Monday, October 19, 2009
Steel & Silver Lazy or Just Resting?
***BREAKING NEWS*** The S&P 500 broke 1,100 at 10:37 AM (PDT)
It is 5:46 AM. There was a pleasant Monday surprise in the break room this morning. Doc Titus tucked a note and photo behind the coffeemaker:
Thanks for your hospitality last week. With all your new-fangled gadgets, I thought you might like to see a snow plane I built in the 1930s. If I get back your way this winter maybe we can whip one up in the shop. We'd have quite a time out on the Diamond Valley flats!
The ole Colonel will look for a wooden propeller next time I'm out by the airport. Finding an engine like that might take a little longer. I'll ask Eric or Johnny. By the by, if you missed him last week you can find out more about Dr. Elmer Titus by clicking here.
We spent most of last week scratching our heads on gold and oil. We concluded gold might see a top at $1080 or so and oil would see $80 sooner than later. This morning oil futures on the NYMEX hit a new high for 2009 before falling back: $79.05.
Let's look at some other popular areas followed the Report. There is potentially worrying news coming out of Japan this morning. Here is the MineWeb link:
Weak demand means Tokyo Steel will cut prices
There is concern that Japan's biggest construction steel maker, Tokyo Steel Manufacturing Co Ltd, is sensing the recovery in steel demand is losing momentum:
"Japanese steelmakers had seen a pick-up in output since the market hit the bottom in April, driven by strong exports to China and other Asian countries and an increase in car production, but oversupply in China has clouded the outlook for the market." (TOKYO, REUTERS - 10/19/2009)
If this is true, there could be further downward pressure on the steel metals such as nickel and molybdenum (A Wild Ride Ahead for Moly too?).
Silver is looking a little lazy too. On October 7, the Report estimated that if we got to $1050 gold, silver should follow in a range of $18.15 to $19.05. Pardner, we've been hanging around the $1050 neighborhood for a spell and silver is below the lower range ($17.64 early this morning). This may be further evidence that both gold and oil rallies are due more to the weakening dollar than any supply/demand fundamentals. I'll stick my neck out and say that the present silver weakness is leading a gold top. I wouldn't be surprised if all the metals (precious and industrial) are setting up for consolidation. One positive sign is a bit of life in copper which is taking a new shot at $3 this morning. Stay tuned.
Enough soothsaying, let's walk the walk:
4-WD is OFF - the VIX or "fear index" is below 25, smooth markets expected in the near term (what's this?)
Yellow light is ON for possible adverse regulation/legislation (mercury emissions)
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is down $0.21 in early trading to $78.32 (November contract); Gold is up $2.7 to $1054.2 (December contract, most active); Silver is up $0.040 to $17.460 (December contract); Copper is up $0.0695 to $2.9145 (December contract); Molybdenum is steady at $13.625.
The DOW is down 28.49 points to 9987.37; the S&P 500, down 4.63 points to 1087.39. The miners are mixed:
Barrick (ABX) $34.04 down 0.75%
Newmont (NEM) $46.56 down 0.17%
General Moly (Eureka Moly, LLC) (GMO) $2.91 up 1.04%
Freeport McMoran (FCX) $76.90 up 1.54% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are happy, (a "tell" for General Moly):
Nucor (NUE) $45.48 up 0.55% - domestic steel manufacturing
ArcelorMittal (MT) $39.20 up 0.56% - global steel producer
POSCO (PKX) $116.67 up 0.15% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.52% to $1,262,139.48 (what is this?).
Headline Photograph: Dr. Elmer Titus, father of Mariana Titus, with his snow plane by his Highway 51 service sation in the Wisconsin Northwoods (circa 1930s).