We're looking for gold to make a major low by September. If we can rally past $1106, a test of $1140 would be the next stop, however, a close below $1080 would imply a move down to $1030.
- Stocks – The SPX reversed up Monday led by financials - we're looking for a rally into the 8/14 New Moon.
- Gold - Gold broke above $1106 but couldn't close above it - looking for a bounce to $1120 by Friday.
- Silver – Silver rallied above $15 but SLW lagged - this is bearish for another test of the lows after 8/14.
- Bonds - Bonds pulled back today but could reverse higher after 8/14.
- Crude Oil – Oil tested the January lows and reversed higher for a bounce into the New Moon.
- Dollar Index – The Euro looks bullish as the USD reversed down after the NFP jobs report - the commodity currencies are also rallying.
TURNING POINT DAY
Our turn windows for this week are 8/14 - the New Moon.
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 for7/05/15: 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$0.0521 -0.0000) – 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 October. This vertical integration business model adds a new dimension to this company and is worth following.
- Aroway Energy (ARW.V, C$0.015 +0.005) – 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$0.075 -.003)- 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 that the company needs a financing and could be forced to sell a world-class asset for pennies on the dollar.
- Uranium Energy (UEC, $1.38 +.06) - 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$5.31 +.37) – 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, $0.0477 +.0000) – 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, $.0250 +.0000) - UPDATE:De-listed stock. Good asset butneeds 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 30% stops based on purchase price. Buy a basket to diversify risk)
RULES FOR JUNIOR MINING INVESTING:
1) Keep to 5-10% 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.