Wednesday, December 30, 2009
POSCO & Miss Moly Go Dancing
It is 6:04 AM, more snow and the coffee is hot. Make yourself comfortable and the Colonel will return after the market open.
OK, pardner, this is setting up to be an interesting day. The U.S. dollar is rising on increased concerns about European debt and gold is falling in turn. The broader markets are mixed as we race to the year's end but wait, not everything is heading south. It is often the case that strength can be found on weak market days. Today's outstanding stock in the Eureka Miner's Grubstake is steel maker POSCO (PKX), 20% investor in our Mt. Hope project. In fact, POSCO is flirting with a new 52-week high on a day when the world's largest steel producer, ArcelorMittal (MT) is down more than 2%.
What about molybdenum? The gains are small but steady with moly picking up another quarter yesterday to make $12.50. Here's a 1-month chart of molybdenum and nickel, another key ingredient in making steel.
I'd say that's a pretty encouraging trend up. So what's up with General Moly (GMO)? Recently GMO took a dip below $2, recovered nicely to a $2.25 level and today is headed back to 2-bucks. Let's look at a chart of GMO compared to its 200-day moving average:
The average line bottomed this August and has been on a modest uptrend (see Note 1). Today's price is below that line and possibly signaling a good time to buy given the positive action of POSCO and molybdenum together with an improving global demand story for steel. Let's see how Thompson Creek (TC) is doing. TC is another pure play moly mining company that is presently in production;
OK, there is a similar shape to the 200-day average except TC is sitting a little above line (see Note 2). The Colonel has a feeling (and I might be wrong) that both TC and GMO have a reasonable prospect of heading north with moly in the first quarter of the new year. As I mentioned the other day, I bought a little GMO at $2.05 and $2.17 both below the present 200-day average price of $2.40.
I'll close with one more positive indicator. The March (most active) COMEX contract for copper hit a new 52-wk intraday high of $3.362 in early morning trading on a strong dollar day. Last year at this time, copper traded as low as $1.4370. Copper has been our faithful canary in the global recovery mineshaft and she looks like she's going to the New Year dance with POSCO and Miss Moly!
Enough talk, let's walk the walk:
4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected to continue (what's this?)
Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is up $0.21 in early trading to $79.08 (February contract, most active); Gold is down $8.6 to $1089.5 (February contract, most active); Silver is down 0.195 to $16.915 (March contract); Copper is up $0.0275 to $3.3410 (March contract); Molybdenum closed up at $12.50 yesterday.
The DOW is down 7.93 points to 10537.78; the S&P 500 is down 1.89 points to 1124.31. The miners are down:
Barrick (ABX) $39.62 down 0.23%
Newmont (NEM) $47.43 down 0.69%
General Moly (Eureka Moly, LLC) (GMO) $2.07 down 2.36%
Freeport McMoran (FCX) $80.98 down 0.14% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are mixed, (a "tell" for General Moly):
Nucor (NUE) $46.06 unchanged - domestic steel manufacturing
ArcelorMittal (MT) $45.79 down 2.10% - global steel producer
POSCO (PKX) $131.56 up 0.63% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 0.72% to $1,277,012.74 (what is this?).
Headline Photograph by Mariana Titus
Note 1: A 200-day moving average is a 200-market-day average that includes the most recent price in the average and tosses out the oldest. Two hundred market days is roughly 10 months in calendar time. This average smooths the data but lags actual price by 1/2 the averaging interval; in this case, 5-months. The low in July-August therefore reflects the bottoming of GMO share price earlier in February-March. To maintain the current upward trend, GMO actual price needs to stay above the 200-day line. If GMO doesn't move above the 200-day line soon, all bets are off.
Note 2: By comparison, TC is technically a much healthier chart than GMO since the actual share price has remained above the 200-day moving average. A move below this line would probably not bode well for TC or GMO. The positive moly price and POSCO trend should, however, lift both TC and GMO if the steel industry continues to recover in 2010.