Merv's Weekly Commentary, 10 Aug 2008

Merv’s Weekly Uranium Review
for week ending 08 August 2008

Merv’s Daily Uranium Index
Market Data for Friday 08 Aug 2008

Open: 224.88
Hugh: 227.84
Low: 216.94
Close: 222.36
Volume: 2855

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. We know that it’s not going to go on like this forever (or at least we hope not) but we just don’t know exactly when it will stop. The best that we can do is follow what the market is telling us and “go with the flow”. When that flow reverses we will be there very shortly after based upon the charts and indicators. One does understand that the longer the investment time frame one is looking at then the further away from the reversal point would the indicators give a reversal signal. The shorter the investment time frame then the closer the signal will be from the reversal point. Technically, one never expects the reversal signal to be right at the reversal date. Technicians have means of determining actual reversal dates but these are very risky and prone to many “whip-saws”. Such reversal dates are also of a very short term nature and should not be used by the intermediate or long term investor. In this blog you get a quick assessment of the technical position of uranium stocks for all three basic time periods; short, intermediate and long term (the long term only during the week-end commentary).

When looking at the charts and indicators the longer the investment time frame we are looking at the less the volatility of the activity. We are far less likely to get market reversals while following long term charts and indicators than we would while following short term ones. In today’s Weekly Index chart the indicators time period is what I call the very long term. The momentum indicator and the Index moving average reflect a one year time period (52 weeks). This gives us a very long term perspective of where we were and where we are.

In a nut shell the Weekly Index was developed years ago with the starting date of 03 Jan 2003 at an Index value of 100.00. How low the Index might have been prior to 2003 is an unknown. The Index reached its highest point on 13 April 2007 with a value of 14512.58 for a 4 ¼ year move of 14,413%. Since then it has fallen 63% to the present level of 5378.63. Although that is still 5280% above the initial starting point anyone who didn’t get into the uranium stock market until after early 2006 is most likely sitting on losses, if one were a buy and hold investor.

On to our normal week-end review. The Merv’s Daily Uranium Index closed on Friday with a loss of 3.18 points or 1.41%. There were 11 daily winners, 35 daily losers and 4 going nowhere. It was not a good day. Of the five largest stocks by market value, Cameco gained 1.2%, Denison lost 3.8%, First Uranium lost 2.3%, Paladin lost 0.2% and Uranium Participation lost 2.8%. The best daily performer was Western Uranium with a daily gain of 23.9%. The worst daily performer was Crosshair Exploration with a daily loss of 14.6%.

For the week as a whole, the Merv’s Weekly Uranium Index closed with a 454.82 point loss or 7.80%. There were only 4 weekly winners out of the 50 component stocks. There were 44 weekly losers and 2 unchanged. As for the top five stocks by market value, Cameco closed the week with a 2.4% loss, Denison lost 16.0% on the week, First Uranium gained 4.5% during the week, Paladin lost 12.4% on the week and Uranium Participation lost 7.6% during the week. The best weekly performer of those four that closed on the up side was Vena Resources with a weekly gain of 6.4%. The worst weekly performer was Kodiak Exploration with a weekly loss of 23.3%. Just as a note as to how bad the week was, there were 16 stocks with double digit losses during the week.

Looking at the normal weekly chart we see that nothing has changed from last week as far as the long term indicators are concerned. Since 03 Aug 2007 when the long term (40 WMAw) moving average turned downward it has been in a slide ever since, and still is. The Index remains below this negative moving average line. The long term momentum indicator also went into its negative zone at the same date as the moving average turned down. This, after a three month warning moving downwards from its overbought zone. The momentum remains in the negative zone. On the long term there is still no reason to upgrade the rating. It remains BEARISH.

Going over to the Merv’s Daily Index for our other time period analysis we see that the Index remains below its negative intermediate term moving average line and continues to make new bear market lows. The intermediate term momentum indicator also remains in its negative zone below its negative sloping trigger line. This indicator is not quite making new bear market lows but one would not yet call it a positive divergence, just a slight show of less weakness than the Index itself. As for the volume indicator, it is confirming the momentum indicator. It is still negative and below its trigger line but not quite into new bear market lows. Still, all in all there is nothing here to change the intermediate term rating. It too remains as BEARISH.

The short and very short term indicators are shown in the week-end Daily Index chart. On the short term the Index remains below its negative sloping moving average line and the line remains below the more aggressive very short term line. The short term momentum indicator remains in its negative zone and inside its oversold line. It is also below its negative sloping trigger line. The daily trading volume remains quite low suggesting a lack of speculative interest at this time. From all this one can only rate the short term as BEARISH.

Although the aggressive Stochastic Oscillator (SO) continues to flatten out it still remains in its negative zone below its trigger line. The daily Index action seems to be moving sideways but with a negative bias. It is still below its negative very short term moving average line. This all suggests that the immediate direction of least resistance remains towards the down side.

Let’s hope this week will bring some cheer.