Merv's Week-End Commentary, 19 Oct 2008

Merv’s Weekly Uranium Review
for week ending 17 October 2008

Merv’s Daily Uranium Index
Market Data for Friday 17 Oct 2008

Open: 105.60
Hugh: 114.24
Low: 101.02
Close: 108.16
Volume: 5316

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

Tuesday was a good day (Monday was a holiday), Wednesday was not. Then we drifted sideways for two days. Yes, yesterday was an up day but very little relatively speaking. We are once more boxed in with an upper resistance and a lower support. Whichever is overcome should tell us the direction for some time. Although the upper and lower levels of the box are based upon daily highs and lows I do require the Index to close above or below these levels to consider it a break-out. The week as a whole closed on the up side although looking at the Weekly Index one would not know it. One should not expect a sudden reversal of trend from here. There has been too much damage done to the Indices and they need to take time to repair. Although sudden reversals DO happen, don’t expect so. It may take weeks or even months of strength building before we get a good reversal and new trend.

The Merv’s Daily Uranium Index closed higher on Friday with a gain of 2.65 points or 2.52%. There were 29 winners on the day, 15 losers and 6 going nowhere. Of the five largest stocks by market value, Cameco gained 3.7%, Denison gained 3.0%, Paladin gained 3.9%, Uranium One gained 11.2% and USEC was the only loser of the bunch with a loss of 2.3%. The best winner on the day was Continental Precious with a gain of 26.7% while the loser of the day was Powertech Uranium with a loss of 15.4%.

On the week the Merv’s Weekly Uranium Index gained 143.78 points or 6.4%, all due to Tuesday’s move. There were 30 weekly gainers, 18 weekly losers and 2 going nowhere. As for the five largest stocks Cameco gained 7.9% on the week, Denison gained 3.0%, Paladin lost 6.4%, Uranium One gained 8.8% and USEC lost 5.8%. The best weekly gainer was Forsys Metals with a weekly gain of 84.9% while the worst loser of the week was Bayswater Uranium with a weekly loss of 24.0%.

From a long term stand point we are still far from any reversal of trend. The Weekly Index is still way below the long term negative sloping moving average line and the momentum indicator remains deep inside the negative zone. He momentum is toying with that oversold line and is just a hair below the line, but it is still below its negative sloping trigger line. All in all, the long term rating must remain BEARISH.

The intermediate term is not much better. The Merv’s Daily Uranium Index remains well below its negative sloping moving average line. The momentum indicator remains deep in its negative zone although it had recently moved above its oversold line. That usually indicates a possible rally ahead. The momentum is also just above its trigger line and the trigger has now turned to the horizontal (from a downward slope). The volume indicator also remains in a negative mode below its negative sloping trigger line. Although things seem to be moving towards the positive I cannot rate the intermediate term other than BEARISH at this time.

The short term has gone into a lateral trend as shown by the box pattern. Having said that let’s see what the indicators are saying. The Daily Index itself is just below the negative sloping moving average line. The momentum indicator is still deep inside its negative zone and still inside its oversold zone although it does seem to be perking up a little. It is above its positive sloping trigger line and has been for days. The daily volume action is not all that great but that is to be expected. The short term rating, from all this, remains BEARISH however an upgrade may only be a day or two away should the Index continue to climb.

As for the direction of least resistance, that’s a difficult one. Although the Index is still below its very short term moving average line and the line remains negative, the line is starting to make its turn towards the positive. The Stochastic Oscillator which has been positive for the past week and a half has finally moved below its trigger line. The trigger is still, however, sloping upwards. Then we have the box. I’m inclined to call the direction of least resistance as lateral until I can get a better combinations of indicators.

I’m sure that things will reverse at some point. In the mean time it would be great if there was another sector of the market that is doing great as a place to profit. Unfortunately we seem to be in a very strong bear market all over the place. My Dow signaled a bear back in December (same for the S&P 500) and is showing no signs of turning. I guess it’s just as well to keep your capital in some risk free security or in cash until things turn around. Whichever market you may be interested in remember one sure fire thing, there will be analysts ready to call the turn on a day’s action and they most likely will do it a few times during the bear market. It’s better to wait for the market itself to confirm a turn had taken place and go with an established new trend. As far as uranium stocks are concerned, you will hear the reversal signal here. As far as gold and silver stocks are concerned, well you will need to subscribe to the Merv’s Precious Metals Central for that information. Check it out at http://preciousmetalscentral.com.