Merv's Weekly Commentary, 03 Aug 2008

Merv’s Weekly Uranium Review
for week ending 01 August 2008

Merv’s Daily Uranium Index
Market Data for Friday 01 Aug 2008

Open: 239.02
Hugh: 244.15
Low: 231.97
Close: 236.84
Volume: 3026

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

Well, here we are, another week has gone by and still we keep getting negative action. There is some sign in the long term chart and indicators that the negative activity is getting tired and we might not be far from some kind of change. Whether that change is towards a new bull market or just towards a rest period with lateral activity remains to be seen. From the long term wedge pattern that the weekly Index is trapped inside we could get a significant lateral or even upside action and still not totally reverse the existing bearish trend. However, sometimes in the future we could get a breaking of that wedge to the up side and that would signal better times ahead. We’ll just have to wait it out.

Friday was another down day in the uranium stocks. The Merv’s Daily Uranium Index closed lower by 2.59 points or 1.08%. There were 15 daily winners and 25 daily losers. The market was somewhat undecided which way it wanted to go as we had 10 stocks that remained unchanged on the day. The performance of the five largest stocks was primarily on the down side. Cameco lost 2.5%, Denison lost 6.3%, First Uranium lost 2.2%, Paladin gained 0.2% and Uranium One lost 1.4%. The best daily performer was Hathor Exploration with a gain of 8.7% while the worst daily performer was Ur-Energy with a loss of 6.9%.

As for the week as a whole, the Merv’s Weekly Uranium Index closed lower by 59.81 points or 1.01%. There were 21 weekly winners and 29 weekly losers. As for the five largest stocks, Cameco lost 2.0% on the week, Denison lost 1.5%, First Uranium lost 3.1%, Paladin gained 0.2% and Uranium One gained 10.7%. The best weekly winner was Hathor Exploration with a weekly gain of 18.9% while the worst weekly loser was Strathmore Minerals with a weekly loss of 19.5%.

There was nothing much new in the long term action as far as the chart or indicators were concerned. The Weekly Index closed below its continuing negative weekly moving average line. The momentum indicator continues to move mostly in a lateral direction inside its negative zone although it has now moved into a new low level. The one slightly positive indicator up until now was the fact that the momentum indicator was not moving lower with the Index. It is now. From the Weekly Table (posted separately) we see that for the long term the overall BULLISH/BEARISH ratings stand at 8% bullish and 72% bearish. So, for another week I must continue with a BEARISH long term rating. This is not yet a market one should be in on the buy or hold side.

Going over to the daily chart we see that the Daily Index continues to move sideways while the intermediate term moving average line continues to move lower. The momentum indicator has been moving in more of a lateral direction with the Index and it looked like it might close above its negative trigger line but today it is below the trigger. The volume indicator is also trending lower below its negative trigger line. Both the momentum and volume indicators are, however, still above their levels from early April although the Index is now considerably below its level. From the Weekly Table (posted separately) we see that for the intermediate term the overall BULLISH/BEARISH ratings stand at 13% bullish and 81% bearish. I have no alternative to continue with a BEARISH rating for the intermediate term.

On the short term the main indicator to watch is that “box” pattern that the Index has been trapped inside for the past two weeks. Whatever the indicators are saying, as long as the Index stays inside that box it could go anywhere from there. However, looking at the indicators, the Index remains below a negative sloping moving average line. The short term momentum indicator remains just above its oversold line and just above its positive sloping trigger line but still is in its negative zone. That would justify a short term rating of BEARISH.

As for the immediate direction of motion, despite the neutral movement in the Index over the past week or two the more aggressive Stochastic Oscillator had been moving steadily higher to the point it has just breached its neutral line to the up side. This sure does not seem to square with an Index that is below its very short term moving average line and the line heading lower. Until that internal strength diminishes and turns downward I will maintain that the direction of least resistance would be to the up side.

The review of the component stocks in the Index is going slowly, other more urgent problems seem to keep propping up. However I continue to work on the review and expect to have the review finished shortly. One of the time consumers is that I am considering changing the Index to just represent the 50 largest trading uranium stocks and shoving the smaller stocks into a second speculative Index which would be made up of actively traded smaller speculative and gambling variety of stocks. This is the time consumer.