Stocks & Equities

The Bottom Line -Use Strength to Reduce Exposure

The intermediate corrective phase in North American equity markets remains intact. Short term strength provides an opportunity to reduce equity exposure, particularly in sectors that have a history of moving lower during a summer corrective phase. These sectors included industrials, consumer discretionary, materials and financials.

Selected sectors are setting up for seasonal trades this summer including fertilizers, energy and gold. They already are showing signs of outperformance relative to the S&P 500 Index and the TSX Composite Index. Stay tuned for special sector opportunities as the summer progresses.

Equity Trends

The S&P 500 Index fell 16.65 points (1.01%) last week. Trend remains up. Resistance is at its May 22nd high at 1,687.18. Support is at 1,598.23. The Index remains below its 20 day moving average, but bounced once again from near its 50 day moving average. Short term momentum indicators have declined to neutral levels.

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The TSX Composite Index fell 185.94 points (1.50%) last week. Trend remains down. The Index remains below its 20 day moving average and completed a “Death Cross” when its 50 day moving average fell below its 200 day moving average. Tech Talk is not a believer in the Death Cross indicators, but other technical analysts are talking about it. Strength relative to the S&P 500 Index changed from neutral to negative. Technical score based on the above indicators changed from 0.5 to 0.0 out of 3.0. Short term momentum indicators are oversold, but have yet to show signs of bottoming.

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Percent of S&P 500 stocks trading above their 50 day moving average fell last week to 59.60% from 67.80%. Percent remains in a downtrend from an intermediate overbought level.

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Percent of S&P 500 stock trading above their 200 day moving average slipped last week to 88.20% from 90.60%. Percent remains in a downtrend from an intermediate overbought level.

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Bullish Percent Index for S&P 500 stocks slipped last week to 81.20% from 82.00% and remained below its 15 day moving average. The Index continues to trend down from an intermediate overbought level.

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Bullish Percent Index for TSX Composite stocks fell last week to 59.41% from 62.76% and dropped below its 15 day moving average. The Index has resumed an intermediate downtrend.

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Percent of TSX stocks trading above their 50 day moving average fell last week to 31.80% after briefly reaching a low of 24.69%. Historic data shows that the TSX Composite Index frequently bottoms on a recovery by Percent from below the 25% level.

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Percent of TSX stocks trading above their 200 day moving average fell last week to 42.68% from 46.86%. Percent continues in an intermediate downtrend.

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……read so much more HERE including 44 more charts. 

 

 

Soros Joins Ballanger on the Goldbug Side of the Market

In his 36-year career, Michael Ballanger, director of wealth management at Richardson GMP, has seen good markets and bad. As a true contrarian, he sees opportunity in the undervalued precious metals assets and lauds George Soros’ recently reported large gold-related positions. In this interview with The Gold Report,Ballanger discusses market sentiment and some companies that he expects to take off when the market turns.

The Gold Report: A news story in mid-May reported that billionaire hedge fund manager George Soros had almost $240 million ($240M) in gold-related positions. Moreover, on May 16 he had purchased $25M in call options on the Market Vectors Junior Gold Miners ETF (GDXJ). What are your thoughts on that move?

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Michael Ballanger: All one needs to look at is the historical relationship between gold and gold shares to see the logic behind such a move. With every market on every continent now surging to record high levels in response to central bank stimuli, it would be reasonable to manage risk by owning one of the most beaten-down sectors I can ever recall.

TGR: Why does someone like Soros buy gold-related instruments and not equities, even the large caps?

MB: In the case of the GDXJ, he is actually buying a “basket” of equities related to gold/silver mining and exploration. By doing this, he spreads his risk over a large population of companies in the same space. Picking individual companies in this space invites execution risk because as we have seen in numerous cases in the past decade, a one-off event such as politics or natural disasters can undermine a correct call on the sector as a whole.

TGR: Are you aware of other big-time players that are making similar moves?

MB: Not specifically and certainly no one as notable as Mr. Soros. It is interesting that the managers who were early in the gold trade such as Eric Sprott are more bullish today than ever and that is noteworthy given gold’s performance since 2000; despite this current correction and in my view, it is a correction rather than a secular bear.

TGR: When last we spoke you were convinced the market had found a psychological bottom. You noted that at the end of 2012, the TSX Venture Exchange (TSX.V)—acting as a proxy for the junior mining sector—was trading at 0.71 times the gold price. As of May 31, it was 0.69 times the gold price. Do you see the TSX.V-gold price ratio moving further sideways for the foreseeable future?

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MB: I based my “bottom call” on sentiment. The sentiment in the junior space in January was abysmal and it is just as abysmal today. However, weak sentiment numbers, while historically reliable, do not tell you that the price has stopped declining. In that context, I was early because not only has the Venture Exchange dropped to new lows under 1,000, the TSX.V-gold ratio has recently hit .66 versus the bull market high over 5.0, which is actually quite remarkable.

TGR: What’s your thesis for investing in mining equities (large, mid and small cap)? Precious metals investors want to know what they should do over the course of the summer months. What’s your advice?

MB: There is always a degree of seasonality to the mining sector and the numbers dictate that one should wait until mid-August to begin initiating positions but I suspect that may be too “cute” because of the severity of the valuation compression we are witnessing in the juniors. Companies that were considered good value at $75/ounce (Measured) are now trading at under $20/ounce and so these prices may not wait for mid-August if gold decides to reverse or if sentiment shifts early back to the bull camp.

TGR: In our last interview you discussed “well incubated” junior mining companies, ones with a core of investors that understand how the game is played and have the long play in mind. Where are those companies?

MB: In a nutshell, some have done quite well but most have been disappointing. Despite either positive earnings reports or new discoveries, each time they try to lift off the bottom, they have been sold as a liquidity event. It is almost a Pavlovian reaction; they sell off because they have sold off in the past and until new volumes come in to relieve the supply that will not change until sentiment changes.

TGR: In January, you told our readers about Tinka Resources Ltd. (TK:TSX.V; TLD:FSE; TKRFF:OTCPK). What’s happening with Tinka now?

MB: Since the January interview, Tinka has continued to execute its corporate strategy of upgrading the Peruvian silver resource to Measured from Inferred while adding more ounces, but the big event was the recent A13-05 drill result, which was arguably one of the best massive sulphide intercepts in at least my time in this space. Sixty meters of 7.75% zinc with the total section of mineralized envelope running north of 200 meters is a very encouraging, if not spectacular, intercept. The company completed a financing in May (full disclosure: RichardsonGMP participated in that funding) and is now poised to recommence with further exploration on Ayawilca (the zinc) while finishing off the redefinition of Colquipucro (the silver). The share price has retrenched from the all-time high of $1.25 in March to the current $.75–.80 range.

TGR: Would you like to give any other updates on companies you’ve mentioned in previous interviews? At the moment, are there any other companies you’re closely following?

MB: Bitterroot Resources Ltd. (BTT:TSX.V) is another name in the unloved category. When I met its president, Michael Carr, he showed me the geophysics on his project in northern Michigan, just south of the White Pine mine. Within the exploration sector, this is a compelling story that speculators could sink their teeth into at $0.09 or $0.10/share. It is an exploration play so it may not be suitable for all investors but for those that can bear the risk, it is an interesting speculation.

MB: Another Peruvian junior I have been dabbling in is Darwin Resources Corp. (DAR:TSX.V). The company has a gold property in northern Peru, sandwiched by Rio Alto Mining Ltd. (RIO:TSX.V; RIO:BVL; RIOAF:OTCQX) and Barrick Gold Corp. (ABX:TSX; ABC:NYSE). Darwin trades around the $0.12 range on the TSX Venture Exchange. Darwin was a spinout of Mawson Resources Ltd. (MAW:TSX; MWSNF:OTCPK; MRY:FSE). Early geochemical results have been very interesting, to say the least.

TGR: Before we let you go, please give our readers something to ponder.

MB: Whenever I am interviewed for my comments on the precious metals sector, I am usually addressing an audience that is predisposed to understanding the value of holding gold or silver bullion or equities in their portfolios, but what is rarely addressed is the correct allocation. There are some who believe that it is the ONLY asset that one should own and there are others that believe that it should be used as a balancing tool within a larger mix of assets.

No greater example of the need for a correct mix of assets could have been more obvious than the behavior of gold versus the S&P 500 since mid-2011. While bullion has dramatically outperformed the S&P 500 since 2000, the S&P 500 has been a superstar versus gold for the past 18 months. For this reason, it is critical to be flexible in your allocations because while I am certainly one of the most fervent believers in the importance of gold in protecting the purchasing power of portfolios, as a wealth manager I have to maintain a balance and that is something everyone must remember.

TGR: Thank you for your time.

Originally trained during the inflationary 1970s, Michael Ballanger, director of wealth management at Richardson GMP, is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of the University of Pennsylvania. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE: 
1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Reportas an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Tinka Resources Ltd. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Michael Ballanger: I or my family own shares of the following companies mentioned in this interview: Tinka Resources Ltd. and Bitterroot Resources Ltd. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Tinka Resources Ltd. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent. 
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. 
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

 

Nikkei Plunges After BOJ Minutes

Nikkei Drops Fast After Bank Of Japan Minutes

After Nikkei futures rose as high as 13,225 earlier (up 6.3% from Thursday’s close), they have taken a sharp turn lower following the release of the minutes from the Bank of Japan’s May 21-22 policy meeting.

Right now, the Nikkei is trading around 12,995, up *only* 4.4%.

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….read more HERE including the key paragraphs from the minutes:

Faber: The Market’s Similar to the Explosive NASD Nov/99 to Mar/00

marc faber1-300x290When it rose past 100%

Last year, Singapore real estate investment trusts (REITs) went up by 40%, and they are up higher this year. But I don’t think that they are the greatest bargain at the moment. Right now, high dividend-yielding stocks are moving up hugely.
 My sense is that we are in a market similar to the Nasdaq 100 between November 1999 and March 2000 when it rose past 100%, or the oil price between February 2008 and July 2008 when it shot up 70%. When there is upside acceleration, it’s a bad time to buy. Is it a good time to short? Yes, if you have deep pockets, maybe it’s a good time to short the equity markets. But who knows? 

….newer posts from Marc below: 

Marc Faber’s Favorite Singapore REITs

Gold has far outperformed Financial Assets since 1999

Most of my GOLD is in a safe-deposit box in Switzerland, but I am shifting it to Asia

 

 

 

Todd Market Forecast

Todd Market Forecast for Tuesday June 11, 2013  

Available Mon- Friday after 6:00 P.M. Eastern, 3:00 Pacific (for a list of servicers go HERE)                  

DOW                                                         – 117 on 2150 net declines

NASDAQ COMP                                    – 37 on 1150 net declines

SHORT TERM TREND                            Bullish 

INTERMEDIATE TERM TREND            Bearish

STOCKS:

A sense that the World’s central banks are going to cut back on money printing keeps affecting the stock markets. Today, there was disappointment that the Bank of Japan left things unchanged and this caused heavy selling in Europe that spread to our shores.

Some are saying that when the Fed takes its foot off the accommodation pedal, it will be bullish because that would suggest a better economy. We disagree. In the past, when the Fed stopped easing, stocks have had a tendency to drop. 

GOLD:

Gold was down sharply in the early going, but fought its way back. It was still down $9. Rising rates seem to be the catalyst for pushing gold down.  We’ll stay in the bullish camp until and unless support is broken. 

CHART:

Yesterday, we showed you a chart indicating that the S&P 500 had bested a previous high. But, there is another methodology that sends out a less bullish message. Note that there is a descending peaks pattern that still needs to be bested. We don’t like this methodology as well as the one described yesterday, but it does have a place. Also, note that the advance decline line is closer to its previous low than the index is. This can be a problem. 

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TORONTO EXCHANGE:    Toronto was down 159.               

S&P\TSX Venture Comp:  The Venture Comp lost 9.                                                

BONDS: Bonds were early, but managed to reverse.                                           

THE REST: The dollar got whacked pretty good. Silver, crude and copper were all down.                               

BOTTOM LINE: 

Our intermediate term systems are on a sell signal as of June 4, 2013. 

System 2 traders    We had a signal. Buy the E-mini S&P 500 futures contract and/ or the SSO. The E-mini trades all night. The SSO trades until 8 p.m. EST. We’ll assume the price for both at that time.  

System 7 traders   We are in cash. Stay there on Wednesday.                      

Stock investors We are long Intel from 21.61 with a stop at 22.50.     

NEWS AND FUNDAMENTALS:  

There were no important economic releases on Tuesday and there are none on Wednesday. Obviously a very slow week.  

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We’re on a sell on bonds as of June 10.          

We’re on a sell for the dollar and a buy for the euro as of  May 20.                         

We’re on a buy for gold as of May 20.    

We’re on a sell for silver as of May 15.       

We’re on a sell for crude oil as of May 29.           

We’re on a buy for copper as of May 3.                

We’re on a sell for the Toronto Stock exchange TSX as of  June 5.         

We are on a sell for the S&P\TSX Venture Comp. as of Jan. 29. 

 

 Screen shot 2013-06-11 at 5.06.49 PMINDICATOR PARAMETERS

Monetary conditions (+2 means the Fed is actively dropping rates; +1 means a bias toward easing. 0 means neutral, -1 means a bias toward tightening, -2 means actively raising rates). RSI (30 or below is oversold, 80 or above is overbought). McClellan Oscillator ( minus 100 is oversold. Plus 100 is overbought). Composite Gauge (5 or below is negative, 13 or above is positive). Composite Gauge five day m.a. (8.0 or below is overbought. 13.0 or above is oversold). CBOE Put Call Ratio ( Below .80 is a negative. Above 1.00 is a positive). Volatility Index, VIX (low teens bearish, high twenties bullish), VIX % single day change. + 5 or greater bullish. -5 or less, bearish. VIX % change 5 day m.a. +3.0 or above bullish, -3.0 or below, bearish. Advances minus declines three day m.a.( +500 is bearish. – 500 is bullish). Supply Demand 5 day m.a. (.45 or below is a positive. .80 or above is a negative).

      No guarantees are made. Traders can and do lose money. The publisher may take positions in recommended securities. 

 

Ed Note: For a complete list of Stephen Todd’s services go HERE

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