To begin with, I like Mark Mobius. When I feel like Asia and Emerging markets are worthy of investment I use Mobius’ actively managed funds as opposed to FXI or EEM (associated bull and bear funds of which are very tradable).
On crude oil: “at below 50 this is something that no one, ah, ever imagined…”
This is something I would take issue with. Prechter most certainly imagined it, and stated so even at the peak of ‘Peak Oil’ hype, which is just another beautiful illustration of human hysteria in financial markets. I do not assign prices to things unless I can chart them, and so I have long-since assigned 1.50/lb. to copper. But during the ‘Peak Oil!’ craze I did my share of bitching and moaning about it from a contrarian perspective.
Anyway, Mobius goes on to say that he thinks the price of oil has no relationship to its supply/demand fundamentals. He says it is all sentiment. One thing I would mention is that Deflation is largely sentiment as well. At some point it becomes impulsive (as leverage gets taken down, as in Q4 2008) but for now, as Prechter often states, a deflationary mindset is taking hold. Commodities have been ground zero for the first phase of Deflation, which makes sense.
Also of note on Mobius, he thinks that some commodities (in particular the precious metals) are going to get a spike upward soon. He then babbles about supply/demand in the precious metals, which is to be ignored. But like many gold bugs, he may just dumb luck into a gold rally… if risk goes ‘OFF’. That is where the PM’s would assume ‘1st mover’ status in [anticipation of] any coming inflationary operations.
A strange situation in Copper sees the metal sagging and the miners popping. The metal has been on a rally that we have been tracking all year (easy now, there is huge long-term resistance above, not shown on this daily chart) but has sagged for the last month. The miners on the other hand, have risen over that period.
Conclusion? I don’t have one. Just pointing out a weird situation. Maybe Copper was a barometer to the present USD weakness and now the various touts, pumpers and carnival barkers across the commodity spectrum are doing their thing. It’s easier to buy the miners after all, than the metal. That stuff is heavy!
The Uranium ETF is following premier U miner Cameco higher today. We have been keeping a casual watch on the U’s in NFTRH as one of the ‘outlier’ commodities that can bounce in a corrective USD atmosphere.
The problem I have with this bounce however, is that there was a write up on MarketWatch getting hysterically bullish about Uranium and Japan’s recovery and China’s new nuke build out and whatever other standard pump inputs could be included. To make it worse, the article quoted the man who in his own mind invented the investment cases for both Lithium and Rare Earth Elements; junior gold stocks too! He’s been trumpeting these things throughout their bear markets.
So I left it alone. If the U bounce is real, there will be plenty of time to get on it.
I have not even read the interview before starting this post. By the end of the post I will have read it and I assume, taken issue with at least some of it.
The very term “Resource Sector” is something that bothered me going back to the ‘inflation bull’ market of 2003-2008. Back then I used to grouse about the gold is silver is copper is tin is oil is hogs crowd always lumping ‘resources’ together as if they are anywhere near the same thing. They are not; they are vastly different, with most ‘resources’ being economically cyclical while gold is counter cyclical.
Sure, sometimes when the inflation tout is going good it all goes up. But there is no resources sector as a discrete and unified asset class. So my conclusion was that anyone pitching “the metals” as many used to often do (gold and industrial metals all in the same analysis) is either just lazy or a ‘resource sector’ pitch man or woman. There were tons of ’em in 2003-2008.
Anyway, on to Casey here…
L: Well, Doug, we’ve seen another quarter of high volatility and significant world events. What strikes you as most important at present?
Doug: Everything is still held together with chewing gum and baling wire, for which I’m grateful, considering what’s coming. It’s very clear to me that the global economy is in very much the same space as it was in 2007—in other words, on the edge of a precipice.
So buy resources! Wasn’t that a solution from many corners of the fear trade into the 2008 top when resources of all kinds eventually crashed as bad or worse than the stock market?
Continue reading Signs of a Resource Sector Bottom? Really?
Wow, look at the big rally in Copper (hourly)…
Wow, look at the resistance coming up (monthly)…
It’s all in how you want to cherry pick time frames.
The monthly chart says it’s all just noise until Copper clears 3 bucks a lb.
Crude Oil fund USO is tickling a lower short-term low today and that is not a good sign for the would-be bottoming process that people seem to be managing.
We noted in this week’s NFTRH report that Crude had been struggling with the MA 50 and here is USO turning down from it today. We also noted that commodities continue to look precarious at best, with a few outliers like RE, Lithium and Uranium making bounces.
Further, a weekly chart of the USD shows what looks like a consolidation, not a correction in the making. Given the pervasive bullishness on the USD, I have thought it would have taken a decent correction by now, with all the anti-USD stuff bouncing. But so far, it’s not happening.
Guest Post by David Stockman & Stealthflation
Commodity Prices Are Cliff-Diving Due To The Fracturing Monetary Supernova—The Case Of Iron Ore
Crude oil is not the only commodity that is crashing. Iron ore is on a similar trajectory and for a common reason. Namely, the two-decade-long economic boom fueled by the money printing rampage of the world’s central banks is beginning to cool rapidly. What the old-time Austrians called “malinvestment” and what Warren Buffet once referred to as the “naked swimmers” exposed by a receding tide is now becoming all too apparent.
This cooling phase is graphically evident in the cliff-diving movement of most industrial commodities. But it is important to recognize that these are not indicative of some timeless and repetitive cycle—–or an example merely of the old adage that high prices are their own best cure.
Instead, today’s plunging commodity prices represent something new under the sun. That is, they are the product of a fracturing monetary supernova that was a unique and never before experienced aberration caused by the 1990s rise, and then the subsequent lunatic expansion after the 2008 crisis, of a cancerous regime of Keynesian central banking.
Continue reading Commodity Cliff Dive…
I find it kind of lame when someone puts up a chart with a heading like ‘The most bearish/bullish/important/profound, etc. chart in the world’. Here we cue memories of a funny post at some website with “the most bearish gold chart in the world” back when gold was well down in the triple digits.
Look, chart guys are proud of their charts and proud of their analysis, I get it. I think highly of my own work. But I don’t think highly of hype (as if you haven’t gleaned that by now) so I’ll just robotically remind you that this chart, the most ********* chart in the (financial) world, is in a big picture uptrend and never stopped being in one.
The number of characters in ********* actually fits at least 2 good descriptors I can think of for the above.
Folks, this chart is from yesterday’s close. Commodities are down hard again today. They are also deeply over sold, yet I still want nothing to do with them (note to self… don’t let silver drop too far with those calls still in hand). 500 is the key level per this weekly NFTRH chart we have used since well before CCI’s breakout early in the year.
It is time to be considering that the age of inflation or more accurately its cost-effects may be over.
It is time to be considering that inflation gurus set up a cottage industry in scaring everybody about hyper inflation.
It is time to be considering that for now the US economy and stock markets benefit from a transitional Goldilocks phase.
It is also time to consider the message that commodities may be sending for a day when that pendulum (the lack of inflation expectations) swings too far.
Joining its friends in the commodity and precious metals complexes, the daily Palladium chart is starting to get bearish as if on cue, after reading this article at Kitco.
Aside from instructing that the 50 day moving average is a place to bet against Palladium for those who wish (we’ll call this a public NFTRH+ style highlight, without the other parameter details), the “major uptrend in 2014” that the article talks about is busted.
Macro geeks like your writer will be using Palladium in relation to Gold going forward as but one tool among many in gauging the macro. After all, that’s where the real interesting stuff is, as opposed to any single asset class in my opinion.
Copper is a tough one. If copper hangs in and hints at an ‘inflation trade’ (i.e. anti-USD) bounce to come, I’d like to buy COPX or FCX. The charts are coming along nicely. COPX was NFTRH+’d recently for just such an occasion.
The weekly chart of copper is trying to hold above a downtrend breakout line and hold a trend out of March.
But the monthly chart is still disgusting, a year or so after it was created…
Continue reading Doctor Copper Updated