"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, January 7, 2011

Mixed Jobs Report - Eureka Miner's Index Stumbles

Morning Miners!

It is 5:33 AM. Scott Raine brought us some of his 2011 Red Label Special last night and it will get you to the weekend faster than a wide open Holley 4-barrel! Grab a cup and let's crank'er up. I just watched the Labor Department report on CNBC Business News and unfortunately it looks like we still have a Stromberg 1-barrel on our economic recovery engine. Give me a moment to check COMEX gold...

Mixed Unemployment Report - Gold down & up & down

Yesterday we said a better than expected monthly labor report would continue to put pressure on the recent precious metal correction. How about a so-so report? The good news is that the jobless rate fell to 9.4% in December, its lowest level in 19 months. The bad news is that the economy added just 103,000 new jobs, economists forecast payrolls would rise by 150,000 (see note 1). The better news is that private-sector employers added 113,000 jobs and the November number was revised up significantly to show an increase of 71,000 jobs from a previous estimate of 39,000. Not horrible but not great - a sobering 14.5 million people in the U.S. who would like to work can't get a job.

COMEX gold dove to $1352.7/oz just prior to the report release. It rallied an impressive $18.6 to $1371.3 just after the jobs data hit the wires but then fell back to $1368.5/oz, just a tad lower than yesterday's close ($1371.7/oz). A lot of smoking tires but no traction for precious metals; COMEX silver fell and rose and came back to just below 21 cents of yesterday's closing price ($28.915/oz versus $29.126/oz).

The Eureka Miner's Index(EMI) - Trouble ahead?

The broader markets are now open and the Eureka Miner's Index(EMI) may be telling us something more ominous than a lackluster labor report. The EMI gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County. This includes benchmark miners for gold, copper and molybdenum, interest rates, a measure of market volatility and the most active NYMEX/COMEX contract data for oil, gold, silver and copper prices. Oil and copper are an important part of the EMI because they are both proxies for global growth and fossil fuels are an important component of mining cost.

The 1-month moving average of the EMI is good to watch because it smooths out some of the day-to-day market volatility. The average has been up, up and away since this summer but stumbled this morning. The EMI has fallen below this average for three consecutive days and the average itself had its first downward move this morning - 686.9 versus yesterday's 688.5. The EMI may correct upwards this afternoon or Monday; if not, this could be a bearish sign for the metals & miners going forward. The ole Colonel will be watching the Eureka Miner's Index like a hawk.

Daily Market Roundup

Enough talk, let's walk the walk:

Eureka Miner's Index(EMI)

This morning the Eureka Miner's Index(EMI) is above-par at 628.55, down from yesterday's 651.78. We are now 3-days below the 1-month moving average of 686.85, a potentially bearish sign.

The record high for the EMI is 816.78 set 01/04/2011; 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 which is now under pressure.

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 but there could be rough roads ahead; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) in the low-$100s above its 200-day average of $83.07 (our new warning level, 01/05 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 $0.46 in early trading at $89.84 (February contract, most active); Gold is up $2.1 to $1375.8 (February contract, most active); Silver is up $0.197 to $29.395 (March contract, most active); Copper is down $0.0230 to $4.3850 (March contract, most active)

Western Molybdenum Oxide is $16.00; European Molybdenum Oxide is $16.70; LME moly 3-month seller's contract is $16.90, LME cash seller is $17.10

Stock Market Morning Update

The DOW is down 3.52 points to 11,693.79; the S&P 500 is down 1.12 at 1272.73. Miners are mixed:

Barrick (ABX) $49.46 up 0.41%
Newmont (NEM) $57.50 up 0.98%
US Gold (UXG) $6.92 down 1.28%
General Moly (Eureka Moly, LLC) (GMO) $6.02 up 0.84%
Thompson Creek (TC) $14.39 up 0.35%
Freeport-McMoRan (FCX) $116.41 up 0.28% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $35.56 down 0.92% - global steel producer
POSCO (PKX) $109.82 down 0.98% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.05% at $1,853,108.47 (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

Note 1: Economists surveyed by Dow Jones Newswires had forecast payrolls would rise by 150,000 and that the jobless rate would fall slightly to 9.7% (WSJ, 01/07/2011)

Headline photograph by Mariana Titus

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