for week ending 04 June 2010
Merv’s Daily Uranium Index
Market Data for Friday 04 Jun 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.
It looks like we are in a holding pattern. The bear seems to have been exhausted but the bull has not yet gathered enough steam for a good run. We are just below a significant down trend line and have developed a short term support. Now if only we could get enough strength to get through the trend line we might be looking at the sun once more. For now it seems we are keeping our fingers crossed that that short term support will hold.
I am often asked if there is any real relationship between the movement in uranium price versus the movement in stock price. Well, looking back at the chart price for uranium and the Merv’s Indices there is a relationship but not necessarily directly. The Indices (stocks) topped out a couple of months before uranium actually topped out. The Indices bottomed out a few months before uranium bottomed out. The subsequent rally topped both the stocks and uranium at about the same time in April/May of 2009. Since then the stocks have been in a basic holding pattern moving laterally with a slight negative bias while the price of uranium has been on the slide. Uranium price is back almost too where it was when it bottomed out while the stocks (Indices) are not even half way back to their previous lows. So where to from here?
I am looking for uranium price to start a new move towards higher ground. However, if the world’s economies should start to slide then the need for more electric generating plants may diminish for a while putting a damper on uranium need and therefore stock prices. Everything is connected only it’s hard to tell which will move first, economy, commodity, stocks?
The fundamentalist is probably tearing his hair out confused and frustrated trying to figure all that out. The technician just relaxes, has his beer, watches his games on TV and looks at his charts without worrying much. The technician adheres to the saying that a trend in motion stays in motion until it is reversed, and goes with that. He doesn’t worry WHY, WHAT, WHEN, etc.
So, why, what, when, where are we?
The Merv’s Daily Uranium Index closed lower on Friday by 3.69 points or 2.39%. There were only 9 daily winners, 33 losers and 8 going nowhere. Cameco lost 2.3%, Extract went nowhere, Fronteer gained 3.0%, Paladin lost 1.8% and Uranium One gained 0.4%. The best daily winner was CanAlaska Ventures with a gain of 9.1% while the loser of the day was Quaterra with a loss of 15.2%. Market Vectors Nuclear Energy ETF lost 4.0% (maybe the world’s economy IS going down the blaster).
As for the week as a whole, the Merv’s Weekly Uranium Index closed the week lower by 105.33 points or 2.36%. There were 10 weekly winners, 35 weekly losers and 5 going nowhere. Cameco lost 4.9% on the week, Extract lost 1.6%, Fronteer gained 4.9%, Paladin lost 0.6% and Uranium One gained 18.4% for the week. The best weekly winner was Uranium One with that 18.4% gain while the weekly loser was Uranerz Energy with a loss of 15.4%. Market Vectors Nuclear Energy ETF lost 2.5%.
On the long term both the Daily and Weekly Indices continue to be in sync. Both are below their negative moving average lines. Both of their long term momentum indicators remain in the negative zone. They are toying with their trigger lines but closed Friday below the lines, which continue to be in a negative slope. As for the volume indicator, that continues to show weakness and remains below its negative sloping trigger line. As you can imagine, both the Daily and Weekly Indices long term ratings are BEARISH.
Nothing looks good from the intermediate term either. The Daily Index remains well below its negative sloping moving average line. The momentum indicator remains in its negative zone but is moving above and below its trigger line. On Friday the momentum indicator closed just below its trigger although the trigger line remains pointing upwards. The volume indicator continues to be weak remaining below its negative trigger line. All in all, the intermediate term rating remains BEARISH. The short term moving average remains below the intermediate term average and the Index remains below that down trend line for confirmation of the bear.
As for the short term a reversal of trend seems just around the corner but not quite yet. We went bullish on Thursday but the Index turned lower on Friday nullifying that rating for now. The Daily Index closed below its short term moving average line and the slope of the line once more turned downward (after only one day on the up side). The short term momentum indicator, which was getting close to its neutral line, has once more turned lower and closed below its negative trigger line. The daily volume activity remains sluggish and below its average level for the past 15 days. All in all, the short term rating is once more at the BEARISH level. The very short term moving average line, although moving downward, remains above the short term moving average line and not confirming the change to a bear rating. We are at such a state that minor moves by the Index seem to have a major effect on the indicators and ratings.
As for the immediate direction of least resistance, I will stick with my previous lateral direction for now. The Stochastic Oscillator is suggesting some minor strength behind the very recent Index move and is now pointing upward but is still in its negative zone and below its negative trigger line. Maybe one more day and it will turn positive.