George Maniere: Are There More Black Swans for General Moly?

InvestingAdvicebyGeorge – Wow, what an amazing day yesterday! Days like yesterday, while not for the faint of heart, are days that I enjoy. We made a 40 point move in the S&P. It is important to note that historically, a 20 point move in the S&P is normal in a year. This was 40 points in one day!

With a break of 1258 I believe that the S&P has completed a major distributive top and with the deteriorating picture in the world equity landscape it represents the start of a new cyclical bear market. I am sticking with my call that we are witnessing a the first wave of bear market that will begin no later than early October. The macro picture is that we would see a fourth quarter rebound that would set us up for a deeper bear market that would likely last deep into 2012.

So it would appear that my SPXU trade is still in play as the S&P closed at 1188.88. That is 1.22 points under my resistance level of 1190.00 so today bears keeping a watchful eye on The S&P and SPXU. As I have written my timing has been off on this trade but if the S&P continues its rally I will continue to buy SPXU because by October the S&P will sell off to at least 1050 / 1032 and if it breaks that support will continue lower.

Yesterday started off as scripted. It moved sideways not really doing much of anything. At around 1PM the market made a nice advance and at 1:30 the market went parabolic shooting up 277 points on the Dow. This was great and I sold some holdings at nice profits but one stock stuck out like a sore thumb General Moly (GMO). With the Dow up 277 points General Moly which has been range bound and going nowhere for the last 3 months was up $0.03 and closed the day down $0.05 at $3.70. Please see the chart below.

A look at this chart will show that since mid July when it was trading at about $4.90 until today when it closed at $3.70 it has put on a firm level of support at $3.50 but has put in a series of successively lower lows.  I thought this must have something to do with the water rights appeal, which by the way Eureka County has spent close to $3 million dollars litigating on behalf of two farmers whose property will not even be impacted by this mine.

I’m not sure these two incidents below are related but with the anemic trading of GMO today I certainly believe it is worthy of reporting.

Yesterday, Hanlong mining chief executive Mr. Steven Hui Ziao, was prevented from leaving Australia after being accused of insider trading allegations. He is suspected of being guilty of insider trading activities in relation to Bannerman Resources and Sundance Resources.

Coincidentally, yesterday General Moly (GMO) announced that Nelson Chen, Chief Operating Officer of Hanlong Mining will replace Steven Xiao, Managing Director of Hanlong Mining Investment as Hanlong (USA) Mining Investment’s designee to the General Moly Board of Directors, pursuant to the Hanlong transaction announced in March 2010.  Mr. Chen will serve on the Technical committee.

Mr. Chen has served as Chief Operating Officer of Hanlong Resources in Australia since March 2010. Mr. Chen has served as a director of Hanlong Resources in Australia since June 2010 and has served on the board of Moly Mines as an alternate director to the principal of Hanlong Group since April 2010.  He also represents Hanlong on the Eureka Moly Management Committee of General Moly.  Prior to joining Hanlong, Mr. Chen was an Associate Director at the Sydney, Australia office of PricewaterhouseCoopers. Mr. Chen has 11 years of audit and M&A transaction advisory experience with PwC.  He was involved in a large number of financial due diligence and acquisition advisory transactions with a focus on leading engagements servicing Chinese clients.  He has extensive experience in many industries including mining, manufacturing, consumer products, financial services, real estate.

At this point I have absolutely no knowledge if these two incidents are related but it certainly raises a suspicion as with a 277 point move up in the Dow, GMO was up $0.03 and closed the day down $0.05 at $3.70. I hope to get further clarification on this today because it appears at first glance that General Moly is simply guilty by association.

In conclusion, I have had many readers writing and asking about gold and silver. Gold has had a parabolic run up and in the last few weeks it has finally taken some time to take a breather and consolidate. As money pours into the equity markets on the news that Greece will not default, gold and silver will sell off. This is both expected and healthy. I see gold moving lower as the S&P stages a fake rally until possibly the end of September. At that point gold should be at about $1700.00 and silver should probably be at $37.00. I view these as great secondary buy points. In October the market will sell off and I will ride it down on the back of SPXU while buying gold and silver at great secondary buy points.


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