Charts of Interest: AUY / SWC / CUP / NEM / KBX

Comments: Now that KBX has breached the 2.35-2.40 resistance, the next target is around 2.67. After that I'd expect some bouncing around beween 2.40 and 2.65 since KBX is now starting to get very overbought in the short term. This chart looks great though, especially after a pullback. I don't hold KBX at the more, but I recommended it to a few (very patient) friends quite a while back and I think it could work out quite well for them eventually.

Comments: I'm a little excited about this stock. After filling the May gap, there's a possibility of a big move up. But it's still risky. Have to keep in mind that they recently announced the resignation of their CFO AND their CEO. Even though no scandal was involved, you kind of have to wonder what's going on. Still, if Copper prices rally in the face of all those people who have been recently claiming that the Copper bull market is over, and if CUP announces any decent new names to fill the places of the departed officers, CUP could be a huge winner and it looks like a speculative buy right here. I hold a bit of CUP in my trading portfolio.

Comments: They keep saying that a platinum ETF is unlikely because the supply is too scarce and so a platinum ETF would disrupt the platinum market. Does that sound familiar to you at all. Bullish on this stock, but I sold today as it looked like it might be hitting the upper channel. But you know me, always selling too early.

Comments: Hankering for a break of the downtrend. It would be helpful if this bellweather stock adopted a more bullish posture. Considering what happend to GG after their recent merger announcement, I actually think that NEM's recently enunciated policy of favoring growth through exploration and addition of smaller pieces rather than rushing towards a big merger is actually bullish for this stock. Investors should at least be assured that the same thing that happened to GG's shareprice won't happen anytime soon to NEM. I'm holding January callsin NEM.

Comments: After a huge run up recently, I expect some consolidation. But eventually AUY could end upa big winner. It's close to its all time highs. Beyond that, the sky could be the limit. Or more precisely, $14. I'm holding January calls in AUY and also have it in my trading portfolio.

FCX / PD Merger

Freeport McMoran Copper & Gold Inc. will acquire copper giant Phelps Dodge Corp. in a $26 billion cash and stock transaction.

Related Article: [http://biz.yahoo.com/ap/061120/freeport_phelps_dodge.html?.v=14]

This is an interesting deal for the shareholders of both companies. The benefits to holders of PD are obvious as the deal is priced at a 33% premium to PD's closing price as of November 17 and the stock is currently trading up 28% as I write this. However, the deal could also be a good one for shareholders of FCX. Richard C. Adkerson, president and CEO of Freeport-McMoRan has stated that the deal will be immediately accretive in earnings and cash flow for FCX, and PD also offers the largest copper reserves in the world of any company. The deal will also enable FCX to diversify away from its dependence on the gigantic Grasberg mine in Indonesia.

Although Adkerson downplayed any possible pricing power issues arising as a result of the merger, stating that "we will be a large company, but not anything like one that will cause any concerns," I nevertheless find it significant that Copper futures were up on the news of the merger, which will create the largest copper miner in the world. I think that says something about the potential leverage the combined company may be able to bring to pricing negotiations as a supplier.

Checking in at the New York Times version of the merger, it sure looks like the NYT still has a woody for Freeport. In the NYT report about the merger, it's hard to tell whether the article is about the merger or about the environmental and human rights "contrversies" that have supposedly dogged Freeport? Or rather, about the controversies with which the New York Times has dogged Freeport? One thing is certain however: those guys at the Times need to focus more on reporting the news and less on pushing their agenda. I think they're losing their ability to distinguish between one and the other. For a company that has had some spectacular lapses in their internal controls (Jason Blair) the NYT sure can get pretty self-righteous and crusader-like about some things, the mining sector being among them.

Related Article: (you have to copy and paste the link into your web browser because the entire link won't fit if I post it as an active link)

[http://www.nytimes.com/2006/11/20/
business/worldbusiness/20deal.html]

HUI Chart & Commentary

Comments: Now that we're caught between the 50 and the 200 day moving averages, some bouncing around between the two is possible before the next move up. The trend is down until proven otherwise.

Last Week Portfolio Gain/Loss: -3.76%. A reentry much too early snapped my 5 week portfolio gain streak. That made me mad as hell. Realistically, it may still take a week or two before we begin the move up again, but I'm probably just going to sit on my positions for now.

XAU 5 Day Timing Chart

Comments: Looks like Gold is staying above $620 after a brief dip below. Gold stocks may be a buy upon a retest of the lower trendline or upon a breach of the upper downtrendline. The 135 XAU area may also offer support. Although the stocks are having a nice recovery rally right now, it's probably best to stay on the sidelines and watch a little longer. It seems a bit too quick for the consolidation to be over and today the minutes of the FOMC meeting will be released so there is always the possibility of negative a surprise there. Even upon a break of the downtrend, I think that the most likely event is a return to the previous high at 142.5, before further sideways consolidation.

How Low?

Comments: How low will Gold go? The $620 area is quite important. below that I think we'll see a slightly deeper correction with the HUI going below its 200 day MA. I think there is a fairly decent likelihood of this happening since we recently had a bearish moving average crossover. According to one projection, I see the HUI going as low as 308. but it seems a bit unlikely that it will fall that low. Still, it's probably best to play it safe now than to be sorry.

I've sold down my precioous metals exposure during the last few days down to about 20% portfolio exposure. STP has been going to bat for me in alternative energy and I just sold HAL stock and calls around the day's highs for a modest profit ahead of its KBR spinoff pricing. These two have helped to keep me in the positive this week, while NTO (which I sold yesterday) was a serious drag on my results. Still, all in all, so far so good. Nursing a modest profit for the week.

I've gradually been raising capital to buy back into gold and silver stocks. SWC, PAL, SLW, GSS, SSRI, and AUY are some of the ones that I will be looking to possibly enter when this correction looks like it has run its course. I know, I know... GSS... not that great a company, but if you've been reading the updates here, maybe you can understand why.

Charts of Interest - STP / PAAS

Comments: STP may be on the verge of a downtrend break. If it does break the downtrend, the next points of resistance would be 28, 30 and 32. with 30 to 32 the most likely next major resistance.

Comments: Relative Strength. Can PAAS stay above its broken downtrend? I'm betting it can. Certainly an upgrade to sector outperform by CIBC while some other precious metal stocks are getting slammed doesn't hurt. Actually, SLW has also been showing a lot of relative strength today

Did I mention that I'm more bullish on Silver than I am on Gold?

HUI Chart & Commentary

Comments: Looks like consolidation time. Let's see if we can maintain above the 200 day MA and the up trendline. I sold a little bit on Friday, though it probably would have been better to sell more.

Last Week's Profit/Loss: +0.38%. Even though my gain was again paltry last week, it was still my 5th straight week of gains. If there is a pullback in Gold/Silver, the trick will be to somehow maintain my winning streak--that's going to be a challenge. This coming week will be very important for me as a trader in how I manage risk.

Current Portfolio Exposure: 47% Energy + Calls; 19% Gold; 15% Silver; 8% Base Metals; 11% Cash. I think I'm a bit over exposed in Energy going into next week. On the other hand, being fairly diversified across the commodities should help to lower risk. I currently like Silver more than Gold on this move. I will be looking to add SSRI, PAAS and/or SLW during any weakness. Also like GSS (I know, it's always in the crapper...)

Update: Golden Star Resources (GSS)

I received the below detailed update about GSS's third quarter results in which GSS swung to a profit of 1.4 cents per share from an investor who has been closely following this stock for quite some time:

"Game winning home run in the bottom of the 9th!

Concerns/results:

* Apparent end of rainy season left Biox start-up in question. / Biox being treated as an existing facility. 75% of needed power already allocated. Shortfall being made up with diesel and Prestea Underground work idled. 3.5mm TPA new plant has already been running for several weeks. Should bring in another 35 - 50,000 ounces of production in Q4.

* Existing Bogoso and Wassa plants could face further power cutbacks. / Not going to happen. Aboadze generating station back in full service any day. Reservoir water levels have risen sufficiently to increase hydro power. These 2 mills are scheduled to produce 52,000 oz. in Q4, even with current power curtailment.

* Lower production meant they could run short of cash while paying for an idle Biox
plant. / Q4 generated $7mm, plus a $15mm credit facility is in place. They have plenty of cash w/o selling other assets. Q4 production between 85-90,000 ounces.

* Potential long term power shortages in Ghana. * New 100 mw power plant being purchased by the miners in Ghana, plus an additional new 160mw VRA power station coming online by mid-year. There is more than enough power for everyone.

Bottom line: Golden Star not only survived, but has turned the corner and returned to profitability. Q4 '06 and Q1 '07 will both feature sequentially higher earnings and higher production. Q2 '07 should hit the jackpot with all 3 mills running at maximum output and processing the most beneficial type of ore at each mill. Throw in Hwini Butre-Benso ore that is almost 3x richer in late '07, and they should hit their 500,000 ounce target easily.

Looking beyond, Prestea Underground should be back in production in '08, and they have ore grading up to 160 g/ton. GSS is back, it'll just take a little patience. The facts are there, but due your own DD in case I missed something.

Democrats' Victory Bullish or Bearish for Gold?

Comments: Gold sold off over $10 on news of the Democrats' success in regaining a majority in the House and closing in on a majority in the Senate, breaking the recent short term uptrend. Is the Democrats' victory bullish or bearish for Gold?

The following factors argue that it is bearish for Gold:

1. The Democrats are likely to be less aggressive and less confrontational in the international arena. A lessening of geopolitical tensions, many of which have been either caused or exacerbated by the U.S. will lead to Gold being less attractive as a currency of safety. For instance, it was reported yesterday that Gold declined a further $5 on the news that U.S. Defense Secretary Donald Rumsfeld was shown the exit sign.
2. It would be difficult to spend more money and cause greater deficits than the Republicans have done over the last few years. The Democrats might be able to put a check on Republican spenders gone wild.

But, the following factors argue that the Democrats' victory is bullish for Gold:

1. Democrats are perceived as being tougher on trade with China. They will likely increase the pressure on China to relax FX controls which will have the effect of increasing the prices of many imported goods in the U.S. leading to possible greater inflationary pressures.
2. Democrats are considered as protectionist, which could hurt the U.S. economy, putting pressure on the US Dollar.
3. Democrats are historically friendly towards social spending agendas which could continue to leave the liquidity spigot open and pouring.

Overall, it's unclear how much will change with the White House firmly in the hands of conservatives. I suspect that this would have been a Gold bearish event if it had happened 4 years ago. Today, with the situation being what it is on the international front and on the domestic fiscal front, at least for the neat future, it probably comes as too little too late.

Related Article: "Wall Street Undeterred, Gold Confused"
[http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=C99C2FE4-17A4-1130-F542CD7932527CD9]

Do you think that the Democrats' winning a majority in the House and Senate is bullish or bearish for Gold? Let me know what you think.

HUI Chart + HAL + VGZ

Comments: The HUI continues climbing today, despite the ugly candlestick yesterday. Wonder how far this is going to keep on going, with Gold not moving up that much.

Comments: In energy, my pick HAL has been underperforming the OIH, especially today when it is down around 2% compared to the OIH whcihy is off by just 0.5% or so, and I wonder if it is because of the fact that it is possible that Democrats have a chance of winning the elections today. HAL is definitely one of the more political stocks out there. In fact, I think that must be the reason for the recent underperformance.

Comments: Some help is (hopefully) on the way in the form of a bullish wedge now forming in HAL on the 5 day chart.

Comments: VGZ is now trading below the neckline of a head & shoulders pattern after pricing its public offering considerably below the recent market price.

HUI Chart & Commentary

Comments: HUI continues climbing. The uptrendlines are getting steeper and steeper, but it could still run to its target of 345 on this upleg without taking a pause. However, I'm getting a little cautious the higher we go. Would prefer to fully buy back on a pullback than to buy into this strength.

Current Portfolio Allocation: Energy: 34% + Calls; Gold: 19%; Silver: 8%; Short S&P 500: 4%; Cash: 35%.

Last Week's Gain/Loss: +0.78%. A paltry gain considering the action last week, but it still marks the 4th straight week of gains for me so I'll take it. Unfortunately, running into a well-below market pricing of the public offering by VGZ didn't help matters much... Let's see for how many weeks I can stretch my win streak.

I Could See Myself Loading Up on Energy Stocks...

...and doing something like this:

"BP Refinery Gets Bomb Threat: Bomb Threat Is Called in to BP Refinery in Indiana, Boosts Oil Prices"
[http://biz.yahoo.com/ap/061103/refinery_bomb_threat.html?.v=3]

Comments: Interesting volume action in the oil tracking ETF recently. Sign of a bottom?

Comments: Finally seeing some action in HAL, one of the OIH components though I'm still under water in the HAL calls.

(I was kidding about doing the faux bomb scare...)

HUI 5 Day chart + Platinum ETF?

Comments: in what is probably an over abundance of caution, I sold a good chunk of my Gold shares today and yesterday.

Comments: I wonder if the recent bullish action in SWC is due to the rumors of a platinum ETF coming out soon? I usually prefer PAL over SWC, but SWC is more leveraged to platinum than PAL, which is more of a palladium producer.

Link: "Platinum ETF in the pipeline"

[http://www.moneyweb.co.za/education/etfs/374905.htm]

We Have Lift Off!

Comments: Gold looks set to break its downtrend, which all but assures that the HUI will reach its price target at 345. After a surge, I would expect some consolidation in Gold that may go on for quite some time rather than an acceleration straight up. Regarding the HUI, in the short term, the 200 day moving average at 324 may provide some resistance, especially since now we are trapped between that and the 50 day.

I converted all of my QQQQ shorts into gold miner longs the last two days. The general markets are crazy right now. Earnings are pretty good, but guidance going forward is so so and the economic results are coming in pretty horrible. Still, this market is looking like it will seize just about any positive and try to rally on it.

Comments: Silver still needs to confirm the break out in Gold. So far, I don't think it has. It may be time to switch into some silver miner shares soon however since the downtrend break in the RSI seems to suggest that a downtrend break in silver (above $12.50) should be just around the corner.

Comments: I also like OIH (Oil Service Holders) and its components on this pullback. For instance HAL looks pretty decent and I acquired some shares + calls today in it.

I might be switching a lot between Gold, Silver and Oil shares in the coming weeks.

Gold on the Cusp...

Comments: Gold has pierced the $600 barrier where it had been previously repeatedly rejected and is now seriously flirting with a break of the downtrend line. BUT, with the HUI up only 1.71% about an hour into trade, this breakout can't be yet deemed to be convincing. Volume is coming in at a decent pace so far.

Consumer spending rose an anemic 0.1% in September and Wal-Mart Stores Inc. gave a lackluster sales report. Generally, I'd say these news items are bullish for Gold, but they could also again raise the issue of possibly weaker than hoped seasonal jewelry demand going into the Christmas shopping season, similar to the issue that plagued Gold in September.

Meanwhile, the U.S. death toll in Iraq reaches 100 in October.

Progress in Iraq

BAGHDAD,Iraq - Fifteen policemen and two translators were kidnapped, then killed in Iraq's second-largest city, Basra police said Sunday. Gunmen also attacked an Iraqi government convoy and wounded a bodyguard of Prime Minister Nouri al-Maliki, but the leader was not in the procession, officials said as violence rose in Baghdad after a post-Ramadan lull. A mortar attack elsewhere in the capital killed four Iraqis and wounded four, while other gun assaults left two policemen and a civilian dead and two officers wounded. A kidnapped state television host and his driver also were found slain. North of Baghdad, gunmen ambushed a convoy of Sunni pilgrims bound for Islam's holy city of Mecca and killed at least one person, with attacks across Iraq causing a total of at least 15 deaths. The bodies of 23 people also were found, most believed to be the victims of sectarian reprisal killings.

By SINAN SALAHEDDIN, Associated Press Writer, October 29, 2006

QQQQs Look Ripe for a Fall -- But How Far?

Comments: Anyone think that Friday's action in the Nasdaq was anything other than temporary profit taking?

There are some interesting divergences forming in the general market right now. But it's unclear which way they will shake out.
Link: [http://www.stocktiming.com/Tuesday-DailyMarketUpdate.htm]

Gain/Loss for the Week: +4.9% . My gain for last week was +0.8%. Three straight weeks of gains for a change... But still have some serious work to do to recoup.

HUI Chart & Commentary

Comments: After a broken minor head and shoulders top on the HUI, the target price seems to be around 308 to 309, with 305 being important support below that. I made repurchases in a couple of Gold miners on Friday. The ideal situation would be to take my profits out of PSH (short QQQQs ETF) after a nice sell off in the Nasdaq, and put them fully back into gold stocks at support.

Current Portfolio Allocation: 59% short QQQQs and SPY; 36% long Gold, 5% long Copper. Small Put position in QQQQ.

(Gold) Sentiment: bullish, until proven otherwise.

QQQQs

Comments: Although the QQQQs are again testing the downtrend, they are starting to look
toppy with a black hanging man candlestick the most likely outcome from today. Still, I wouldn't put it past the market to have some kind of blow off top that breaches the trendline.

HUI Chart & Commentary

Comments: The HUI looks like it will touch the upper part of a fairly narrow channel. I sold most of my gold and energy positions today at around 317 HUI for a fairly decent trade. Just going to wait and see how things begin to play out from here.

I also went short some QQQQs. Without confirmation, this is a bit risky, but the market is horribly overbought and the QQQQs' momentum has started to lag, while the Diamonds and the Cubes are horribly overbought.

Current Portfolio Holdings: 34% short Nasdaq 100 and S&P; Longs: 10% Gold; 5% Copper.