Lithium - The Next Wave ?

A prominent theme on the TSX Exchanges that last few weeks is a sudden interest in all penny stocks with the word "lithium", attached to them. Canada Lithium, Western Lithium and Lithium One are a few that come to mind but that I am not invested in. Some easy doubles there if you caught the first wave.

Why lithium ? There is tons of it around the world, but less that is economic and even less that is not able to be processed through a procedure known as "brine roll out" which is much more cost effective than typical hard rock mining. The other part of the equation is some deposits discovered contain high levels of manganese which is a viable product, but increases production costs. As you are mostly aware we need lithium for not only cell phones and lap top batteries but for of course,the electric car.

In the next 5-10 years there will be a serious demand for this mineral like never before, a five fold increase according to Mitsibushi. Chile, Argentina as well as the Chinese and the Russians have a shit load of this stuff, but the clincher is Obama's desire for America to be self sufficient and not be at the mercy of the foreigners, just as he is with oil dependency. Also Obama just put out $2.5 Billion for grants on improving on the lithium battery efficiency and new developments.

When you consider there is only one lithium mine in all of North America down in Nevada, then a large ramp up in new exploration plays in Canada and the US looking for the next economic deposit will make for some serious cash generating opportunity. I will be keeping an eye out for the undiscovered lithium gems the market is sure to invest in. But as in most gold rush type plays, the trick will be seperating the men from the boys. More in another post on that subject. Stay tuned !

Bulls 4 Herd1

Well whoever made that VIX bet last week just had their ass handed to them on a platter. The bulls continued to claw back from Mondays down day and keep the streak alive with year high closings including oil. Overbought or not, there is power in this buying and any corrections will have to be horrendous news to create any drastic change in trend.

Obama's after market anounncement of another $2 trillion to the defecit is really no surprise when considering we have almost become immune to these surprises. The question is wether the markets will do much more than a couple of days swoon over this announcement before reloading and push higher as long as numbers like this morning's existing house numbers and more Bernake statements telling us all is just jim dandy again.


And that folks is what will keep the market moving in the short term, the TA chart showed enough pressure relieved on the indicators to keep the black boxes in hyper mode. This could well break DOW 10,000 in the next week and blow all the bears to bits. I never trust history when dealing with the markets, just when you think you got a lock on the picture, you are left in the dust.


Gold had a nice pop today when the pros seemed to making calls of some retracement to the $910 mark. I will be checking my charts closer over the weekend but that may well be a bullish reversal we saw this week.

Happy Friday !

Decisions Decisions

As mentioned before, I plan to begin popping out a couple of junior stock picks of mine over the next few weeks. But first, for those who are new to the juniors but want to learn,then listen up, but for the pros they will want to skip.
I want to discuss the subject of the high risk hazards and murky waters of the junior stock penny game and how the crucial decisions you make after doing your due diligence can effect your success rate.

Lots of cash can be made from these stocks if you understand the game and how it differs from the blue chips and the mid caps stocks while following a set of rules that will reduce your chance that you will lose ,let alone get outright burnt by unscrupulous companies. I'll be the first to admit to going to the school of hard knocks to learn these valuable lessons over the years, but my success rate has been much better the last several years because I started to follow a system check list that helps me avoid what I call the "shady money".

One reason I like Stockwatch.com is not only the market depth action and news updates, but I can research anyone in the company going back to 1990. That alone is worth it's weight in gold. When finding a stock you like, the first thing you have to do is go to the "Company" section and see what I refer to is "the cast of characters", AKA "the management". These people will 90% of the time determine your odds even if the "story" sounds so enticing. Once you see the difference on who these people are and who they have been with before, you have a massive insight into their success rate.

You also have to use the yearly business cycles of whatever the sector is to determine whether it is a good time to buy in or not. Is it the spring sell off ? Is it the summer doldrums when most juniors have a hard time promoting ? or is it coming into the best time of the year when the junior resource stocks who actually have real deal/new property/ successful summer drilling results ?

The fall is that ripe time for them to raise money and promote the crap out of their company to attract larger shareholders who may participate in the private placements. This is where it gets dicey separating the wheat from the chaff and having some real DD skills and using charts all comes into play in a major way.

I will delve more into this over the coming weeks but when I find management with successful backgrounds starting up a junior, I am all ears. But there are other sharks in the ocean you must avoid too that will chomp your ass when given the chance.


Til next time !

Oil Wrestling

It was all about oil today as the inventories shocked by an 8 million barrel shortfall versus a prediction of a million barrel surplus. Lots can be said about this oil stock offshore sitting on ships but the end result was oil prices soared a few bucks and the markets roared back from a negative 80 odd point open to a day high 80 odd point peak to close up 60. As I said in my last post, do not underestimate the bulls to kick in bigtime when you least expect it.

Looking at the chart, the SPY has blown off quite abit of the overbought signals and may be able to keep the market in a range trade. A 9000 DOW has to be the psychological support number at play here so any floating around 9100 - 9400 til weeks end will be expected depending on jobs claims numbers out tomorrow and option expiration Friday.

Herd 1 Bulls O

The herd had their way today from the get go and barely let the bulls up for a gasp or two. Lots of negative stuff flowing out there that two weeks back was on the back page. Those cheerleaders that the recession is over got a wake up call today with nary a victim left unscathed. A few consumers stocks and some other defensive plays got spared but mostly weakness across the board.

Is this the beginning of something bigger or a short term correction in a range trade ? We should know this by midweek as traders analyze the support/trend lines and the black boxes calculate their logarithms.


You know we were due for some sort of downside move but with a ton of cash on the sidelines still I won't underestimate the bulls to pump it back up if given some positive housing and PPI numbers in the morning.

The DOW futures are up tonite and Asian markets all slightly in the red but not down big like I expected. Should be an interesting and volatile week with it being option expiration week which always makes for some fireworks.

Herd Think

Something to think about at these crucial junctions in the markets is the "herd think" and which way they are leaning. One of the most important market sentiment indicators as most of you know is the VIX index AKA the Volatility Index. Currently we are sitting at the lows of the year going back to last fall. Trying to guess where the pros and institutions are placing their bets gives you a good idea what "may" be coming down the pipe.

According to Bernie Schaeffer of Schaeffer's Investment Research, the large options players have massive bets on the markets moving to the downside in a big way just as they did last year at this time and they made a killing. But are they right this time ?

Seems the consensus back a month ago was that this earnings season was going to be disastrous and look what happened. The options shorts got killed and stock shorters had to cover like madmen which only added fuel to the first legs of this most recent rally.

But what happens if they are wrong this September ? As I posted back a few months ago, the "Sell in May" theory didn't work back coming out of the 2002 recession and we saw some phenomenal stock price runs the past 2 months.

The key point to Schaeffer's article is that the big money is overpaying relative to past S&P500 volatility history.

His closing comments sum it all up :

In addition to the "group think" issue, there is also the fact that recent realized volatility is very much supportive of current VIX levels. The 20-day historical volatility of the SPX is currently a shade below 20% compared to a VIX of about 25. I appreciate the fact that a low VIX can also serve to dampen realized volatility, but the fact is that options traders buying SPX puts (and calls) at current "low" levels are actually overpaying relative to recent historical volatility.

The "inevitability of a higher VIX" argument is a very seductive one, and it is supported by some compelling data as suggested above. But – perhaps to the surprise of some of the confident VIX bulls -- predicting the course of future volatility is a very tough game. And I would strongly suggest that you remain open to the possibility that we have not seen the lows in the VIX, and further that it should not be a total shock if we saw a VIX in the teens before it ultimately bottomed and volatility became a "buy" again."



As I always do, check out both sides of the coin no matter how tempting the "herd think" is.

Dog Days of Summer

Once again it's been awhile between updates so no better time then now to start thinking about a plan of attack heading into the fall while the lazy days of August slowly fade.

We are all well aware of what the DOW has been doing, and myself along with many others wondering when is this summer rally going to correct ? Looks like we have some cracks starting to show but we will have to see what September brings us as history shows we have a 50/50 chance of a sell off. The markets have risen on what is considered low volume so it will exciting to see which way the pros think it should go when they are all back from vacation.

I am compiling a short list of potential winners over the coming weeks so stay tuned. Remember these are all super high risk stocks and I accept no responsibility for anyones losses. I am here for fun and if we make money then the more the better.

Time for a Corona cause it's Friday in August.

See ya soon !