Timing & trends

Cover Shorts: Special Precious Metals

Posted by Bob Hoye - Institutional Advisors

on Monday, 7 October 2013 20:25

imagesOur Quick Pivot of August 22nd noted that the surge in Precious Metals had become speculative. The RSI on the silver/gold ratio had reached 79 when anything above 78 indicated “dangerous conditions”.

The high for the RSI was 80 and the HUI set its high at 283 on August 27 and SSRI reached 10 on the same day. The advice was to take some money off the table and that nimble traders could play the short side of the silver market. Today’s low for the HUI has been 223 and for Silver Standard it’s been 5.95. While the move could generate lower momentum readings, nimble traders could cover shorts.

Markets Go Nowhere

Posted by Lance Roberts: The X Factor Report

on Monday, 7 October 2013 17:34

“The current bullish uptrend remains intact which requires that we maintain exposure to the equity markets for the time being.”

Leading up to last week the threat was that if the government was shut down that the markets would tumble.  I made it clear that this was unlikely to happen as the “markets” have seen this before, and with the Federal Reserve remaining fully committed to artificially inflating asset prices, there was little downside risk present. 

Screen Shot 2013-10-07 at 10.26.04 AMSo, for all the “fuss and turmoil” the markets really paid very little attention to the antics in Washington.

While market volatility certainly increased in the past week – there was no violation of any support levels or the current bullish trend. In fact, as I stated this past week in our daily blog posting:

“As you can see the market reached its peak in July as the Federal Reserve reiterated its position that it would not be tightening its accommodative policy anytime soon.  That rally from the June lows had taken the markets to an extreme overbought condition that needed a correction/consolidation process to resolve. However, it is important to notice that the May/June correction NEVER triggered a ‘sell signal.’

The significant difference is that the correction which began in August took the markets down to the longer term uptrend but triggered the issuance of a “sell signal” in the process. This change in dynamics required our models to reduce equity risk by 25%. (Portfolio models are holding 75% of target equity allocations currently.)

The subsequent market bounce, following a collision of announcements in September with Larry Summers stepping out of the race for Federal Reserve Chairman, ostensibly putting Janet Yellen in the seat, Obama stepping back from military action in Syria and the Federal Reserve not “tapering” their current bond buying program at their September meeting, seemed like the selloff was over. 

However, that rally failed on two levels:

1) The markets failed to break out to a new high; and
2) The “sell signal” was not reversed. 

This suggested that the corrective process was still in play, and despite the rally, kept the portfolios holding increased cash positions.

The recent government shutdown/debt ceiling debate drama is certainly providing the necessary catalyst for the continuation of the current corrective process. However, the markets, at this point, have not violated any short/intermediate/or longer term support levels that would warrant significantly reduced equity exposure. The current bullish uptrend remains intact which requires that we maintain exposure to the equity markets for the time being.”

The rally off of that short term weekly support on Friday kept the markets in play for the time being.  However, the upcoming debate over the debt ceiling certainly puts the markets at risk in the short term and is something that we should remain very mindful of.

>> Read More. Download This Weeks Issue Here.

 

About Lance Roberts

Lance Roberts is the General Partner & CEO of STA Wealth Management, Host of the “Streettalk Live” Daily Radio Show (streamed live at www.streettalklive.com), and Chief Editor of the X-Report and the Daily X-Change Blog.
Follow me on Twitter: @streettalklive

Higher Oil’s Impact on Gold

Posted by Nadia Simmons: Sunshine Profits

on Monday, 7 October 2013 15:41

 Is Crude Oil Ready for Further Growth? What Impact Could It Have on Gold?

One of the main events of recent days was the first U.S. government shutdown in 17 years. Light crude dropped to a new monthly low at $101.05 on concerns that this event would reduce demand for black gold in the world’s largest oil consumer market. In the previous week, the yellow metal also declined and dropped below $1,300 an ounce. Despite this declines, on Wednesday, both commodities rebounded sharply supported by a weaker U.S. dollar as commodities priced in the greenback became less expensive for holders of other currencies. Additionally, in the second half of the previous week we saw similar price action in both cases.

Taking the above into account, investors are probably wondering: what could happen if the recent positive divergences between both commodities remain in place? Can we find any guidance in the charts? Let‘s take a look at the charts below and try to find answer to this question. We’ll start with the daily chart of crude oil (charts courtesy by http://stockcharts.com).

simmons october72013 1

On the above chart, we see that the situation improved slightly in the previous week. Last Monday, crude oil dropped to a new monthly low of $101.05 per barrel. With this move the price of crude oil declined not only below the August low, but also below the 38.2% Fibonacci retracement level. Despite this drop, we saw a pullback, which erased most of the losses late in the day. 

In the following days, we saw further improvements as oil bulls managed to hold this level. This positive event triggered another pullback, which pushed light crude to the previously-broken rising medium-term support line on Wednesday. Additionally, the price of light crude came back above the 38.2% Fibonacci retracement level and the breakdown below this level was invalidated. Although crude oil closed Wednesday almost at the rising medium-term support/resistance line, the buyers didn’t have enough strength to break above this resistance until the end of the previous week. 

Looking at the above chart, we see that crude oil remains in the declining trend channel. Therefore, if we see a breakout above the medium-term support/resistance line, we could see a move up to the declining short-term resistance line based on the Aug. 28 and Sept. 19 highs – currently close to the $106.4 level (marked with blue). 

Please note that the nearest support is the September low and the 38.2% Fibonacci retracement level. If it is broken, the next one support zone will be slightly below $100 per barrel where the 50% Fibonacci retracement level intersects with the June high. 

Once we know the current short-term outlook for crude oil, let’s take a closer look at the chart below and check the link between crude oil and gold. Has it changed since our previous essay on oil and gold was published? Let’s examine the daily chart.

simmons october72013 2

Looking at the above chart, we see similar price action in both commodities at the beginning of the previous week. They declined on Monday, however, in the case of crude oil, the buyers managed to hold the September low in the following days, which resulted in a sharp pullback on Wednesday. Meanwhile, gold declined and reached its new lowest level since the August top. Despite this drop, the rest of the week looked similar for both commodities.  

Summing up, looking at the relationship between crude oil and gold, we notice similar price action in both commodities in the previous week. Therefore, if this relationship remains in place, we could see some strength on a short-term basis in case of the yellow metal and crude oil. However, we should still keep in mind that the recent decline in crude oil is just slightly bigger than the previous ones and light crude remains above the 38.2% Fibonacci retracement level, which forms strong support. From this point of view, the uptrend is not threatened at the moment. At the same time, the downtrend in gold remains in place and the yellow metal remains below the declining resistance line, which has already successfully stopped buyers several times. 

Thank you.

Nadia Simmons

Sunshine Profits‘ Crude Oil Expert

Oil Investment Updates

Oil Trading Alerts

 

 

* * * * *

 

 

 

Disclaimer

 

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

 

 

 

 

 

Oh No, Here We Go Again

Posted by Michael Campbell - Money Talks

on Monday, 7 October 2013 14:31

Michael Mike Campbell image Ouch! Politicians and groups like organized labour are arguing their unrealistic position of doubling Canadian Pension Plan contributions. Michael reveals the numbers on what an individual, especially the Self-Employed could do better on their own. 

{mp3}mcbuscomoct7fp{/mp3}

OPEC is in Big Trouble

Posted by Michael Campbell interviews Josef Schachter

on Monday, 7 October 2013 14:30

Money Talks Michael Campbell interviews Josef Schachter, Canada’s leading independent energy analyst and founder of Schachter Asset Management

Michael Campbell: How has the budget and debt ceiling debate going on in the United States affect energy prices the oil market in particular?
 
Schachter: The problem with the US’s is it’s pretty anemic growth of about 1.5 -2 % of real GDP, and every week that the US economy has the government shutdown its near a 1/4  of 1% for for the week impacting the quarterly numbers. So if the Government is shut down for 2 or 3 weeks you’ve got barely much growth in the US. Of course if the economy is not growing in the states the demand for energy is going to be weak.
For example if you look at last week’s data be demand fell from 19.3 million barrels per day to 18.7, down 580,000 barrels a day. So now you’ve now got supply in the US, with inventories built by 5 million barrels of crude oil last week and you have 97.5 days of supply which is probably 10 or 12 days more than is necessary. 
 
You’ve also got increasing production in the United States as well as OPEC increasing production. Specifically you’ve got Nigeria, Saudi and Iraq increasing production, plus if there’s a resolution of this Iran situation, and all of a sudden Iran’s sanctions are removed, they’re going to increase production and all of a sudden you’re going to have a glut on the world. 
In short from a from a fundamental point of view we’ve been bearish on energy. We’ve said the fair value of the price of oil is  $70-$80 and that there has been about a $30 risk premium in it because of the problems in Syria, Iran and Egypt. So you have maybe $10 dollars for each of those items and slowly each them seem to be resolving. All of a sudden that risk premium should come out. 
 
Since we’ve been cautious on energy the index may be up 3 or 4 %, but it has been very difficult to make money in the sector. Now with oil potentially vulnerable to the downside here you want to be very careful or be underweight the sector. 
images-1Campbell: One of the things that comes out of the blue are solutions to things that we didn’t see coming. For example in the early 1980’s we had the National Energy Policy projecting huge jumps in the price of oil that didn’t manifest because they couldn’t anticipate fuel injection being so much more efficient than carburetors. 
 
The equivalent today, perhaps even more profound is incredible impact of Fracking on keeping
natural gas prices low and oil supply increasing. Is Canada about to miss their opportunity because of the negativity towards the energy sector? 
 
Schachter: Yes, Take for example the province to BC having these issues about LNG in the export terminals, you know the longer they take to get a resolution and get a go-ahead other countries like Australia and other places are going take that market share away. The longer the political and environmental hurdles take to resolve themselves as well as the fiscal arrangements where the government wants its share of the pie, all that has to be resolved in 2013. If it drags them through the end of 2014 others are going to take that market share that’s being created in Asia because Japan is closing the nuclear plant, as well as the existing demand in Korea and China. Add to that all these guys have the potential for shale, especially China, so there will probably be growing production growing on that side and they will want less from imports. Of course we will suffer.
 
I don’t think the total demand is going to be as vibrant that everybody’s talked about in the past because of technological advances. Right now the demand for crude oil maybe 90 million barrels worldwide. In the old days we used to say by the end of this decade it might be a 100 million. If we take into account the amount that’s going to come from non-OPEC,  OPEC is going to lose market share and of course they’re not going to want to do that. 
Campbell: One of things it’s killed me Joseph is the debate about the Northern Gateway pipeline has largely taken place outside at the reality of our demand for petroleum products.  People still want to drive their cars and for all the incredible information, call it propaganda, they have not been able to make a go of it in the electric car market. Of course even in that market it depends how you’re producing electricity, if its in a coal-fired State it’s a joke if you think that’s an environmental savings. 
 
 We use jet fuel, heating oil,  and gasoline and all that is transported by pipeline into BC. 
 
Schachter: If they don’t go the pipeline route because of environmental blockages you are going to end up having rail cars going to the refineries that are willing to pay for it, because going by tank cars is way more expensive. Of course the tank cars go back empty so there are those inefficiencies as well. 
The issue is safety and though some of the pipelines were built in the 50’s and 60’s the newest pipelines are being built with fabulous environmental standards. Simply put people are not being rational on pipeline opposition and in the end it is going to hurt Canada and our our fiscal position. 
 
Campbell: US self-sufficiency in oil, is it a game-changer? 
Schachter: Yes, as I mentioned earlier the US is producing about 7.8 million barrels of liquids,  thats up 25.4 % from a year ago. So the total in the US is now 12.3 million barrels and consumption is only 18.7.  Well the difference of about 6.3, Canada produces about a third of that then you have Mexico and Venezuela. So the need for all oil from the Middle East is really coming down. To be specific the US is now producing about 12.3 million barrels of liquids, 7.8 million of crude oil and natural gas liquids and renewables of 4.6 million, and they’re probably going to see growth of another million barrels in 2014. So as time goes on between fuel efficiency of individual cars and the greater use of natural gas the US which was using 21.8 million barrels a day is now down to 18.7. If that continues on a worldwide basis where fuel efficiency and new alternatives like using compressed natural gas, the demand is not going to be there for OPEC. Of course opec needs revenues to fund their their subsidized food programs they’re going to have to push out more product and and the price will come down. 
 
I also think there’s gonna be some severe tax loss pressure this year as people made money in banks, insurance and in other areas but lost money in the mining and the energy sector,  so we think there is going to be a significant amount of tax loss pressure on resource sectors in the November-December window. That probably will give us a nice buying opportunity and then there will be a nice bounce into 2014. 
 
So my recommendation to find the names that you like and be ready to be buyers of those names during the upcoming tax selling pressure which will happen. 
 
Campbell: If I was to make my list, what characteristics should these companies display? 
Schacter: You want to have companies who have low cost a lot of upside in terms of the drill bit. Look for companies that have low finding cost, low operating costs, strong balance sheets and have land plays where there is significant upside. 
 
Right it’s not easy to make much money in natural gas so everybody’s been moving towards liquids, but at some point we’re going to see natural gas be a much better commodity. Right now many companies are trading below Net Asset Value, so from an accounting point of view they are really cheap. 
 
I think there is going to be another lengthy bull market cycle like we had from 1974 – 1981 or 1998 – 2008. It might start 2-3 years from now, in the meantime during the next couple of years you have to be a more nimble investor with a trading mentality because stocks swing around quite a bit with the commodity prices. 
 
The names I like on the domestic side are companies like Delphi Energy Corp (DEE.TO), Long Run Exploration Ltd. ( LRE.TO) and  Tamarack Valley Energy Ltd. ( TVE.V). All of them are up for the year because the liquids have done well. They’ve also done much better than the sector, Long Run up 25-30%, maybe more than that for Tamarack. 
 
On the international side we like companies with drill bit upside, names like Petromanas Energy Inc. (PMI.V), WesternZagros Resources (WZR.V) and Dualex Energy Intl Inc. (DXE.V)  that are exploration plays and if Mother Nature cooperates they could do very well. The sector on the international side has been pretty tough this year as as many you have your listeners would know
 
Campbell: Joseph, you’ve been giving good advice, at the last World Outlook Conference you made a very clear that there were better places to put your money in and you were certainly dead on about that. Thank you for joining us today.