"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 4, 2011

Jobs, "A Very, Very Good Report"; NYMEX Oil 2 1/2-Year High

*** BREAKING NEWS *** New records for COMEX silver & NYMEX OIl:
COMEX Silver $35.405/oz 13:20:00 ET 03/02/2010, May contract most active
NYMEX WTI Crude $104.60/bbl 14:10:00 ET, 03/04/2011, April contract most active

Morning Miners!

It is 5:45 AM. Have a cup of that terrific Raine's Red Label TGIF. The ole Colonel just finished watching the CNBC Business News coverage of the U.S. Labor Department's monthly jobs report. On a day of rising oil prices, it is good to hear some good news...

Jobs, "A Very, Very Good Report"

It is funny how one quote always stands out from the CNBC morning commentary on one of our most important pieces of economic data, the monthly jobs report. February's release was mixed, complicated with the impact of bad January weather - CNBC bond market reporter Rick Santelli summarized last month's report simply, "It stinks!" He went on to say those that portrayed the data differently were a bunch of "Kool-Aid drinkers."

This morning it was Chief Economist Mark Zandi of Moody's Analytics turn. He excitedly exclaimed that the numbers represented a "very, very good report." Why? Nonfarm payrolls rose by 192,000 in February, private-sector employers added 222,000 jobs and the unemployment rate fell to 8.9%. Economists surveyed by Dow Jones Newswires had expected the jobless rate would inch up to 9.1% from the previous month's 9.0%. Even the ever-skeptical Santelli begrudged that "U6", a measure of broader unemployment, was better than he expected falling to 15.9% (see note 2 below).

The economist's expectation for nonfarm payrolls was 200,000 a little higher than the actual figure but the January number was revised to show an increase of 63,000 jobs from a previous estimate of 36,000. All in all not too bad except six million Americans were still out of work for more than six months in February. Nuts.

There was a nearly unanimous view that the markets had already priced in the results with yesterday's rallies. Gold and silver popped a little on the news, the U.S. dollar and Treasuries were mostly unperturbed and we'll see how the broader markets fare in a few minutes.

COMEX gold is presently trading at $1420.6/oz; silver at $34.605/oz and copper at $4.5320/oz. Here is the price action on the London spot markets for gold and silver, the right side of chart is just after the jobs report release:

Markets fall on rising oil prices

It looks like the unresolved crisis in North Africa and Middle East has trumped a good U.S. jobs report. As I write this section the DOW has dropped 69.85 points to 12,188.35 and the S&P 500, 8.75 points to 1,322.22 after both enjoyed solid rallies yesterday. More jobs, higher oil prices - the yin-yang of markets today and perhaps many more days to come.

The gold miners are up with gold but the mining sector is mixed. The Eureka Miner's Index(EMI) is down slightly from yesterday at an unremarkable 480.5 and down from the 1-month moving average of 545.1. The EMI gives us the market temperature for the sectors that have the greatest impact on mining in Eureka County.

The EMI has pretty much been moving sideways lately waiting for an excuse to return to January highs or descend to new lows for the year. Yin-yang, high oil prices place a real cloud over an otherwise good recovery story domestically and globally. Stay tuned.

NYMEX Oil breaks $104/bbl

NYMEX light sweet crude just made a 2 1/2-year high breaking $104/bbl at 7:20 AM PT. Here's an update of the record books for the big three metals together with NYMEX and Brent crude oil:

COMEX Gold $1441.0/oz 11:30:00 ET 03/02/2010, April contract most active
COMEX Silver $34.975/oz 11:30:00 ET 03/02/2010, May contract most active
COMEX Copper $4.6375/lb 06:15:00 ET 02/04/2011, March contract most active
NYMEX WTI Crude $104.09/bbl 10:20:00 ET, 03/04/2011, April contract most active
ICE Brent crude $119.79/bbl 02:45:00 ET 02/24/2011, April contract most active

Daily Oil Watch

On February 1st we identified North Sea Brent crude oil as a good barometer for the developing crisis in the Middle East and North Africa. The most active front month contract remains above $100/bbl with a large spread from the North American benchmark, Western Texas Intermediate or "Texas light sweet crude", traded on the NYMEX (see note 1). The Report normally follows the latter but will track both until things settle out in this volatile region.

Here are the most active front month contracts as of this morning (6:22 AM PT before new NYMEX high at 7:20 AM PT):

NYMEX light sweet crude $102.99
ICE North Sea Brent crude $115.44
Spread (ICE- NYMEX) = $12.45 (yesterday $13.36)

Here are the June contracts with a narrower spread:

NYMEX light sweet crude $104.80
ICE North Sea Brent crude $115.41
Spread (ICE- NYMEX) = $10.61 (yesterday $11.30)

Although prices are off their crisis highs, we still have $100+ Brent and NYMEX in June favoring higher oil prices for the summer. The Colonel's December prediction that we would see NYMEX $100/bbl oil before the Fourth of July came true on February 23rd.

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 480.48 slightly down from yesterday's 485.54 and below the 1-month moving average of 545.06. The EMI continues to be down from the high set on January 4th and a trend reversal in the short term is now uncertain.

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.

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 ON - The miners are still in a rough patch but conditions are improving; The VIX or "fear index" is below 25; bellwether Freeport-McMoRan (FCX) remains trapped between its 100-day and 150-day moving averages but still above its 200-day average of $43.06 (our new warning level, 02/02 update after the FCX 2:1 stock split); 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 RED light is turned on our Fuel Gauge with oil above $100

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, R&R Partners parts ways with Nevada Mining Association, Obama budget includes mining royalty , Mineral commission fights consolidation

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Commodity Market Morning Update

NYMEX/COMEX: Oil is up $1.08 in early trading at $102.99 (April contract, most active); Gold is up $4.2 to $1423.7 (April contract, most active); Silver is up $0.278 to $34.605 (May contract, most active); Copper is up $0.0420 to $4.5320(March contract, most active)

Western Molybdenum Oxide is $17.00; European Molybdenum Oxide is $17.75; LME moly 3-month seller's contract is $17.24, LME cash seller is $17.01

Stock Market Morning Update

The DOW is down 69.85 points to 12,188.35; the S&P 500 is down 8.75 at 1322.22

Miners are mixed:

Barrick (ABX) $53.32 up 1.37%
Newmont (NEM) $54.53 up 1.74%
US Gold (UXG) $8.01 up 2.04%
General Moly (Eureka Moly, LLC) (GMO) $5.16 down 2.09%
Thompson Creek (TC) $13.14 up 0.31%
Freeport-McMoRan (FCX) $52.50 up 0.19% (a bellwether mining stock spanning copper, gold & molybdenum)

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

ArcelorMittal (MT) $36.60 down 1.61% - global steel producer
POSCO (PKX) $103.68 down 0.96% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 0.27% at $1,821,408.54 (what's this?).


Colonel Possum

Note 1 - West Texas intermediate (WTI), also known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing and is the underlying commodity of New York Mercantile Exchange's (NYMEX) oil futures contracts. The price of WTI is often referenced in North American news reports on oil prices, alongside the price of North Sea Brent crude (Wiki).

Note 2 - The Bureau of Labor Statistics calculates five alternate measures of unemployment, U1 through U6, that measure different aspects of unemployment:

* U1: Percentage of labor force unemployed 15 weeks or longer.
* U2: Percentage of labor force who lost jobs or completed temporary work.
* U3: Official unemployment rate per the ILO definition occurs when people are without jobs and they have actively looked for work within the past four weeks.
* U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
* U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
* U6: U5 + Part time workers who want to work full time, but cannot due to economic reasons (underemployment). (source: Wikipedia)

Headline photograph by Mariana Titus

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

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