Next Big Trade In Search Of Bull Markets

28Aug/140

Tweets, Headlines, and Charts for 2014-08-27

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27Aug/140

Bull Bear Report

I'm introducing a new report to the site called the "Bull Bear Report".  This is a simple trend following model using a moving average crossover system to determine if a market is in a bull market or a bear market.  The moving averages I am using are the 9-month EMA and the 12-month EMA.  When the 9-month is above the 12-month, the market is in a bull market.  When the 9-month is below the 12-month, the market is in a bear market. The report contains how many months there has been since the last crossover, which provides a duration for the bull or bear market.  This is important because it helps identify markets that are late in bull or bear markets, or early in new bull or bear markets.  The idea would be to be skeptical of markets that have been in bull or bear markets for a long time (the rough average for a cyclical bull market is 3-5 years and a cyclical bear market 1-3 years) and be interested in markets that are potentially entering new bull or bear markets. This system works well for trending bull and bear markets, as you can see in the chart of GDX below.  GDX had a fairly clean bull signal in 2009 and a bear signal in early 2012 without a lot of crossover.

gdx

For choppy bear markets this system does not work well, such as what happened with EEM between 2012 and 2014.  Multiple false signals in both directions.  Choppy markets are the nemesis of trend followers.

eem

In the current report, we can see that the major indexes such as the Nasdaq, S&P 500, and Dow Jones are all in near 5-year bull markets.  Major market sectors are approaching 5 year bull markets too.  I'm not surprised that things like energy have been catching up this year because as you can see on the report they were not as deep into their bull markets as other major markets. On the early bull market side we have things like Palladium, Coffee, Emerging Markets, and Bonds.  On the bear side most of the things in bear markets are commodities related.  Notice that copper and gold miners are now almost in 3-year bear markets.  The GCC commodities index actually just threw a whipsaw signal swinging back to a bear market over the last couple of months. So the overall picture is one of stock indexes and sectors in later stage bull markets and commodities in later stage bear markets.  Bonds and some commodities and emerging markets are in early bull markets.  I will publish these results each month to capture trend changes with the idea of finding early bull markets to profit from.

Bull Markets

Ticker Months Chart
SHY 133 Chart
XRT 61 Chart
QQQ 60 Chart
XLK 60 Chart
XLY 59 Chart
XLP 59 Chart
DIA 58 Chart
XLV 58 Chart
SPY 57 Chart
IWM 57 Chart
IYT 57 Chart
XLI 57 Chart
IYR 56 Chart
XLU 54 Chart
XLE 47 Chart
XHB 33 Chart
XLB 32 Chart
IYZ 31 Chart
XLF 30 Chart
PALL 21 Chart
OIL 13 Chart
FXE 13 Chart
FXF 12 Chart
FXB 11 Chart
EEM 5 Chart
JO 5 Chart
IEF 4 Chart
TLT 4 Chart

 

Bear Markets

Ticker Months Chart
JJC 35 Chart
GDXJ 33 Chart
GDX 30 Chart
CANE 23 Chart
FXY 22 Chart
SLV 21 Chart
PPLT 19 Chart
WEAT 19 Chart
SIL 19 Chart
FXC 19 Chart
GLD 18 Chart
CORN 17 Chart
FXA 16 Chart
UUP 12 Chart
GCC 2 Chart
SOYB 1 Chart

 

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27Aug/140

Tweets, Headlines, and Charts for 2014-08-26

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26Aug/140

Tweets, Headlines, and Charts for 2014-08-25

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25Aug/140

Starcore (SAM.TO) An UnParalleled Market Mis-Pricing

Of the universe of 6,774 stocks and ETFs you can screen on Finviz.com only 11 sport a dividend of over 10% and a P/E ratio of less than 5.  Pretty much all of them are involved in the oil and gas space as trusts.  So Starcore (SAM.TO) is a unique stock in that it sits there sporting a dividend close to 10% still and with such a low P/E ratio of less than 5.  The reason it's so unnoticed and undervalued is it's in the gold mining space, which everyone still loathes and wants to ignore, and it's a small cap stock with one producing property.

But oh how things will change for this and other gold mining stocks whenever gold goes into a new bull phase.  Profits will expand, and with these companies going through a lean and mean bear market they will emerge with earnings growth that will literally ignite their share prices once this thing gets going.  Starcore, a gold miner willing to share a good portion of these profits with shareholders is going to start getting the valuation of a dividend paying stock, which is going to be a lot higher.

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

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25Aug/140

Tweets, Headlines, and Charts for 2014-08-24

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24Aug/140

Starcore (SAM.TO) vs. Gold Resource Corp. (GORO)

Instead of a weekend report I'd like to do a quick comparison of two gold stocks, and discuss why I think Starcore is still a great opportunity.  I own shares of Starcore and am biased so take what I say with that in mind.

After Starcore indicated last year that they'd pay up to 50% of their earnings as dividends I thought it was a great opportunity that the market was completely ignoring.  To do a comparison though with what that would mean to the stock I looked at a similar gold stock that paid 50% of their earnings as dividends, and that was Gold Resource Corp.  GORO has since reduced their payout ratio to around 25% of earnings due to low gold prices and other issues.  But that is still a nice payout ratio for a mining stock and the market has rewarded GORO with a higher market cap than it would normally have with no dividend.

If you want to boil it all down to simple numbers, currently GORO produces about 3X as much gold as Starcore, but has a market capitalization of 10x of Starcore.  And with Starcore's new dividend, assuming they payout another annual dividend of about the same amount next year, Starcore has a similar payout ratio to GORO.  So either the market is overvaluing GORO or undervaluing Starcore or both because the discrepancy in valuations doesn't make a lot of sense.  GORO does have more properties than Starcore but since they aren't producing for GORO they shouldn't be worth much in the current marketplace.

So given the fact that Starcore is now a dividend paying stock, if it was valued at a simliar valuation to GORO given its gold production numbers it would have a 75 million to 100 million market cap.  Instead it only has a 30 million market cap currently.  So in my view Starcore could easily double from here and not even blink an eye because it's undervalued compared to other mining stocks.  And that would still put the dividend at 5% if Starcore traded at 40 cents assuming they pay another 2 cent dividend next year.  That would still be one of the highest dividends of any gold mining stock and that's after 100% price appreciation from here.

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

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