Merv's Weekly Commentary, 19 July 2008

Merv’s Weekly Uranium Review
for week ending 18 July 2008

Merv’s Daily Uranium Index
Market Data for Friday 18 July 2008

Open: 254.13
Hugh: 258.11
Low: 245.52
Close: 250.37
Volume: 3859

Note that the volume is an average volume of round lot sales for the 50 component stocks. For total volume, multiply by 5000.

It seems so long ago that I last posted a weekly commentary that I’m not sure where to start. I’ll just go as if I never left. For those who may be trying to keep up with the Index on their own, let me know and I will update the data to you. Provide your last day of data to start from. E-mail address may be found in the Profile section of the web site.

First, a sincere thanks from the family and especially myself for the many wishes for my brother’s recovery, and condolences for his passing away. They were very comforting.

BUT life goes on.

Although uranium seems to be in a little rally mode this has not affected the stocks, they remain in a bearish mode making new bear market lows during the week. This low was not all that impressive and could be quickly reversed. Part of the decline was the introduction of a new stock for one that was taken over during the week. The new stock had a sharper decline than did the Index in general (both daily and weekly) and this may have been a major reason for the drop of both Indices into new lows. Next week should tell us if this is so or if the drop was in fact a general demise of the stocks.

Frontier Pacific Mining Corp. was absorbed by Eldorado Gold Corp. on Tuesday. Due to time constraints and not having followed the uranium markets for some time I took the liberty of including Eldorado in place of Frontier in the Indices. Eldorado is basically a gold stock but now does have some uranium business due to the take-over. I will shortly be reviewing the complete Index and updating the stocks. Until then Eldorado will remain.

Going first to my long term prognosis, the weekly chart looks like a disaster zone. We are still inside that major bullish wedge pattern. It is a “bullish” pattern because it is usually broken on the up side for a new bull move. However, it must first be broken on the up side and that is still some distance away. It is noted that although most “Nuclear” Indices are breaking support levels they all are still some distance from their previous lows of a few months back. This is due to the greater representation of nuclear power plant and nuclear industrial stocks in their Indices and therefore much lesser impact from any uranium mining and/or exploration stocks that are included.

The Merv’s Weekly Uranium Index closed the week at 6271.34, down 125.82 points or 1.97%. There were 14 winners, 35 losers and one stock unchanged. As for the five largest stocks, Cameco lost 5.2%, Denison lost 5.8%, First Uranium gained 8.1%, Paladin lost 12.5% and Uranium One lost 8.5%. Except for First Uranium, it was a lousy week for the biggies. The best weekly performer was Western Prospector with a gain of – wait for it – 77.0%. This is, of course, a take-over situation and the gains are now all eaten up. Checking back to my archives Western Prospector turned POS on the intermediate term (my preferred time period) in the 14 May 2008 table at $0.62 and has remained POS ever since. A 100% plus gain in just over two months does not seem too shabby. The worst weekly performer was Tournigan Energy with a loss of 20.0%.

Looking at the weekly chart and indicators, the Merv’s Weekly Uranium Index continues below its negative sloping long term moving average line, as it has been doing for over a year now. The long term momentum indicator continues in its negative zone but has not made a new low to confirm the Index new low. For now the momentum indicator is showing just a little greater strength (or lesser negative strength) than the Index. This may reflect the addition of the new stock as indicated above. However, nothing here to get encouraged about in the foreseeable future and the long term rating remains BEARISH.

Going over to the daily chart and indicators, The Merv’s Daily Uranium Index has just closed below its previous support by just a minor amount. Not yet what I would consider a decisive break but not a good sign in any event. The next few days will tell if the break is a valid one. For now, the Index continues to move lower, below its negative sloping intermediate term moving average line. The intermediate term momentum indicator remains in its negative zone, where it has been since Nov, and is below its negative trigger line. The indicator is still some distance from its previous lows and may be giving us a positive divergence signal, although we wouldn’t know until the next up leg comes into play. It could be just lagging the Index action. The volume indicator is tracing a similar trend to that of the momentum indicator with a possible positive divergence in progress. For now all I can go with is what I’ve got, and that is a BEARISH rating.

On the short term everything is negative. One would really have to stretch his imagination to find any positive signs for the short term. So, let’s stretch. The short term momentum indicator (as well as the more aggressive Stochastic Oscillator) is just about to enter its oversold zone. We have had previous rallies from this negative momentum level, although it has also gone much further negative. The daily volume is relatively low versus the previous upside volume, but this also is to be expected and not really a great indication of strength. Well, that’s about it. Short term the rating can only remain BEARISH and the immediate direction of motion remains to the down side.

Long term “investors” should be remaining on the sidelines, as they should have been for a year now. Intermediate term speculators should also remain in the sidelines but there are bargains to be picked up from time to time. Follow the table ratings for this. The TUTORIAL helps here (see left side on main page). As for the gambler, they are always active, either on the up side or down side, but they should understand the great risks they are taking.