Bought LSG @ $1.47

I bought shares in another Canadian gold miner yesterday. This one is Lake Shore Gold Corp (LSG) which trades on the AMEX exchange. My purchase price was $1.47.


This first chart is a weekly of LSG and uses the slower 'trending' setting of the True Strength Index (TSI) indicator set at (25,13). The TSI rendered three BUY signals which I regard as strong confirmation this stock has turned the corner on its downward momentum and should see better days ahead soon.

Click on any chart to ENLARGE

The next chart is a daily and compares the price performance of Lake Shore Gold (LSG) with gold (XGLD) and the Junior Miners ETF (GDXJ). Here we see the familiar TSI BUY signals, as on the weekly chart above - trend line break, positive divergence and ZERO crossover - and note that this stock has severely underperformed both XGLD and GDXJ beginning last May, 2011. We also note that Lake Shore Gold now trades at just 60 cents on the dollar with respect to its book value.

I have done several hours of due diligence to learn what explains the sky dive from $4.50 per share to $1.05 in the past 9 months. The company has several mines in Canada with one that went into production beginning January 2011. The expectations for the amount of gold they could process were lowered by the company at about this time and that triggered several analyst downgrades. Add to that the general swoon one can easily see in the GDXJ beginning last May and the recipe for price to move to the opposite extreme was put into action. 


My interest in this stock begins with its ridiculously under priced stock market valuation and is sustained by the technicals (TSI) that suggest it is a candidate for price appreciation in the near future. Also, the current book value of Lake Shore Gold is $1 Billion and it began trading on the AMEX exchange last August. 


Price projections are usually tough to get real excited about because they are often overly optimistic, or so my experience has led me to believe. But, for what its worth, here is what the 11 analysts who follow this company think about its prospects for future price appreciation (Jan. 26, 2012).

Bought CGR @ $1.46 - CDY Update

First a brief update on Cardero Resources (CDY). I introduced this stock to readers on December 26 when it was trading for 95 cents. Though I did not purchase CDY (I set a limit price that was never hit) I am very pleased that many readers did buy the stock, as it closed today at $1.53. This daily chart updates the stock's subsequent performance and highlights what can happen when the overhead resistance of the 50 dma and 200 dma are overcome.

Click on any chart to ENLARGE

Today I purchased Claude Resources (CGR) for $1.46 per share. Having missed the strong run of CDY I decided to just get on board Claude Resources and be patient. Let's begin with a look at the weekly chart.

I've looked over a couple hundred miner charts to find this one. I was impressed with the cup with handle pattern and the recent/current retest of the handle. In a really ideal environment, such as I think is now developing in the mining stocks, the retest that pulled price down from $3.00 to nearly $1.00 in the space of a single year could act like a sling shot - energizing upward price movement when selling pressure is finally exhausted. 


This chart of daily price movement shows that CGR currently has some of the same challenges as CDY had when I brought it to your attention. That is, overhead 50 dma and 200 dma resistance.

The stock has made it up through an initial price trend line of resistance just this week, but there are a couple others waiting overhead. The True Strength Index (TSI) indicator shows that sometime before the end of February we should have a break out of significance, up or down. Should price be able to navigate through the next 50 cents of landmines - up past $1.90 - there will be little if any resistance from there on, whatsoever.


If we take a look at a closer view of the daily chart we can see that CGR has some positives going for it at the moment. Two BUY signals have been given by the TSI - a trend line break and a ZERO crossover. Additionally a stealth positive divergence has been building for a number of weeks as price seems to be consolidating and at last dissipating the last of the downward momentum of the past year. Today we had our first test of the 50 dma and it's not surprising to see it fail on the first try. But I am quite sure there will be more attempts.

You may have noticed the earnings projections for Claude Resources that I put on a couple of the earlier charts. I found it nearly impossible to find another stock with more explosive projections: 2010 2 cents, 2011E 10 cents, 2012E 21 cents and 2013E 30 cents.


CGR has a smallish number of shares outstanding, with 164M. It is a Canadian company with all of it's mining operation in Canada. And best of all, for me anyway, is that it is currently priced at just 1.4X book value. That's cheap. There are a several other AMEX miners that trade with a lower price to book value ratio - CDY, KGC, AUMN, GSS, GBG, BRD - but the estimated earnings of these did not impress me as favorably as CGR.


In closing, here are a couple tidbits from my study. The first is from The Motley Fool (11-17-2011) and provides an overview of Claude's business/operation. The second tidbit shows that despite the stock's continual slide over the past six months, large institutional buyers have continued to load up on CGR.

Go get 'em!

The MouES Bit Too Hard - Covered ES @ $1322.50

I have a certain tolerance for pain when trading and when it is reached I get out of the position and move on. Today the MouES (E-mini S&P 500 Index Futures ES) bit me repeatedly - until it reached my tolerance level. Then I covered my two sold futures contracts with a buy at $1322.50. 


I had a number of very excellent trades earlier in the month and decided to define my tolerance level such that it would not allow those trades to go entirely for naught. So, if this should be my final trade of January (unlikely) I will conclude with a very modest 3% gain in my account value for the month of January 2012.


Here is the daily chart of ES as of a short while ago.

Click on the chart to ENLARGE

Yesterday I spent a few hours studying the S&P 500 price movement since the March 2009 low. The takeaway for me is the similarity of this rally with the fall 2010 rally. In that case, rather than the daily cycle bottoming on Day 35-40, it bottomed on Day 59 - clearly stretched in response to QE2. 


But we don't have QE3 to account for current price action. Or, do we? 


Is the FED printing money to 'loan' to the European Central Bank (ECB) at 0% and we don't know about it? Maybe Saudi Arabia is selling oil to China for Chinese currency - rather than US Dollar currency? Maybe there is huge liquidation of accounts in Europe that is being first converted into US Dollars (which would be US Dollar bullish) but then invested in our or other stock markets (which would be US Dollar bearish)? Or something else having to do with credit default swaps (CDS) between the US and Europe?


Or maybe I am just being paranoid and the overdue daily cycle for the S&P 500 is just a little late arriving this time. At this moment that explanation seems (to me) about as likely as Santa Claus visiting my chimney on December 25 or 26 and saying he forgot what day it was, but I guess it is possible. 


In any event, the TSI is now sky high, price is at the very top of the 3 week price channel and the downtrend line from 2007 is still overhead. The FED meeting is over and I would think that the ES will go into a profit-taking correction soon. 

The Mother of All Trend Line Breaks (?)

With the Sunday overnight trade about to begin in the Asian futures market, how about we take a look at what could be the mother of all trend line breaks this week. Yes, I'm talking about the Standard & Poors 500 (SPX). We'll look at a couple of daily charts that should frame exactly what is at stake and take a guess as to how this intriguing question will soon be resolved.


I created a new indicator this weekend and it is shown in the lower indicator panel of the SPX daily price charts. The output of this indicator shows us the relationship between the daily price of the SPX and its 50 day moving average (dma). A reading of ZERO means that the SPX and its 50 dma are the same. Positive readings are the percentage the SPX is above the 50 dma while negative readings are the percentage the SPX is below its 50 dma.  Also, positive readings differ in color as the SPX rises above its 50 dma.


This first chart covers the past 3 years and begins just before the historic 666.79 March 2009 bottom. Additionally, I have identified the daily cycle lows (DCL) which are typically 35 - 40 trading days apart and the intermediate (weekly) cycle lows (ICL) which are generally 5-6 months in duration.

Click on any chart to ENLARGE

The things I note about this chart is that a daily cycle low (DCL) is now due. Also, it's fairly unusual for the SPX to exceed its 50 dma by 3% (magenta), quite unusual for a reading greater than 4% (dark blue) and 5% has been a very rare reading for the past 2.5 years - in fact, in the most recent 2.5 year time frame I can count only 3 such occurrences and each lasted a matter of a single day. 


By the way, we nearly reached the 5% mark this past Thursday with a SPX close 4.76% above its 50 dma.


So, here is the trend line that all eyes are on. It is derived by connecting the 1576.09 high achieved on October 11, 2007 with the highs achieved in April and July of last year, 2011. 

We are very close to reaching that trend line. Something in the neighborhood of 1330 would be a break out. Heck, that's only 15 buck higher than last Friday's close of 1315.38. That does not sound like much, does it?


So we slice right through 1330 and keep heading to 1400, maybe to all-time highs and rival 1576.09 by summer. Kewl!


NOT. 


I think all the profit taking that stopped the SPX in April and July of 2011 is about to repeat, leaving the daily cycle to top and go into its timely sky dive. Additionally, those two runaway rallies since 2009 went by the name of QE1 and QE2. My hunch is that we need a QE3 to inflate the stock market so it will blast up through the line of resistance overhead. I have not heard that QE3 will be announced, nor do I think it will be announced at this Tuesday's Ben speech. 


But 4sure - if Ben does announce something like QE3 I have no doubt we will see the mother of all trend line breaks.


Have a great week!

4 Hour Dollar Chart Reveals Imminent SP-500 Correction

I was looking at the US Dollar Index ($DXY) 4 hour chart this evening with my favorite True Strength Index (TSI) indicator set to (7,4) and I began to notice the occasional but very severe down spikes in the TSI over the past 8-9 months. These unusually severe readings are, of course, temporary periods in time when the US Dollar Index has come under extreme selling pressure and downward momentum is incredibly and unsustainably intense.


But just looking at this chart really did not tell me much more.


Then I got to wondering. How do these down spikes compare with a chart of the S&P 500? I mean, is there any correlation between the two? Could these extreme and unusual selling episodes in the US Dollar Index possibly tell us something about the movement of the stock market?


So, being the researcher type that I am, I dutifully wrote down the meanest looking down spikes noting their dates, hour and TSI reading. Then I began to locate these dates on a daily chart of the SP-500 - then I recalculated the stock market's daily cycles.


Somewhat to my amazement, there it all was in one easy to grasp picture. The down spikes were not random after all. 


Each daily cycle had just two of these critters, with the second one coinciding within days, if not hours, of the beginning phase of the journey into the final cycle low. 

Click on the chart to ENLARGE

The most severe reading was recorded on July 26, 2011 at -0.86 (far left daily cycle rectangle). The second most severe reading occurred today with a measurement of -0.81 (far right daily cycle rectangle).


As we are on something like Day 35 of the current daily cycle and with the TSI reading of an unusually severe sell-off in the US Dollar Index occurring today I have no doubt the stock market is about to take a nice nose dive. 


The other thing I would mention is the size of these daily cycle finales. I don't see one on the chart any less that 100 S&P points. Do you?


UPDATE:
Thurs. Jan 19 
2:30 pm est


The current reading is not -0.81 as last evening, but -0.89. This is incredible selling pressure.
I think if the US Dollar's sellers put any more logs in the fire the iron pot belly will begin to melt. 

ES, GC + SI - Riding the TSI Teeter-Totter

You can probably remember those good old days when you and your friends would head down to the local park and play on the teeter-totter. I sure do. And my memories of watching my children discover the joy of riding a teeter-totter, remembering their laughter and their screaming back and forth at one another is very precious to me as well.


The topping process in the stock market is much like the teeter-totter, it seems to me. Using the True Strength Index (TSI) indicator to observe the up and down swings of momentum as price begins a new rally, continues to rally then reaches an expiration or temporary peak, can be seen as an easily understood and familiar teeter-totter ride.


This post will look at three of our favorites - S&P 500 Emini Futures Index (ES), gold futures (GC) and silver futures (SI) - and use the TSI to examine the teeter-totter experience of a rally that, as always, needs to take a break before beginning anew.


Let's begin with this 4 hour chart of ES. Notice the up and down swings of the TSI - much like a teeter-totter - as this current rally has unfolded.

The teeter-totter is great fun but also requires lots of energy to be expended. The TSI indicator shows us that at some point - like the point where we are right now, as a matter of fact - fatigue begins to set in. The highs in the TSI indicator begin to not reach as high and the indicator drifts lower and lower, like a hot air balloon running out of umph, towards the ground. The ground, in this case, is the trend line break (green line) and the ZERO crossover (red line).


Another observation of this teeter-totter characteristic can be seen in this 4 hour chart of GC. Here we observe that as this rally has continued, the length (measured in terms of time) of each upswing shortens. It is indeed like watching children play on a teeter-totter. The initial burst of excitement yields a lengthy and robust time of play, but as time goes on fatigue begins to set in and each following burst of enjoyment becomes shorter and shorter - until the kids just get off the thing and take a rest.

And how about a third and final look with a 4 hour chart of SI?

I hope you enjoyed your time at the park today!

Oh Wow! I Just Caught Another MouES ($1300.0)

I had my trap set to try and catch another mouES overnight and surprise, surprise - I caught one. Not another mouse like the kind with a long tail and cute little ears. No, this one is the kind that is spelled ES - as in E-mini S&P 500 Futures Index. Actually, as soon as the mouES was captured I sold him to someone else for $1300.0 with a promise to buy the cute critter back at a later date. 


Here is a daily chart of the ES futures index.

Click on any chart to ENLARGE


It kinda looks like this mouES is never going to stop running higher and higher. Well, I agree. 


But all mouES have to stop for a drink of fresh water and a nap sooner or later ......


Next, a 4 hour chart.

Still looks good for the mouES, wouldn't you say?


I guess if I have a card up my sleeve, besides knowing today is Day 35 of a daily cycle that usually bottoms somewhere between Day 35 - 40, it is this next chart.


This is a 4 hour chart of the SP-500 and it shows the True Strength Index (TSI) indicator's closing whereabouts from last Friday afternoon's session. If the mouES continues to run another couple hours until the NYSE opens we will get an impressive gap opening in the SPX. And no doubt the TSI indicator will take a healthy pop higher, as well.


But how high will it jump?  From 0.07 clear past 0.35? 

Obviously, I am skeptical. And besides eye-balling the possibilities, I have seen this drill before. The futures get run up over a (long) weekend, the SPX opens with an impressive gap higher, creating a negative divergence SELL signal on the TSI, then price gets (for some reason or another) clobbered.

We shall see.