Thursday, July 22, 2010
Copper Soars, CAT Hauls - Congress & Jobs Chill
It is 6:06 AM. Thor is back from his weekend romp in England - have a cup of his thunderous brew! No longer the terror of his younger days, our favorite Norseman has only a few postcards and trinkets to show for his trip. However, he did have enough zip to throw a thunderbolt or two into the London Metal Exchange (LME) as copper continues its rally hitting 2-month highs and breaking it's 200-day moving average. Here is the reaction of spot prices this morning:
Copper and oil are two important commodities to watch to gauge the health of global recovery. NYMEX Oil is also up today moving closer to $80 territory at $77.40/bbl; COMEX copper is trading at $3.1565/lb. The falling LME copper inventories we noticed earlier this month (Maybe Things Aren't So Bad After All) are apparently due to copper price differences between the LME and the Shanghai Futures Exchange. As explained by a recent article in the Wall Street Journal, Chinese copper prices have been about $60 more on a per-ton basis making it cheaper for traders to buy copper at the LME and ship it to China for delivery.
Caterpillar reported a knock out quarter this morning, another important piece of the global story. Here is a link to their press release:
Caterpillar Second-Quarter Profit up 91 Percent, Sales and Revenues Increase 31 Percent; Raises 2010 Outlook for Sales and Revenues and Profit (Press release, 7/22/2010)
Chairman and Chief Executive Douglas Oberhelman said, "We continue to be positive about the longer-term prospects for many of the industries we serve--like mining, energy, infrastructure, electric power and rail..." Good news for CAT skinners and miners, pardner.
Of course there is always a party pooper, this morning there may be two. I am starting to think that the U.S. Congress may be the greatest threat to our nascent global recovery. Yesterday they began two-day hearings with poor old Uncle Ben from the Federal Reserve. I'm sure he would rather go to his dentist for multiple root canals. As the testimony started at 2:00 p.m. (EDT) the S&P 500 rally dropped more than 18 points in sixty minutes (1.7% decline). He didn't say much more than he has said previously restating that the U.S. economic outlook was "somewhat weaker" but the setting and nattering questions from lawmakers chilled the markets.
The second headwind comes from a disappointing morning report from the U.S. Labor Department. According to the Wall Street Journal:
"In its weekly report Thursday, the U.S. Labor Department said the number of U.S. workers filing initial claims for jobless benefits increased by 37,000 to 464,000 in the week ended July 17. Economists had expected claims would rise by 21,000." (WSJ, 7/22/2010).
OK, the broader markets are open and it looks like we have a rally. All of our favorites are in the green and let's pray the second day of the Federal Reserve Chairman's testimony doesn't reverse all the positive earnings reports and outlooks of the past several days. The Eureka Miner's Index(EMI) just pegged 115, let's keep her above par buckaroos.
Enough talk, let's walk the walk:
The Eureka Miner's Index(EMI) is comfortably above par at 115.01, up from yesterday's 102.40 and a big improvement from the 6/7/10 low of 50.7. Remember an EMI greater than 100 is good times for metals & miners.
4-WD is ON - rough but improving roads in the marketplace; The VIX or "fear index" is below 25; metals & miners remain on shaky but firmer timber with benchmark FCX trading in the high-$60s but still well below its 200-day average of $76 (our new warning level), 10-year Treasurys are safely below 4% preserving a low-interest rate environment
The GREEN light is turned back on for Commodity Reflation with copper trading above $3/lb
The GREEN light is turned on for Stable Markets the VIX below the 30 level (what's this?)
The YELLOW light is on for Investor Confidence as further market corrections are possible.
The GREEN light remains turned on our Fuel Gauge with oil below $80
A ORANGE light is ON for possible adverse regulation/legislation: Mine Safety Violations, Miner's claim fee, Miner taxation, Cortez Hills, mercury emissions , General Moly Mt. Hope Water Rights, U.S. House committee debates miner workplace safety bill
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
NYMEX/COMEX: Oil is up $0.84 in early trading to $77.40 (September contract, most active); Gold is down $5.1 to $1186.7 (August contract, most active); Silver is down $0.028 to $17.775 (September contract, most active); Copper is up $0.0635 to $3.1565 (September contract, most active)
Western Molybdenum Oxide is $14.00; European Molybdenum Oxide is $14.50; LME moly 3-month seller's contract is $14.29, LME cash seller is $14.08
The DOW is up 195.18 points to 10,315.71; the S&P 500 is up 23.33 to 1092.92. The miners are mixed:
Barrick (ABX) $42.42 up 1.66%
Newmont (NEM) $58.77 up 1.03%
US Gold (UXG) $4.57 up 2.74%
General Moly (Eureka Moly, LLC) (GMO) $3.12 up 1.63%
Thompson Creek (TC) $9.05 up 2.96%
Freeport-McMoRan (FCX) $69.28 up 4.87% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are up, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $31.78 up 5.23% - global steel producer
POSCO (PKX) $108.34 up 3.45% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 2.24% to $1,365,977.10 (what's this?).
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Headline photograph by Mariana Titus