Tuesday, August 10, 2010
"Tweener Day" Jitters for Metals & Miners
It is 5:53 AM. Have a hot cup of Ruby Tuesday and try something different in your routine today. Why not? The ole Colonel plans to take his sidekick, Loquita, for an extra long morning walk. I'll call this 10th of August a "tweener day" for the markets because we're between not knowing what happens next and the Federal Reserve's thoughts on the matter which will be released at 11:15 AM (PDT). In the waiting room most things opened red this morning. Gold is down (COMEX $1193.1/oz), Silver is down (COMEX $18.015/oz) and copper is down (COMEX $3.2865/lb). This 24-hour chart of copper spot prices is a good example of "tweener" jitters in the metal complex:
The Report has been signaling for some time that the recent metals rally may have challenges ahead (Will Gold & Copper Ever Make Up?). Oil & gold and copper & gold continue to be in a nasty inversion, a bearish indication for things to come (a correlation inversion occurs when a commodity price moves in the opposite direction to a reference price, in our case gold). The 3-month inversion of both oil and copper with respect to gold began May 13th and is not showing much sign of changing its mind although gold is heading down the mineshaft in the same direction as the other metals this morning (for more on this correlation flip-flop checkout China to the Rescue?).
The broader markets are now open and the DOW and S&P 500 are taking a pounding (down more than 1%) and but not as bad as our poor metals & miners (bellwether Freeport-McMoRan off more than 2.5%, Barrick down 2%). The Eureka Miner's Index(EMI) is 127.8, nearly a 24 point drop from yesterday's healthy 151.5.
Besides waiting for Uncle Ben Bernanke to utter some soothing words about what he might do if all hell breaks loose, there are two other clouds on this morning's horizon. London Bloomberg correspondent Anna Stablum wrote a nice piece on the China real estate bubble losing air and its possible effect on copper demand:
Copper Slides on Concern China's Cooling Property Market May Curb Demand (Anna Stablum, Bloomberg News, 8/10/2010)
Finally, the Wall Street Journal reports this morning that U.S. productivity took an unexpected turn down:
"Nonfarm business productivity dropped at a 0.9% annual rate in the April to June period, the Labor Department said Tuesday. It was the first decline since the fourth quarter of 2008, when productivity fell by 0.1%. Economists polled by Dow Jones Newswires were expecting productivity to rise by 0.3% in the second quarter." (WSJ, 8/10/2010)
OK, that's enough for me...time to take Loquita for a long stroll. At least oil is trading below $80/bbl again. Stay on your horses buckaroos!
Enough talk, let's walk the walk:
The Eureka Miner's Index(EMI) remains above par at 127.77, a big drop from yesterday's 151.54 but 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 roads in the marketplace; The VIX or "fear index" is below 25; metals & miners return to shaky timber with benchmark FCX dropping to the low-70s after being near above its 200-day average of $75.3 (our new warning level, 8/05 update), 10-year Treasurys are safely below 4% preserving a low-interest rate environment but there is some deflationary caution now that we are sub-3%.
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 GREEN light is turned back on for Investor Confidence as investors return to equities.
The GREEN light is turned on our Fuel Gauge with oil dropping 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 down $0.99 in early trading to $81.02 (September contract, most active); Gold is up $10.0 to $1209.4 (December contract, most active); Silver is up $0.174 to $18.495 (September contract, most active); Copper is down $0.0120 to $3.3415(September contract, most active)
Western Molybdenum Oxide is $14.25; European Molybdenum Oxide is $15.05; LME moly 3-month seller's contract is $15.54, LME cash seller is $15.33
The DOW is down 121.29 points to 10,577.46; the S&P 500 is down 13.99 to 1113.80. The miners are not happy campers:
Barrick (ABX) $42.37 down 2.27%
Newmont (NEM) $56.35 down 1.55%
US Gold (UXG) $4.76 down 2.86%
General Moly (Eureka Moly, LLC) (GMO) $3.17 down 2.76%
Thompson Creek (TC) $9.43 up 4.91%
Freeport-McMoRan (FCX) $75.75 down 5.53% (a bellwether mining stock spanning copper, gold & molybdenum)
The Steels are hurtin' too, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $32.72 down 2.39% - global steel producer
POSCO (PKX) $108.29 down 1.08% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 2.12% to $1,383,467.34 (what's this?).
Write Colonel Possum at email@example.com for answers to your questions or to request e-mail updates on the market
Headline photograph by Mariana Titus ("Clockwork Purple")