for week ending 14 January 2011
Merv’s Daily Uranium Index
Market Data for Friday 14 Jan 2011
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.
Friday put a dint into a steady up and up week in the uranium stocks but you could almost see the top forming the previous day. Once again one can see the weakening in the momentum indicators, the 13 Day RSI posted here, the 30 Week RSI posted earlier or the 50 Day RSI posted on Thursday. Maybe a word about weakening momentum is in order.
As you all realize for my commentaries I use the Relative Strength Index (RSI) as my default momentum indicator. In the Table posted each week I use a proprietary momentum indicator that I had developed specifically for the Table information and this may give us a slightly different message at times. Many, if not most, technicians and non-technicians use the MACD indicator. I have my problems with the MACD but it would take too much time to go through them today.
My simple definition of a momentum indicator is an indicator that in some way tries to measure the strength of the recent price action, up or down.
Weakening of the momentum indicator suggests that the momentum indicator is not performing as well as the price relative to their recent performance. Looking at the 13 Day RSI posted here you can see that as the Index was reaching new highs in early Dec and later in early Jan the RSI was not making similar new highs but was making slightly lower highs on each move. This shows a weakening process in the strength of the price move. So what, you might say? That would be a very good comment.
All that the momentum is telling us is that the strength of the most recent moves are a “little bit” less strong than the previous move. However, when the momentum indicator is at a high strength level to start with a “little bit” of strength reduction may not be of concern. That is why I so often caution that this is only a warning and not a prediction of coming events.
When the strength of a move (I often interchange the terms “strength” and “momentum” as to me they are the same thing) is way up there at the 70% or higher level one cannot expect the trend to continue at that level of strength for long. When the strength of a move is in the 50% to 60% level then a decline in strength is getting us nearer and nearer to a negative strength or at a level from when reversals of move occur. So, one must understand if the momentum is strengthening or getting weaker BUT ALSO what the level of strength we are talking about.
If we have a momentum peak at the 75% level and then during the next price rise to new highs the momentum only reaches 70%, that shows weakening but is not really a concern because the strength of the price move is still quite high. If the momentum peaked at the 60% level instead (while the price made a new high) then we would see a serious weakening in the momentum and this WOULD be a concern. A lot of this is judgment.
One final point about momentum. I think I am about the only technician that uses different time period momentum indicators when analyzing different investment time period activity (at least I don’t know of any other technician that does this). Most, if not all, technicians use a short term momentum such as a 13 or 14 day RSI to analyze ALL time period activity, whether short term trading or long term investing. I’m always curious as to why use a short term indicator when one is considering long term investments. Something just doesn’t seem to be right. To each their own.
Where was I before I got sidelined? I hope that illuminates the use of the term momentum and strength in these commentaries. Now, back to the real world.
The Merv’s Daily Uranium Index closed on Friday down 0.58 points or 0.23%. There were 19 winners, 22 losers and 9 stocks totally disoriented as to which way to go. Cameco gained 0.7%, Denison gained 1.2%, Extract was one of those disoriented, Paladin gained 0.6% and Uranium One gained 3.0%. The best daily performer was Energy Fuels but with only a 4.5% gain. The worst daily performer was Xemplar Energy with a loss of 7.1%. Market Vectors Nuclear Energy ETF gained 0.8% while the Global X Uranium ETF was totally confused which way to go.
For the week as a whole the Merv’s Weekly Uranium Index closed the week at 10472.87, up 693.13 for the week, or 7.09%. The Daily Index closed the week with a weekly gain of 4.76%. There were 38 weekly winners, 12 weekly losers and no stocks confused which way to go on the week. Cameco gained 4.5% for the week, Denison gained 11.9%, Extract gained 3.9%, Paladin gained 7.5% and Uranium One gained 19.9%. The best weekly winner was Powertech Uranium with a gain of 31.4% while the worst weekly loser was NWT Uranium but with only a 4.4% weekly loss. Market Vectors Nuclear Energy ETF gained 4.0% on the week while Global X Uranium ETF gained 6.9%.
Apart from the % difference in the performances of the Weekly and Daily Indices since the bull trend started we once more see the Weekly Index making new recovery highs while the Daily is not yet there at new recovery highs. The more speculative stocks continue to be the performers.
The long term indicators have not changed lately and one would not expect them to change until there is some significant downside in the markets. Both, the Weekly and Daily Indices are zooming ever higher and are way above their positive sloping long term moving average lines. Both momentum indicators are also way up there in their positive zones. Nothing serious going on here yet. The volume indicator has been moving sideways recently but remains above its positive trigger line. Both Indices are rated as BULLISH from the long term perspective.
On the Intermediate term the Daily Index things are still going great. The Daily Index is still well above its positive moving average line after coming close to the line a week or so ago. The momentum indicator remains in its positive zone although it has been showing a steady decline in strength over the past two months. It is, however, slightly below its negative sloping trigger line. The volume indicator remains above its positive trigger line after being below the line for a few days a week back. All is still in place for a rating of BULLISH. This rating is confirmed by the short term moving average line remaining above the intermediate term line.
On the short term things are bouncing around somewhat. This week the Daily Index closed above its moving average line and the line slope is once more in an upward track. The momentum indicator remains in its positive zone and is above its positive sloping trigger line. The daily volume action is neutral with the Friday volume being about at its average 15 day value. All in all the short term can be rated as BULLISH. The very short term moving average line has just moved very slightly above the short term line for confirmation of this bull.
As for the immediate direction of least resistance, I’m going with the lateral direction again. It does look like the down side is starting to show its face and lower Index levels are ahead but I’ll still go with the lateral.