Monday, December 5, 2016

A Nice Short - Term Buying Opportunity For Gold Bugs

Some people were claiming that the yesterday's Italian referendum could trigger another financial meltdown. Well, the Italian people said NO to Mr. Renzi's government but the markets...ignored it. Today the Euro is going up, the US dollar is going down is going down as well.

I guess gold bugs may feel disappointed. As usually, no matter what is going on the gold is going down. However, in my opinion, today gold and the US dollar are drawing a nice picture for the risk-averse investors. Simply put, it looks like an interesting short -term buying opportunity is in the making. Look at these two charts:

1. The first chart shows the current price action of the US dollar:

The US dollar is breaking down from a short-term consolidation.

2. Now the second chart. This time it is a well-known silver / gold ratio:

Since late November the ratio has been in its upward trend. 

I think that the charts above create an explosive short - term pattern for higher gold prices.

Friday, December 2, 2016

Another Divergence Between Gold And The Silver / Gold Ratio

My readers know that I am tracking the relationship between silver and gold. A few times the divergences between these two metals delivered nice short - term buying signals. But the last signal was a fake. Although the silver / gold ratio was going up, the entire precious metals market crashed - look at the charts below and the area marked in orange (the upper panel shows gold and the lower panel shows the silver / gold ratio):

Now both metals are drawing another divergence. Gold is going down (green arrow) but the ratio is going up (red arrow). Who will win?

Thursday, December 1, 2016

Top Five Portfolio 2017 - Update

One of my readers has made a comment that it is much better to offer the entire portfolio than  just one pick today, then another pick in a week etc.

I agree  so let me make one change. The entire portfolio (all five picks) will be available within two weeks. My readers will be notified on that blog (section "Top Five 2017". The price is $50 per portfolio (fifty US dollars).

New Portfolio Top Five 2017

The end of 2016 is very close so it is the right time to start a new portfolio of precious metals stocks. To remind my readers, this year the Top Five Portfolio consisted of five picks:
  1. Fresnillo plc
  2. Claude Resources (in the mid year this company was replaced with B2 Gold)
  3. Newmarket Gold (now Kirkland Lake)
  4. Fortuna Silver
  5. Richmont Mines
The chart below shows the results delivered by my portfolio (for comparison, I have plotted the returns delivered by GDX and S&P500):

As the chart shows, between December 16, 2015 and November 30, 2016 the portfolio delivered a return of 130% (GDX: 48% and S&P 500: 6%). Well, despite a strong correction in the precious metals sector the Top Five Portfolio is still performing very well (much better than the broad precious metals market).

That is why I want to repeat this experiment and construct a new portfolio for 2017. This time it is going to be a little bit different. Let me explain.

A new portfolio will consist of five picks. I think a few picks may be the same as in 2016 but a few new companies will surely be added.

Next, contrary to this year, I am going to be more active. It means that some rebalancing is possible. If I find a new and, in my opinion, a better company I am going to replace an old pick with this new one.

Now, what criteria do I use to decide whether a pick qualifies to my portfolio? Here they are:

  1. Only producers - My picks do not include any exploring company. Simply put, explorers are riskier than producers, and I want to limit risks as much as possible. What is more, these producers must hold at least two operating mines.
  2. Debt free - Debt is also risky, so my top companies hold either very small debt or even no debt at all.
  3. Low costs of production - My picks are low-cost producers. If I am wrong claiming that this bull cycle in gold is intact, low-cost producers should perform relatively better than other PM-related stocks. It means that losses incurred by investors should be relatively low.
  4. Catalysts - Looking for the best stocks, I am trying to find companies with some near-term catalysts defined as a big chance for a relevant increase in production, a possible acquisition or management change etc.
Now, an important message. The 2017 Top Five Portfolio is a paid service. It will cost $50 (fifty US dollars).

Within the next two weeks I will notify you on this blog that the portfolio is ready to be dispatched.

What will you get for this price? Let me list:
  • five stock picks
  • portfolio rebalancing (if I decide to replace an old pick with a new one you will get this new pick for free)
  • regular updates (at least one per quarter) - the updates should include my comments on financial results, operating results etc.
  • alerts - you will be notified if there is any important issue related to the stock pick
All these picks, comments, alerts etc. will be delivered through email (PDF file) to the subscribers

Simply put - you pay $50 and I am doing the job for you.

That's it. Quite simple I guess.

All details, pay buton and notifications will be available in the  section "Top Five 2017". 

Last but not least. Because it is a paid service I will not comment on the new portfolio on this blog, Seeking Alpha etc. The picks or comments on them will be available only for paid subscribers.

Wednesday, November 30, 2016

S&P 500 - Speculators Are Not Buying This Top

Speculators are not buying this top in S&P 500. According to the COT report, they are actually decreasing their net positions in S&P 500 futures:

Look at the chart above. The area marked in yellow indicates a period when speculators were increasing their long positions (26.9 thousand fresh contracts were added) on S&P 500. Shortly after this period there was a minor correction in prices. Then the index continued its march up.

Now we are encountering a different pattern. Although the index made a fresh top, speculators are currently decreasing their long positions. Last week they were even net SHORT the S&P 500 - look at the chart below:

Generally such pattern precedes an incoming weakness in stock prices. Whenever we see (areas marked in yellow):

  • speculators shorting the index
  • stock prices still going up
a substantial correction is expected.

Sunday, November 27, 2016

Gold: Two Charts. One For Gold Bears And One For Gold Bulls

The first chart shows the old GLD picture:

Well, it looks terribly now. The amount of gold in GLD vaults is going down sharply and GLD prices broke below their strong support at 115. This is the chart for gold bears.

Now, the chart for gold bulls:

It is a little bit complicated so let me explain.

The upper panel shows gold prices. The lower panel shows the US dollar index. For better comparison, I have plotted an inverted version of the US dollar index.

As a rule, both charts should perform in the same way. If gold goes up the inverted US dollar goes up as well (and the "right" US dollar index goes down).

That is theory. However, it is the divergences that count. The first divergence occurred between March and December 2015 (points A and B). The US dollar index had the same readings at point A and point B but gold had not. Gold was lower - I would say that the gold sentiment was negative : although the US dollar did no change its value gold was weaker. 

Now, look at the point B and C. Most recently the US dollar goes up strongly (and the inverted variant of greenback goes down). The point C is lower than the point B.
However, and that is the argument for gold bugs, now gold at the point C is higher  than at the point B. Generally, it should also be lower is not. I would say that the sentiment among gold players is now positive.

Monday, November 21, 2016

Drilling Sector - Relative Performance

Here is the chart showing drilling companies and their relative performance:

There are two leaders: Geodrill (Western Africa) and Orbit Garant (Canada).

On the other hand - look at Energold. The company is going steeply down.