This Week’s Commentary – January 19, 2008 – Numbers and Charts

by JDH on January 19, 2008

Let’s start with some numbers:

Year to date the Dow Jones Industrial Average is down 8.79%.

The Nasdaq Composite Index is down 11.77%.

The S&P 500 Index is down 9.75%.

The Gold Bugs Index (The HUI) was at 409.37 at the close on December 31, 2007, and closed Friday at 436.80, so by my calculations that’s an increase on the year of 6.7%.

My portfolio on the year is now down 2.7%, which means I am doing better than the Dow, Nasdaq and S&P, but worse than if I had invested in HUI gold stocks.

My portfolio’s downers have obviously been the uranium stocks; the good performers have been in gold and silver, and my losses were mitigated by the covered writing program I did on my gold and silver stocks, all of which ended up working out well, except for the position I took on K.TO – Kinross Gold Corp., which I had to buy back at a loss.

So what happens from here? Have we climbed the wall of worry yet? I doubt it.

Gold Chart

Obviously gold has had a small consolidation; past history would indicate more consolidation, but who knows, it could easily rally from here. Either way, I fully expect to see $1,000 gold in the next few months, so I plan to hold my core gold holdings, and buy more on dips.

Agnico Eagle

Obviously AEM.TO – Agnico Eagle Mines Ltd. had a big dip, so I’m glad I sold it near the top, as I suggested I would. Unfortunately I didn’t do the same on my other gold stocks (I didn’t sell others because most of them were covered; that’s the disadvantage to my covered write strategy; it helps mitigates my losses, but makes it harder to sell the stock when you want to). With this big drop, Agnico may now be at a buy point again, so I may start dabbling.

G.TO – Goldcorp Inc.‘s chart looks much the same:


The RSI is now back to more favourable levels, so I have no plans to sell at this level.

Some silver stocks have gotten hit hard, and so it’s probably time now to average down, like on FVI.V – Fortuna Silver Mines Inc.

Fortuna Silver

It looks like the retest of the August lows was successful (it held), and the RSI looks good, and it was actually up on Friday, so I’ll be buying more on Monday. (Monday isn’t a holiday in Canada).

The uraniums aren’t as pretty looking.

Fronteer Development

FRG.TO – Fronteer Development Group Inc. has held it’s August lows (due in part to it’s gold holdings); support is probably in the $9 range, so it’s too early to start buying more at this point.

Here’s an awful looking chart:

Denison Mines

DML.TO – Denison Mines Corp. appears to have broken down in a big way. We are now back down to levels not seen since November, 2006. The RSI is at 28.56, and anything below the 30 level is generally a good place to start a rally, but that could be a month or two away. I think for now I will hold my nose and hold it; I don’t have the guts to average down at this point, although hindsight may prove that that was the prudent move. (We’ll see how I feel on Monday; if we have another down day, I may take the plunge).

Finally, here’s another chart that sucks: PXP.V – Pitchstone Exploration Ltd.


I have highlighted in the green bands periods when the RSI was below the 30 level, which again tend to be good rally points. Again, I don’t think I have the guts to be buying more at these levels, but stink bids around $1.50 may not be a bad idea.

The Plan for The Week

I suspect that this will be a week where I continue to thin out the losers, and place stink bids on the stocks I want to hold long term in the hopes of picking them up cheap on down days.

I also think that the percentage of cash in my portfolio will continue to increase, as I sell losers and don’t replace them with anything.

The economy in the U.S. sucks so bad that George W. wants to give every American cash. (I assume Americans don’t realize that all he is doing is giving them back their own cash, or more precisely just borrowing the money to give them?) That type of strategy is bound to end in disaster, so over the medium term our gold and silver holdings will do great, so for this week I will try to exercise a little patience.

As always, thanks for reading, and feel free to post your thoughts on the Buy High Sell Higher Forum.

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