Wednesday, March 3, 2010
The Colonel's Miners Roundup for March
It is 6:02 AM. Let's have another cup and carry on from yesterday - how are our miners looking for March? The fate of metals and miners has been driven by headline news so far this year but beneath all the ups and downs there are some encouraging signs of recovery. This is helped some by this mornings' news of new austerity measures announced by Greece and a better-than-expected national employment report published Wednesday by payroll giant Automatic Data Processing Inc. (ADP). As reported by the Wall Street Journal:
"Private payrolls fell less than expected in February and layoff announcements dropped to their lowest level since 2006, according to data released Wednesday...The February employment decline was the smallest since employment began falling in February 2008. ADP said the adverse weather had only a very small effect on the ADP Report due to the methodology used to construct it." (WSJ, 3/03/2010)
The "Big Boy" labor report will be released Friday by the Bureau of Labor Statistics' which includes government workers and many believe will be more affected by the recent weather. It appears the markets are adjusting to this fact so a bad number may not have the impact some expect (e.g., White House top economic adviser Lawrence Summers lowered expectations the other day during a CNBC Business News Interview by anticipating higher job losses for February).
Why does this matter to miners? The sovereign debt issues of developed countries such as Greece and U.S. unemployment are perceived to be the major overhangs on the pace of both domestic and global recovery. Bad news on either front is a body blow to metals and miners; good news pushes those sectors to the front of broader market rallies. Beneath all this day-to-day hoohaa there does seem to be some steady improvement, how do we know?
Dennis Gartman, the "Commodity King", says simply, "Look for charts that go from the lower left to the upper right." South Korean steelmaker POSCO (PKX) (and 20% investor in our Mt. Hope) provides a text book example of what Gartman believes desirable. Here is a one-year chart of their stock performance:
The solid line is a 200-day average which is trending steadily upward. Even with the volatility in January and February, their share price has remained above the 200-day line. That's a Gartman Yee-ha! Let's look at our two benchmark miners; Freeport-McMoRan (FCX) as an overall bellwether and Thompson Creek (TC) as a major moly producer:
Hmm...not too bad. Both dipped to their 200-day but have recovered nicely. Before we look at our local miner's charts let's see how everyone is doing with respect to their averages:
Freeport-McMoRan 200-day $69.00; yesterday's close $77.98
Thompson Creek 200-day $12.00; yesterday's close $14.09
Barrick (ABX) 200-day $37.50; yesterday's close $39.47
General Moly (GMO) 200-day $2.50; yesterday's close $2.60
U.S. Gold (UXG) 200-day $2.70; yesterday's close $2.81
This is in stark contrast to their collective performance as reported January 29th, Freeport "Broken", Miners in Correction. Things may be looking up pardner.
Here are the respective charts for ABX, GMO and UXG:
While not "textbook Gartman", the upward trend in all three is evident and current stock prices are all above the 200-day averages. U.S. Gold is the only miner that is seeing their average line start to flatten. If we can keep this herd moving from the "lower left to the upper right" things may indeed be looking up for the miners. Hang in there buckaroos!
Enough talk, let's walk the walk:
4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners have a smoother road with FCX above $74 (what is this?)
The YELLOW light has returned on our fuel gauge with oil above $80
An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
NYMEX/COMEX: Oil is up $1.13 in early trading to $80.81 (April contract, most active); Gold is up $5.4 to $1142.8 (April contract, most active); Silver is up $0.271 to $17.335 (May contract); Copper is up $$0.0495 to $3.4610 (May contract); Western Molybdenum Oxide is steady at $17.50, LME Moly 3-month (seller) ticks up to $19.28
The DOW is up 52.52 points to 10458.50; the S&P 500 is up 6.61 1124.92. The miners are still rocking today:
Barrick (ABX) $40.39 up 2.33%
Newmont (NEM) $52.47 up 1.49%
US Gold UXG) $2.81 unchanged
General Moly (Eureka Moly, LLC) (GMO) $2.66 up 2.31%
Thompson Creek (TC) $14.40 up 2.20%
Freeport-McMoRan (FCX) $80.17 up 2.81% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are still pouring metal, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $41.23 up 4.51% - global steel producer
POSCO (PKX) $118.70 up 1.12% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 2.07% to $1,325,755.16 (what is this?).
Headline photograph by Mariana Titus