Merv's Week-End Commentary, 23 Nov 2008

Merv’s Weekly Uranium Review
for week ending 21 November 2008

Merv’s Daily Uranium Index
Market Data for Friday 21 Nov 2008

Open: 99.45
Hugh: 102.48
Low: 92.02
Close: 99.32
Volume: 5345

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

Just finished my weekly gold commentary and service. Boy what a day they had on Friday. Bullion and stocks going through the roof. Volumes way on the high side. One would almost think that we were in on a new bull market in the precious metals. But it may be all an illusion. One day does not make a new trend (where have I heard that before?). For those interested in gold you may read my commentary at www.preciousmetalscentral.com or at a dozen other sites such as www.kitco.com, www.kitcocasey.com, www.gold-eagle.com, www.marketoracle.co.uk and many others. Although sent, the commentary may not necessarily be posted yet on some sites. Back to uranium.

For the week it was another bummer. For Friday it was a “halt at the support” day. We are getting a mixed message from the Weekly versus the Daily Index. The Daily Index halted its decline at the box support while the Weekly Index made a new bear market low. Which, oh which is giving us the true story? Stay tuned as this mystery unravels itself over the next few days. In the mean time, on with the usual week-end wrap-up.

The Merv’s Daily Uranium Index closed higher by 4.33 points or 4.56%. There were 32 winners, 13 losers and 5 going nowhere. Of the five largest stocks by market value (which is diminishing rapidly) Cameco gained 8.0% on the day, Denison gained 0.8%, Paladin gained 18.3%, Uranium One gained 16.0% and USEC gained 3.1% on the day. The best daily winner was Powertech Uranium with a gain of 20.5% while the worst loser was Energy Fuels with a daily loss of 18.0%.

On the week as a whole, the Merv’s Weekly Uranium Index lost 324.43 points or 14.69%. There were only 5 stocks making it into the weekly winner’s circle. There were 44 stocks in the loser’s circle leaving only one stock that didn’t know which circle to get into. Of the five largest stocks Cameco lost 4.6% on the week, Denison lost 12.8%, Paladin lost 10.2%, Uranium One lost 20.9% and USEC lost 18.6% on the week. The best of the few was Forsys Metals with a weekly gain of 15.3% while the worst of the week was Azimut Exploration with a weekly loss of 36.7%.

Despite the fact that the Weekly Index made a new low there is actually a good explanation for it and it makes things a little better. The Weekly Index is based upon the closing price on Friday. It does not show any of the intraday values or any of the Monday through Thursday closes. It just reflects the weekly Friday changes in value. If we go back to the Daily Index and ONLY used the Friday close we would get the same picture, a new low based upon Friday close only. Using the Friday close for the Weekly data is still okay as we are looking at long term and using weekly Friday close data for the indicators. For the intermediate and short term one should use all the data available as I do for those time periods.

So, once again nothing much has changed for the long term. The Weekly (and Daily) Index closed well below its long term negative moving average line. The momentum indicator remains in its negative zone. It has been toying with that oversold line for a few weeks so I keep expecting a rally of some magnitude ahead, but it keeps evading me. On the long term the rating remains BEARISH.

Going to the daily Index things continue to be more in the negative phase than the positive phase. The Index remains below its negative sloping moving average line with the line now well inside the box. The momentum indicator continues in its negative zone but is showing a greater resistance to moving lower than is shown by the Index. This may be seen as internal strength in the Index action not seen directly by the view of the Index itself. The indicator also remains below its negative trigger line although it is not much below it. The volume indicator is basically conforming to the actions of the Index and remains below its negative trigger line. All in all the intermediate term remains BEARISH.

As for the short term the most interesting event is the daily bounce by the Daily Index off its lower box support line. During the day the Index started on the up side then meandered lower, testing the support, and bounced back to close on the up side. This does suggest that the Index does not want to move much lower but is not yet (at least up to Friday) want to move higher. The recent rally and good weekly move by uranium itself may be a factor here but as a technician I usually do not care what is driving the action. Although Friday was an interesting upside day it was not enough to change any of the indicators. The Index remains below its negative sloping short term moving average line. The momentum indicator remains in its negative zone just very slightly below its negative trigger line. The daily volume action remains on the low side although in a down trend this does not mean much. Lastly, the very short term moving average remains below the short term average for further confirmation that the short term rating remains BEARISH.

As for the immediate direction of least resistance, that’s a toughie. With the Daily Index closing near its high for the day on Friday one should be looking at higher prices ahead as the trend continues. I foresee the trend now moving back towards the upper resistance line of the box. However, other than that daily action there is nothing else in the indicators to provide me with such a conclusion so I’ll play it safe and go with a lateral immediate move.

Usually the stocks move ahead of the commodity. This time it seems that the commodity is moving first. Let’s hope so. We could use a good rally about now.