Merv's Weekly Commentary, 27 July 2008

Merv’s Weekly Uranium Review
for week ending 25 July 2008

Merv’s Daily Uranium Index
Market Data for Friday 25 July 2008

Open: 236.38
Hugh: 242.71
Low: 230.82
Close: 237.07
Volume: 3667

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

Another week, another bummer. Uranium stocks just can’t seem to get a break. Possibly it’s because of the huge gains they had in the previous few years. But that was then, this is now.

It’s interesting to note the differences between the Daily and Weekly Indices. As readers remember, the Daily Index is calculated based upon the total of the component price changes divided by an appropriate number that is based upon a continuity due to component stock changes. This is basically the Dow Jones method of calculating the daily Dow Jones Industrial Average. The Weekly Index, on the other hand, is based upon the average weekly performance of all component stocks.

As the Weekly chart shows, the Index is entering a support zone from the previous mid-2006 action. It is just sitting at the top of such zone. The Daily Index was started on the first of Sept 2006 so does not have a view of the full support zone but the latest value is far below the Sept-Oct support levels. In fact one might guess that the latest Index value would have been below the zone if the Index was started a few months earlier.

So what does this mean. It just emphasizes my oft comment, “nothing is perfect”. You chooses your Index and you takes your chances. In my view both are useful for the task that I use each for. The Weekly is used for long term view of the market and is probably the best for a long term historic view. The Daily is used for short and intermediate term analysis and is great for that job. The long term differences between the two are not important, besides they are historical.

The Merv’s Weekly Uranium Index closed lower on the week by 378.08 points or 6.03%. There were 3 times as many losers as winners during the week. The winners stood at 12 while the losers at 36. Two stocks remained on the sidelines. Of the five largest stocks, Cameco lost 6.2%, Denison lost 11.1%, First Uranium lost 13.6%, Paladin lost 4.3% and Uranium One lost 8.4%. The best weekly winner was Freewest Resources with a gain of 14.8% with Uranium Resources barely behind with a gain of 14.7%. The worst loser of the week from a large group of double digit losers was Titan Uranium with a loss of 23.9%.

The week was miserable but Friday was a little bright spot. The Merv’s Daily Uranium Index closed the day up 1.55 points or 0.66%. Not much, but hey, a plus is a plus. There were 25 winners, 19 losers and 6 going nowhere. Of the five largest stocks, Cameco gained 2.2%, Denison gained 1.5%, First Uranium lost 4.5%, Paladin gained 1.2% and Uranium One gained 0.3%. The day’s price movements were all very minor. They all stayed within single digit. The best mover was Triex Minerals with a gain of 6.1% while the worst mover was Strathmore Minerals with a loss of 8.5%.

Going to the weekly chart and indicators we are still in a lousy downward slide that does not seem to end. It will end but in the mean time it’s lousy. The Index is well below its negative sloping moving average line and the momentum indicator is well placed in its negative zone. The only encouragement here, and at the present it is a small one, is the strength of the momentum indicator. It is losing some of its negative strength and the latest momentum value is still slightly above its previous low of a few months back. Unfortunately, that does not help the ratings. The long term rating must remain BEARISH.

Going to my daily chart and indicators for the shorter time periods I thought I’d just check what their long term indicators looked like. Darn, on the daily long term momentum indicator the indicator HAS dropped slightly below its previous lows of a few months back, confirming the Index move into new lows.

As far as the Merv’s Daily Uranium Index is concerned, we are pushing into new bear market lows and in all likelihood will eventually reach our next P&F chart projection of 190. The sooner it does so the sooner we can look forward to a possible recovery. In the mean time, everything said about the long term can be said about the intermediate term. The Index is below its negative moving average line. The momentum indicator is in its negative zone and below its negative trigger line. The volume indicator continues to move lower, below its negative trigger line but still well above its previous low. With so many negatives the only rating possible for the intermediate term is a BEARISH rating.

There is nothing much positive, i.e. really positive, that we can say for the short term or the immediate term direction of the Index. The Index is below its negative short term moving average line and the very short term moving average remains below the short term, showing no immediate movement upwards. The short term momentum is in its negative zone, in fact it is well inside its oversold zone (which could be seen as a possible positive) and below its negative trigger line. The more aggressive Stochastic Oscillator remains in a horizontal move just below its oversold line. It is also just a hair below its negative trigger line. Over the past week or so the SO has barely moved lower with the Index or other momentum indicators. One might almost suspect it is getting ready for a reversal, but that has not yet taken place. For the short term the rating remains as BEARISH while the immediate term direction of least resistance seems to be back into a lateral trend based upon the Friday action and the SO performance.

I know the uranium market continues to be frustrating but the time will come when the action returns to the glory days. One just has to sit back, relax, (you are out of the market, aren’t you) have a beer and wait to jump on the next confirmed bull move.