Thursday, July 29, 2010

All That Glitters is Gold

Gold stocks look to be on the move today signalling that the selloff in gold may be close to an end. Ventana Gold released excellent results with more extremely high grade results which has pushed the stock up over 13% to over $8 at its height today. If gold doesn't make it back over $1170 it will probably try and test the lows and support at the 200MA, but the way the price is acting and the way the cream of the crop gold stocks are acting today, it is starting to look like a bottom.

With stocks like Ventana reacting so well to good news it also bodes that the mood is much better for buying gold stocks than it has been at any time in the last 3 months. East Asia Minerals, another impressive deposit also took a hard turn towards the 50 and 200MA's today breaking out of its consolidation pattern. It certainly is not a declared bull again in gold but some of theses stocks look like they are not going to get any cheaper.

Today's trading looks like there is more than average buying interest for gold stocks. At least the premiere ones today. The smart investors will be buying gold stocks over the next month for a very strong seasonal run this fall.

All I know is that the 2 factors that are pulling the markets between a bull and a bear at the moment both will eventually drive POG much higher.



All that glitters is gold. :)

Happy Trading

Markets Defy all the Odds... Start to Move up Again

On July 1st, I tweeted that we had hit a possible low on oversold conditions and that markets should rally from that point for the summer before we go lower. Well the market hasn't disappointed and has made me look pretty good to date. :) At certain points I have said that we will go higher, slowly talking it up. The following week I wrote that they would continue to rise and they proceeded to blow through the 50MA rising right to the 100/200MA area where they currently sit. I am not sure if I gave a definitive target but 10,600 was where I expected next resistance.

I strongly believe that conditions are now set for the markets to take another jump up. In fact, they may even get to new 2010 highs, believe it or not. There are technically 2 targets now, one just under 10,900 and the other around 11,200 and if both targets get hit and taken out technically, the market could push higher possibly making a the head in a head and shoulders formation but that is way to far off to correctly predict. I have heard of the double top scenario, but I would suggest with continued beats and strong earnings that will give markets momentum to blow past that number around 11,200. At this point I think that is where the herd gets sucked in b/c headlines from Q2 earnings say everything is rosy and massaged economic data this fall will follow the positive earnings.

I am not sure that is the case, but certainly you can't ignore the earnings recovery for now and the momentum that markets are starting to build. Climbing the wall of worry for just a little while longer before reality does set in.

One thing of note is that I thought beige book report wasn't that bad. Something about manufacturing in there gave me some hope. Manufacturing is the engine of the economy in many ways so seeing some hope there is a positive that industry may be turning around. Which in turn will add jobs.

Currently markets are sitting on a pivot point and started moving off to the upside today but I am looking for 10,600 to be breached before we have confirmation. The Euro keeps moving up as well so I see no real fear in the market in the low volume conditions the rest of the summer. Gold is also holding steady but think it it should get another $10 or $20 cheaper. Am not counting on a much more of a decline in Gold. But who knows? Still don't believe in deflation, not even in recession.

Wednesday, July 28, 2010

US Markets disconnected from Economy

NEWS FLASH!!!

US Corporations profit from global growth, payout a few wealthy Americans and stiff Joe out of a job.


That should be the headline for this quarters earnings season as most companies are beating earnings expectations despite poor domestic economic growth. What this truly means that there is a disconnect between the DOW and the US economy as a whole and sets the stage for further short term recovery in the markets.

The bulls are touting earnings saying too good to miss.. The bears are touting poor economic data.

Earnings vs. Economic data... Let's put them in a cage and see who wins. A fight o the death! Hmmmm... My conclusion... earnings will propel you and give you momentum like an octane boast in your car, but economic data will always win out as everyone sees you just driving in Pinto in the end!

If corporations were smart, they would be taking those global profits and reinvesting at home not hiking dividends and buying back stock to support their share price in weakening economic conditions that the current philosophy is contributing to in a major way.

Tuesday, July 27, 2010

Markets look to resume bullish trend... for now

If you aren't sure where short term market direction was going, you do today with the $20 drop in POG. Gold had traded pretty much positively correlated with the markets until May when the Euro and fear hit the skids and spiked gold out of its cyclical correction period to form a rising wedge that ultimately failed when the fear that the Euro was going to fall flat this summer eased.

Gold went from its traditional inflation trade to a hedge against currencies in a day and was solely trading as a currency on Euro fears. What this all means for the markets and gold is that the currency hedge trade is now unwinding with the $20 drop in gold today signalling that there is further strength in this upswing in markets as well as riskier currencies such as the Euro. I would set at least an 11,000 target on the dow and if markets react positively to earnings we could go to new 2010 highs, possibly heading towards a future head and shoulders pattern. I have heard a double top formation but I don't think the markets will flip flop that quick.

Earnings are just too good to ignore.

One thing for sure is that if the markets do resume a bullish trend, gold will hold stable and resume its inflationary bullish trend. Another thing for sure, is if markets do fall apart because of high debt and impending default by sovereigns, gold will go through the roof as a safe haven currency. So while we are in this not so sure where we are going market, gold has absolutely no velocity, but is in a win win situation whatever way the markets take when they take it.

So until the markets get a definitive direction, POG could wane a bit further. POG has not broken the 200MA in a long while so if the price decline does not abate at the 200MA and closes below the $1130 level I would expect further price declines to below $1100 and wane for another month. Markets can move up and gold won't as long as markets don't believe the rally.

In these conditions, the majors like G and ABX got a long way to go to correct still and some of the advanced development projects prices will wane. The best place to be over the summer in the gold sector is the explorers as this is the season that discoveries are made and deposits and drilled out like swiss cheese. Explorers with successful drill programs adding value are the best place to be. Any fall in price below the $1100 level will be an excellent place to time a buy in your favorite gold stocks. But until it breaks the 200MA in a forceful way I will keep my buy target of $1140 in place.

At this point in time I really don't think the markets really know where they are going with all this confusing data. Bad domestic economic data but awesome earnings.

And the funny thing?!?! As an aside... US corporations profiting off strong global growth, distribute profits to a very few wealthy Americans through dividends and stiff the average american Joe out of a job in the process. The wealth gap is widening if US corporations don't start spending on US soil.

Monday, July 26, 2010

Uranium Sector Starting to Heat Up!!!

After being in one of the longest bear markets for almost 3 years now.... Uranium looks like to finally be turning around. The Uranium market went parabolic in 2006 and 2007 and since then has not been able to turn around after many stocks with just the name uranium in it were sent to dizzying heights as the price of U3O8 soared well past $100.

2 stocks that I put back on the watchlist a few weeks ago and immediately I saw gains were Mega Uranium and Hathor. Mega Uranium MGA.TO is dirt cheap and used to be a company that had a billion dollar market cap and is now trading around .50. This price is a steal for the amount of deposits they have and potential projects they have on the go although they are a little short on production.

Another stock that is turning the corner is Hathor HAT.V, and they keep announcing some of the highest grade and value intercepts in the entire Athabasca Basin, EVER!!! I have heard numerous calls that U3O8 has bottomed and is now moving up to prices of around $60 - $75 dollars and if spot prices move to these levels then it will start generating interest again in the sector as well as some of the riskier, higher cost projects.

Companies that will benefit from this move are the low grade projects in the midwest US such as Denision DML.TO.

Personally I like HATHOR because I am Canadian and there is no better place than the Athabasca Basin. Got in an argument last year with a guy who was still pumping UEX... Maybe UEX gets a mine but HAT is where its at, anyday of the week.

Also like Mega because it has the the biggest potential of the bunch from where it was when U3O8 prices were at their peak.

Sunday, July 25, 2010

What No Money!?!?!?

There is a lot of talk of double dip, and with a jobless recovery it doesn't seem impossible, that we are just in an upswing in a bearish market than in a true recovery, some may even say that we are in a protracted recession with this its first initial dead cat bounce which will be worse and longer than the depression. That last statement maybe an over-exaggeration of where things may head, but you have reputable people calling for situations close to it. To me, I think there are too many doomsayers out there that think things are going to spiral out of control on a global scale.

One thing that bothers me and keeps me out of the bull camp for the time being is that we are having a jobless recovery where many companies are having great earnings by careful accounting, by cutting and reducing spending. They are not creating earnings the old-fashioned way of creating supply and expansion at the end of every normal recession.

So right now most companies are not playing their traditional role in this so called recovery with many sitting on records amounts of cash, refusing to spend. In every traditional recovery jobs plays a vital role into getting to that next stage of expansion. Without the jobs for expansion, you will not create the added demand for your product or service and hence you have this catch 22 developing.

When these companies cut to create profits, they are in effect killing themselves by killing their future market. If most companies are reacting to the same economic situation in the same wrong way, we could end up with even more economic choking happening. The outlook for the economy recovering by jobs will never happen and you will see a widening of the wealth gap in America between the have's and have nots.

So why is the US economy in this situation? It spent to long being a consumer nation relying on a strong dollar to buy cheap foreign goods than it did on building value in its own economy. It spent too long manufacturing goods in foreign countries selling it to americans than it did trying to manufacture goods in America to sell to the world. It saw cheap labor of the third world and sold itself out.

It sold its manufacturing industry out on a national scale, outsourced everything else, with all those jobs going to the dead end service industry, which are always the weakest jobs being the first to lose and last to hire on in economic swings. They relied on credit to spur the economy well past its means and now the American Consumer is spent out. Can't take out anymore equity on their homes that heave been devastated price wise, can't add another credit card, and in most cases are shell-shocked into savings mode that most won't come out of until their debts are paid off. That could be another 5 -10 years wait for the American economy to come back, if it relies on the consumer.

The one positive of that outsourcing has had is it has help other third world countries develop, but at much slower rates, because of using cheap third world labor. Wages in developing nations are rising fast and soon the that advantage that companies used will no longer be an advantage. Hong Kong recently introduced a minimum wage, being mostly a symbolic gesture that wages are being brought up to western standards. So there is a global incentive that is coming up that will force many companies to make a decision

In my view the government wants a cheaper dollar and is doing everything it can to get a cheaper dollar. First and foremost it makes it easier to pay off all the debt that they have acquired over the years and secondly it will help American industry reinvent itself and be more competitive on a global scale. Hopefully they can entice American industry to come home. Spend those corporate dollars in the good 'ol US which will add jobs. Obviously its a culture of corporate philosophy and thinking that has to be changed on a large scale. There is a glutton of credit available, companies are sitting on records amounts of cash.

In my opinion they have both the ability to be in the expanding areas of the world but rebuilding headquarters at home. It is a long way to recovery, but right now Corporate America is at a crossroads and if they don't choose wisely they will lose an opportunity that others will gladly step up and take. There is a market at home, but without investment, it will not recover.

Wednesday, July 21, 2010

All Signs Point to Ominous Outlook for the Fall

As I have been soaking up all the economic data, the markets reaction to earnings and as well as factors such as the drastic 60% fall in the $BDI to levels not seen since the market lows of early March 2009, the jobless recovery in the US, anemic credit velocity, drastic tightening of spending in Europe, throw in a slowing Chinese economy and we now pretty much have a recipe for a double dip or at least another taste of some extended bearish conditions this fall.



Not sure what the trigger will be, but I can almost guarantee that we are going to go much lower from where we are today in the coming months of September and October. If those will be the market lows, it is way too early to tell, but for certain we are setting up for a fall this fall. Already the markets are starting to take large swings to the downside and having a hard time staying above important moving averages.

One thing of note is that the $VIX looks like it is going to break out to the upside as it is forming something of a wedge and can't break support at $23. I think this would be a great place to buy January '11 calls as volatility in the markets is almost certain to increase and this pattern looks to almost certainly be resolved to the upside. It will make a gradual rise over the the rest of the summer to $47 where it will break out as poor economic data starts to come in September. Consumer confidence will be low and I doubt there will be any relief until the holiday shopping season.

We really do have a recipe for another downturn which will almost certainly be seen in the markets. Also riskier currencies will suffer another round of selling and we could very well see the Euro at parity if we do indeed enter into a double dip slowdown.

What is killing the US economic recovery is stagnant credit markets. With the system currently set up how it is there is no fix. Corporations made paper profits on international sales and cutting at home. They are sitting on records of amount of cash refusing to spend it. Since the system is set up for the big guy and the little guy gets only access to and raped in my opinion through mortgages. Of course there is no velocity.

of course there is no hiring. Hello? When a recession turns around companies have to spend, they have to hire, they are not. The US became a great economy on the American dream and was set up for the little guy to succeed. That has completely changed as now America caters to big corporations and the wealthy few. For the little guy to get a loan to start a company or expand a current business is next to impossible. The only way is through equity on a hard earned house they have paid twice for through their mortgage.

America is completely backwards to what made it strong. no one believes the American dream anymore. But if they could introduce credit to those that could and would use it, they would spend it, expand and jumpstart the economy. But they way the system is setup this is an impossible tactic. But it would work in helping to solve the velocity problem. If the corporations won't spend then give it to small and medium business and give the incentives to spend. Allow easier access to loans for legitimate business ideas and spending incentives would help alleviate this problem.

Bernanke's comments today in my opinion are also ominous. He is playing down the idea of a double dip saying they will introduce more stimulus packages but the problem is that this is reactionary and at the rate the credit markets froze up last time and the markets fell apart, stimulus will be too late. If Bernanke wants to avoid a double dip, he should be announcing stimulus now, not if things should worsen. Be proactive Bernanke.

My number one low risk trade other than my gold stocks of course is buying the $VIX at $25 I can guarantee a double to $50 in the coming economic slowdown. At the 200MA this is the lowest risk entry point you can find.

Gold hits first Correction target

Yesterday morning or afternoon depending on where you are in the world, gold hit my first correction target of $1170. Gold actually traded $1175 but it is close enough to say that it hit it and it moved off that price with authority. This represents an excellent entry point for gold, but is not a fail safe entry point as it is still halfway between the 50M and the 200M meaning that technically there is still a good chance that POG can correct to the 200MA at $1141. Any correction to $1141 should be quick and brief if it happens so be prepared to buy at that price point as well. We are technically entering into a strong buying season for where prices are seasonally strong and within super bull markets, cyclical bulls can be quite predictable and gold is seasonally strong from now until September in the very least with more strength coming in the late fall and early winter that usually extends the summer rally.

I am expecting gold to breakout above $1260 this August / September and now is the time to pick up some of these stocks on the cheap. I would enter half my position now at this point and buy the other half at $1140 if it gets there and if it doesn't would buy the other half on a breakout above the 50MA.

Some great stocks to buy... VEN.TO, EAS.V, CSI.TO, SAS.TO, KAM.V, DEC.V, FAU.V, CXT.V.

Thursday, July 15, 2010

Time to buy Gold Stocks is NOW!!!

I'm just putting this post out there that I think this recent mini correction in gold is close to being finished and the time to buy many of these stocks is now for at least a 2 month party. If we enter into a severe sell-off this fall that party may end briefly but will only be another opportune time to buy for what is going to be one of the greatest levered investments.

So far there is still a cautious sentiment towards the gold trade which is great in my opinion because that means that this beast of a bull rally has much further to travel. I certainly think gold has another double from here where I think 'Gold Fever' will start to kick in a some of the smartest looking trades will be buying these gold stocks early. When gold mania hits, the best of the best will go to the moon while even modest exploration companies will be in high demand. Somewhat like what happened to the Uranium market but extended over a longer time period and not as parabolic.

I think gold has hit a bottom at $1180 coming close to my first target of $1170, the way it is trading it is creeping out to another breakout which will happen sometime in August when the fury is started in the fire again. There are some premium exploration companies and junior's developing premium deposits that I believe are at bargain prices and most are oversold.

SAS.TO at $1.20 is a great entry price in a company that clearly has demonstrating that is producing along schedule and has some of the best exploration targets in all of Canada in the premiere mining district of Timmins. This is a new addition to the portfolio as SAS.TO has demonstrated that it can maintain a $1. One of my tests for a quality penny is if it can hold $1 from a run from micro cap status. If no one wants it at a buck... The story is ultimately dead. SAS.TO looks very strong and will become a player in the junior gold producer market with a goal of over 110k ounces of production per year over the short term of 3 years.

I have been a fan of Sangold Resources for a long time now and continue to like SGR.V to become a premiere producer one day. Many people want to liken Rice Lake to Red Lake and though not identical certainly have many of the same characteristics. San Gold has been apart of the portfolio since under $1 so we have seen almost a 500% gain out of this one but this one has legs is very strong and believe slow and steady wins the race. I maintain that SGR.V will be well over $10 stock in a few more years no matter where POG is.

These are 2 prime up and coming juniors. Some other plays that look great, VEN.TO... its experienced quite a bit of selling and some may think they have reached the limits of the deposit, but I think this stock is oversold a $7 and should be bought up. It may not see $13 this summer but $10 is a very reasonable target. Been writing about Ventanna since $5.

EAS.V is working on a monster deposit, so far indications is that they have close to 12MM oz's but with strong gold indication in all areas that this could be just the beginning it has a low float and just keeps getting better by the day. I love the results as the continue to impress. Have been a apart of the portfolio since $2 so $8 high was a great trade. I think it proves some great value as long as they continue to expand the deposit towards a N43-101 report and feasibility. If they continue to expand this deposit then in all effect a bidding war will break out on EAS and I would be surprised to see this well over $20.

CSI.TO is another monster deposit in Brazil. Probably the least beta of this group as it is more of a development and production story and not so much a case of adding value in the ground which limits its growth potential when compared to the previous.

There are so many other plays out there that I believe will pay off as great traders, possibly more if the goods are found. These are the ones that are far from sure bets, so definitely early in the story and may or may not play out according to plan.

FAU.V tops that list, they are in the right spot in the Tintina Gold belt in Alaska and with a name like Fort Nixon, how close can you get to Fort Knox? LOL. Sometimes superstition pays off!!! Anyway they have released some great result to the public from a previous operator that were never released and in my opinion are pretty great. Some of the values are up there and this high grade deposit could easily end up being a 4-5 M oz discovery. The PP was oversubscribed and the had to double the size to close to $6 million from $3 and they will be using the funds to aggressively drill the project this summer. There is a lot of anticipation with FAU.V and this one could be well north of $1 by September.

Other great names that I have my eye on are DEC.V, CXT.V... CXT.V seems to be making a nice rebound after being oversold on IPO from .70 so I would buy this one under .50 as a flyer. They are starting a heavy promo on this company and the follow through volume today was very good at over 2.5M shares.

I am a little less happy with DEC because they are not drilling the zone I want to see defined and can only have access from current trails so they are limited with wha they can do with the high grade discovery from last year but they do impress with the other lower grade zone that they are drilling. LOL. Who says the BC government is mining friendly? It's a freaking dirt road. Hello... I am sure even the animals will vote yay for a new trail to walk on.

Happy Trading, and in Gold's case... INVESTING! :)

Thursday, July 8, 2010

Markets should continue to bounce

Last Friday after the close we correctly called an oversold situation and the markets have had 3 strong days on rally mode since Tuesday. We should see at least another 300 point follow through into next week. Not saying that tomorrow will be an up day but the negative sentiment that has been in the market for the last 2 months seems to be abating and I would expect a continued rally on light volume over the next week for sure as we enter into the summer months.

One positive sentiment factor for a continued rally is that the Euro has technically moved into rally mode of its own making a strong move and we should see the Euro test resistance at 1.300 and the breakdown point around 1.32 and change. With the drastic cuts to budgets in Euro zone nations the reaction has been positive, but we will still wait and see if the Euro zone economies can recover with these cuts.

Since it was the breakdown in the Euro and widespread fear that caused this last sell-off we could see the markets and Euro recover. At best we will be range bound for the summer when we enter into September and a new round of economic data. The TED spread is rising and we wait to see if the spread comes down which will signal stability in Europe. If it continues to go u,p that could be a warning sign although currently it is still within a normal range but on the high side.

The USD seems to be recovering as well from its recent drop off so the YEN is starting to become weaker against all currencies. If you are long the EUR, being long against the YEN may offer more upside than being long against the USD.

Gold should continue to sell-off over the next few weeks and I would expect at least $1170 and lower. If it goes under $1130 I would shy away from the trade. Gold stocks are very weak at the moment. Dogs include YRI and K... Kinross used to show so much promise and now the market treats them very poorly. Huge gap down the other day which is never a good sign. G and ABX are holding up the best but I would expect all gold stocks to continue to drag lower. There is definitely some negative divergence with the spot price and gold stocks. It seems that the strategy for the gold player would be to be long the yellow metal physically and trade the gold stocks cyclically because so far they have not broken out into a super bull market in gold stocks which we are all waiting for. I would expect this market to turn around at the end of July where one could time a good trade to the upside as Gold will soon be entering into a time of cyclical bull period into August and September.

One negative sentiment is that all risk adverse assets seem to be in sell mode and are well off highs. This is usually the first market that the money flees if we are indeed entering into another bear market this fall and none of the risk adverse assets I follow seem to be showing much bullish sentiment at all. The last buying spikes of pennies in April and into May could have been a last gasp of a bullish market the little guys.



Happy Trading :)

Thursday, July 1, 2010

Euro rising on USD weakness

For the last month the USD is in freefall against the Yen a today was a huge move down towards 87.00 before quickly recovering .60 of a penny. Today's trading may be exhaustion to the downside and looks like the currency is making a temporary bottom at 87 with quite a long tail today.

I think one factor for the USD falling so drastically that everyone has overlooked besides the oil spill and poor economic numbers is China's unpegging of the yuan. With the two currencies pegged the USD was in fact backed by the Yuan. It no longer has the artificial backing of the Yuan which is going to definitely make the USD less attractive. It is probably an underlying reason the States pressed so hard for this as well because they want a much cheaper dollar.

So when I read into the Euro, I read that much of the rise over the last month which seems attributed to Europe's countries making drastic cuts in Europe, but is in fact due more to a loss in value of the USD against all currencies.

Just some thoughts anyway, may not be totally right. One thing that may suggest a little bit of underlying strength for the Euro is that it kept rising as the USD came off the bottom today so not totally negatively correlated. Also Gold dropped $40 today as technically it couldn't hold the weak breakout. As Gold has recently been seen as a hedge against the Euro this may also suggest more medium term strength for the Euro. If the USD reverses here then I would suggest gold may come off a bit more and resume its cyclical run after this mini sell-off. $1170 and $1140 would offer great entry points if we can count on the cyclical gold market this summer like it was last. Any less below that and you really risk a breakdown in the chart.

But for the immediate short term on the Euro, it may have topped out for the trader at 1.2540 and I am short with a stop at 1.2550. The 50MA and 1.2500 should prove to be an area of resistance and I would expect somewhat of a sell-off and some swash buckling here, especially if the USD can recover going into next week. One fundamental factor for the Euro's huge rise was the EU banks seem to be repaying their short term loans. Oh great. That means we are not at total insolvency yet but I find the news somewhat grim that they would even have trouble paying back the short term loans.

We will see if there is any follow through or not with this. A trend changer? Not sure. If the struggling euro countries can get their deficits in order while not at the expense of their economies, maybe there is a chance we have seen a bottom. I really doubt it but you have to look at both sides of the story.

Happy Trading