for week ending 07 May 2010
Merv’s Daily Uranium Index
Market Data for Friday 07 May 2010
Note that the volume is an average volume of round lot sales for the 50 component stocks. For total volume, multiply by 5000.
Note that additional charts of the Daily and Weekly Indices were posted earlier and should be viewed during this commentary.
When it comes to resource stocks, whether they are uranium, precious metals, petroleum, etc. I do not believe in long term “investing”. With these stocks one should not, in my view, be thinking long term. One should be focusing on the short term or my preferred time period, the intermediate term. Use indicators for that specific period and follow them. Sometimes you WILL be wrong but that’s the name of the game, you take the losses with the profits but based upon the technical indicators you are going to be on the right side of the market or trend most of the time. Most importantly, you will not get killed by not acting on the down side when you should. Your worst case would be the stock turns around and you lose a little bit of potential gains. Anyone looking for perfection and is not prepared for reversals in these stocks is just asking for a slaughter in his portfolio. Dreaming or wishing is not an investment strategy.
Looking back at the Daily Index this year, it went bearish on 21 Jan and remained so for over two months, until turning bullish on 01 April. One might have jumped into to the market with good intentions of a roaring bull market into the future but the Index turned back bearish two weeks later on 16 April. Since then the Index has dropped more than 10%. Many individual stocks act with a multiplier effect so if one did not get out on the bear signal, losses could be large up to now.
One thing that this suggests is that the more the market goes down the greater the potential for huge gains will be once the market finally does turn around in earnest. One must take these whip-saw effects as something that happens and not let it demoralize one into not acting next time.
Both Indices have come down this past week to their year old support levels. What caused this past week’s slide is anyone’s guess but I guess that we can blame the Greeks. That’s as good of a guess as any. The support is expected to hold so there should be little downside left, but I wouldn’t place my hard earned money on that hope. I’d wait for the turn to occur and be confirmed by the indicators, whichever time period is your preferred time period.
On Friday the Merv’s Daily Uranium Index dropped another 2.79 points or 1.77%. There were 18 daily winners, 28 losers and 4 stocks sleeping through it all. Cameco lost 0.8%, Extract gained 0.6%, Paladin lost 1.8%, Uranium One gained 1.2% and USEC lost 4.3%. The best daily winner was RPT Resources with a gain of 14.3% while the loser of the day was Kivalliq Energy with a loss of 18.2%. Market Vectors Nuclear Energy ETF lost 2.1%.
As for the week as a whole, the Merv’s Weekly Uranium Index lost 461.53 points or 8.84%. There were only 3 weekly winners but 45 losers with 2 stocks sleeping through it all. Cameco lost 1.8%, Extract lost 5.8%, Paladin lost 11.6%, Uranium One lost 5.1% and USEC lost 29.8%. The best winner of those three was NWT Uranium with a gain of 9.8% while the worst loser was USEC with that loss of 29.8%. Market Vectors Nuclear Energy ETF lost 10.7%.
Looking at the two long term Index charts posted earlier there is very little joy one can find from them. Both are giving us the same story. They are both at their year old support levels. They are both below their negative long term moving average lines. The momentum indicators for both are in their negative zone and moving lower. Both momentum indicators have now dropped below their year old support levels, which is never a good thing. Finally, the Daily Index volume indicator is following the Index lower and is below its negative trigger line. The volume indicator is, however, still the one indicator comfortably above its year old support level. Another volume indicator, the Accumulation/Distribution indicator, shows the volume action as even more positive than does the On-Balance Volume which I use as a volume indicator. Despite the positive volume action the long term rating for both Indices remains BEARISH.
As you can expect, nothing positive is going on in the intermediate term indicators. The Daily Index remains below its negative sloping moving average line. The momentum indicator is plunging deeper into negative territory below its negative trigger line. Unfortunately the momentum indicator has not yet entered its oversold zone so there is still room left on the down side, although it does not have to use up that room before recovery. The intermediate term rating remains BEARISH. The short term moving average line is, of course, confirming the rating by being below the intermediate term line.
On the short term this is the period to keep an eye on. Any turn around should show up first here. For now nothing of the sort is yet obvious. The Index is below its negative moving average line. The momentum indicator is deep inside its negative zone below its negative trigger line. In fact, the momentum indicator is deep inside its oversold zone so one might start to expect a halt to this silly downside activity and maybe get into a rally of sorts. However, let’s wait for it. The daily volume activity has gone very negative over the past few days. For today the short term remains BEARISH.
As for the immediate direction of least resistance, well I think I’ll continue flogging a dead horse and go with the lateral direction. The Stochastic Oscillator has not plunged as has the Index suggesting the daily strength is not as negative as one might gather from the Index action. Still, we need things to turn around and that has to start sometimes, so I’ll go with a start on Monday or Tuesday.