"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.

Thursday, December 16, 2010

Pearl Harbor High for EMI? - Metals & Miners Weaken

Morning Miners!

It is 6:07 AM. Grab a cup and let's help our favorite Norseman Thor load up some thunderbolts in the truck. I got Old Miner Woden into senior housing yesterday with a promise to keep Thor out. When those two day-makers get together all hell usually breaks loose. I'm packing Thor over to Newark Valley today so he can practice chucking a few bolts for our weekend storm...far far away from all that nice solitude up the street.

Copper Weakens on Inventory Builds & China Tightening

This Report pays a lot of attention to copper even though our nearest copper mine is in Ely. Copper has been a very reliable canary in the global recovery mineshaft so any change in flight path is important to watch. For months we have witnessed copper inventories drop at the London Metal Exchange (LME). There has been much discussion recently that this is evidence for the tightening global supply of the red metal. The downward trend may be reversing with a small increase in inventory over the past several days:

Bloomberg carries an article this morning on the recent weakness in copper price:

Copper Declines on Increase in Stockpiles, Concerns Over China Tightening (Maria Kolesnikova, Bloomberg News - Dec 16, 2010 5:24 AM PT)

Ms. Kolesnikova points to the build in stockpiles and speculation that China may raise interest rates again to control inflation as important headwinds to further increases in copper price.

The U.S. dollar has been making a nice comeback against the euro and yen currencies with troubles brewing over Spain as the next domino in the European sovereign debt debacle and a less bleak domestic forecast for 2011. A stronger dollar has resulted in generally weaker commodity prices as this week draws to a close. With this backdrop, it's reasonable to wonder if we've reached the highs for 2010 for the metals & miners...let's ask the EMI.

Pearl Harbor high for the Eureka Miner's Index(EMI)?

The Eureka Miner's Index (EMI) gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. On Pearl Harbor Day, we saw new records for gold, silver & copper and the EMI pegged a new high of 739.1. This is impressively up from our 2010 low of 50.7 set June 7th. Copper went on to set another new high this Tuesday at $4.229/lb but has been in retreat along with gold and silver yesterday and this morning. Our favorite miners have also fallen off their recent highs, many of them new 52-week highs set by copper giant Freeport-McMoRan (FCX) and gold benchmark miner Barrick Gold (ABX).

This morning the EMI is in its third day of decline and has nearly reached its 1-month moving average (555.2 versus 545.8). If the EMI falls below this key level, we may see a reversal down for the metals & miners for the remainder of the year. It is expected that tomorrow may be the last high-volume day for the broader markets for 2010. I'm betting on a little bounce buckaroos. In any case, we've ended up pretty good for the year!

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

The Eureka Miner's Index(EMI) is above-par at 555.15, down from yesterday's 623.34. The 1-month moving average is 545.83. The 2010 record high for the EMI is 739.13 set 12/7/2010; the low was set 6/7/2010 at 50.7. An EMI greater than 100 signals better times for the metals & miners relevant to Eureka County, the EMI re-established an upward trend on Friday, 12/3.

200-day averages are used in the EMI to normalize current mining company share price and are updated monthly. Upper and lower trend lines are updated weekly.

Eureka Outlook Dashboard

4-WD is OFF - Markets are stable; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $79.39 (our new warning level, 12/06 update); 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 comfortably above $3.50/lb

The GREEN light is turned on for Stable Markets with the VIX below the 30 level (what's this?)

The YELLOW light is turned on for Inflation Watch as the Federal Reserve resumes buying Treasurys (aka QE2)

The GREEN light is turned back on for Investor Confidence as investment returns to the equity markets

The YELLOW light is turned on our Fuel Gauge with oil above $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?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is down $0.04 in early trading at $88.58 (January contract, most active); Gold is down $11.3 to $1374.9 (February contract, most active); Silver is down $0.258 to $28.995 (March contract, most active); Copper is down $0.0150 to $4.1175 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.15; LME moly 3-month seller's contract is $15.88, LME cash seller is $15.74

Stock Market Morning Update

The DOW is down 21.79 points to 11435.68; the S&P 500 is down 0.10 to 1235.13. Miners are down:

Barrick (ABX) $51.81 down 1.37%
Newmont (NEM) $59.69 down 1.00%
US Gold (UXG) $7.04 down 1.95%
General Moly (Eureka Moly, LLC) (GMO) $5.35 down 0.93%
Thompson Creek (TC) $13.31 down 0.52%
Freeport-McMoRan (FCX) $110.84 down 0.19% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $37.14 up 0.38% - global steel producer
POSCO (PKX) $101.37 down 0.88% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.70% to $1,809,322.15 (what's this?).


Colonel Possum

Write Colonel Possum at colonelpossum@gmail.com for answers to your questions or to request e-mail updates on the market

Headline photograph by Mariana Titus

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