"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Friday, March 19, 2010

Still Fearless in 2010? The Colonel's Market Prediction

Morning Miners!

It is 6:05 AM. Have a cup of that delicious Raine's Red Label TGIF and let's return to a puzzle we started at the end of last year. On 12/29/09 I stated, "Like Alice in Wonderland, the ole Colonel is becoming 'curiouser and curiouser' about the markets lately (Fearless in 2010?). We had a terrorist attack on an airline recently that now appears tied to Al Qaeda and the markets hardly took notice."

Pardner, we're facing the backdoor of March and I'm not any less "curiouser." We've had some ups and downs with sovereign debt issues and China worries but all in all the broader markets have pushed ever higher. Some experts have recently called the market's rally a "melt-up"; others observe it has nothing to do with "fundamentals" or a company's "value." It seems like for many the only fear in the marketplace is a concern that they may miss the rally. Maybe that should be scary.

This Report uses the S&P 500 Volatility Index or "VIX" to gauge fear and we've talked about it quite a bit since last Fall. Here's a link to the original article if you need to brush up on the so-called "fear index":

Viva Las VIXas! Don't Worry Be Happy (The Eureka Miner's Market Report, 9/11/2009)

Simply stated, the VIX above a level of 25 can be a pretty scary place, lately we've been in the sixteens. In fact, yesterday we were at levels close to the market peak just before the now familiar "Great Recession". Look at these numbers:

S&P closing high 1565.15
VIX close 16.12

S&P closing high 1165.83
VIX close 16.62

The markets just opened up and the VIX is starting out of the gates at 16.24. This is the Friday before a possible weekend vote on the highly controversial Health Care Bill and renewed confusion about the Greek bailout plan. Fearless on Friday is pretty "curiouser" for my way of thinking. Now, there will probably be a sell-off later today and Monday could be a bad one but I'm willing to bet that there is more room to run in this goofy "melt-up". How about a Colonel prediction? I'd day an S&P 1193 is a reasonable near term top and better-than S&P 1251 is in the cards for 2010. Let's throw some dates on these - two new bets for the Colonel's Beer Derby (lower right column of this blog):

The S&P will break 1193 before Memorial Day 2010
The S&P will break 1251 before Christmas 2010

How low can we go? Now that's a real scary thought buckaroos...stay tuned!

Enough prognostication, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, an improving broader market trend is expected to continue; metals & miners have a smoother road too with FCX comfortably above $74 (what is this?)

The YELLOW light is switched 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 down $0.32 in early trading to $82.22 (May contract, most active); Gold is down $3.0 to $1124.5 (April contract, most active); Silver is down $0.097 to $17.325 (May contract); Copper is up $$0.0010 to $3.4055 (May contract); Western Molybdenum Oxide sits at $16.25, the LME 3-month and 15-month contracts (seller) both rest at $17.24

The DOW is down 40.59 points to 10738.58; the S&P 500 is down 5.55 to 1160.28. The miners are down:

Barrick (ABX) $39.16 down 1.56%
Newmont (NEM) $50.80 down 0.92%
US Gold UXG) $2.77 down 2.12%
General Moly (Eureka Moly, LLC) (GMO) $3.19 down 2.45%
Thompson Creek (TC) $13.29 down 2.92%
Freeport-McMoRan (FCX) $79.19 down 1.35% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are down, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $42.39 down 2.21% - global steel producer
POSCO (PKX) $120.32 down 0.75% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 1.68% to $1,328,669.12 (what is this?).


Colonel Possum

Headline photograph by Mariana Titus

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