Bill Cara’s Blog for Mar 12, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning.

As market prices seem to be meandering this morning, my brief scan of the media picked up this item, which seems to have gone viral

As the People speak up, we should listen. After all, the topic is Social Equity.

Good morning, Geoff here.

Stock futures are lower this morning as traders focus on China’s economy.

China recorded its biggest trade gap in a decade as exports rose less than expected. Exports are what drive China’s economic growth so this data coming on the heels of a cut in the growth target is seen as a negative. However, a slowing economy often leads to easing monetary policy and this may end up being a positive for the equity markets so keep your eye out for that scenario.

Commodities are also lower today as worries grow about China’s demand growth.

Gold continues to drop as I write this, but the 200 dma has held the last few trading days as traders are buying at that level which is roughly $1675. Unless we get a decoupling, a rising dollar will put pressure on the price of gold. The fundamentals of gold continue to strengthen and I expect gold to move much higher once the dollar rally is over. With that in mind, those of us with a longer term view than a week or two should be looking at prices to add to gold holdings should the price drop on a dollar rally. If you need a core holding, weakness is the time to build it at technical support levels.

Today, the US federal budget deficit numbers will be released. Expectations are for a year over year growth in the deficit from $222 billion last year to $229 this year.

Right now, things look a little cloudy to me. Equity markets are poised to breakout to new highs which should have investors in high spirits, yet I overheard some people complaining about paying over $4 at the pump. When it takes $75 to fill up my tank, I start to notice too.

The consumer sector did breakout last week on the good news from the jobs front. However, the tech and financial sectors couldn’t find new highs and of course worries of the Chinese slowdown hurt the basic materials sector. With the dollar rallying, I would like to see tech and financials breakout to new highs with basic materials and industrials at least consolidating at these levels to get really bullish again. For now, it is wait and see.

Have a great trading day!

Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,162.85 6:45AM EDT Up 0.78 (0.04%) Components, Chart, More
^BFX BEL-20 2,278.28 6:59AM EDT Down 3.62 (0.16%) Components, Chart, More
^FCHI CAC 40 3,482.36 6:59AM EDT Down 5.12 (0.15%) Components, Chart, More
^GDAXI DAX 6,892.51 6:45AM EDT Up 12.30 (0.18%) Components, Chart, More
^AEX AEX General 326.50 6:45AM EDT Up 0.47 (0.14%) Components, Chart, More
^OSEAX OSE All Share 481.10 6:45AM EDT Down 3.39 (0.70%) Components, Chart, More
^OMXSPI Stockholm General 342.79 6:44AM EDT Up 0.20 (0.06%) Components, Chart, More
^SSMI Swiss Market 6,203.75 6:45AM EDT Up 15.24 (0.25%) Components, Chart, More
^FTSE FTSE 100 5,883.70 6:45AM EDT Down 3.79 (0.06%) Components, Chart, More
FPXAA.PR PX Index 992.10 6:59AM EDT Down 5.80 (0.58%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,604.90 7:45AM EDT Up 0.48 (0.03%) Chart, More
GD.AT Athex Composite Share Price Index 743.73 6:44AM EDT Down 8.62 (1.15%) Chart, More

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.

Cara on Trends & Cycles

Vad’s Catch of the Day

Kaimu’s Sound Money

CTA Trading Desk Mid-Day Report

CTA Trading Desk Post-Close Report

Jeff Borsato’s Hidden Truth

The Not so Lone Gunman

This piece by Tariq Ali on the LRB blog that highlights the complexities of wars of occupation.

The Not so Lone Gunman
by Tariq Ali (March 12, 2012)

In most colonial wars people are arrested, tortured at random and killed. Not even a façade of legality is considered necessary. The ‘lone’ American gunman who butchered innocents in Afghanistan in the early hours of Sunday morning was far from being an exception. For this is not the act of a deranged maniac killing schoolchildren in an American city. The ‘lone’ killer is a sergeant in the US army. He’s not the first and won’t be the last to kill like this.

The French did the same in Algeria, the Belgians in the Congo, the British in Kenya and Aden, the Italians in Libya, the Germans in South West Africa, the Boers in South Africa, the Israelis in Palestine, the US in Korea, Vietnam and Central America; and their surrogates have behaved similarly against their own populations throughout South America and much of Asia.

The Russian occupation of Afghanistan also witnessed ‘lone gunmen’ behaving in this fashion, but better-educated than many of their US counterparts they would write about the whys and wherefores in anguished diaries after they had been withdrawn. Rodric Braithwaite’s Afgantsy cites chapter and verse. There is no such thing as a ‘humanitarian’ war. The sooner this fact is accepted by the citizens of the occupying countries the easier it might become to mobilise support to oppose neocolonial adventures and the attendant atrocities.

It’s hardly a secret that most Afghans are opposed to the occupation of their country. Occupying soldiers are well aware of the fact. The ‘enemy’ is not hidden. It is the public. So wiping out women and children is part of the war. Helicopter gunships, bomber jets and drones are more effective killers than ‘lone’ gunmen. The situation in Afghanistan today is so dire that the occupying forces have no way of telling whether Afghans working with them are actually on their side or not. Some of the recent attacks on US and Nato soldiers have come from Afghans wearing police and military uniforms tailored by Nato. So everyone is now the enemy – even the puppet president Karzai, who knows his days are numbered though he, at least, has a few safe havens and numbered bank accounts waiting for him. For the US, the contradictions are implacable. The Afghans want them out and the war has become unwinnable.

So what is to be done? Get out now. These wars that dehumanise the ‘enemy’ also dehumanise the citizens of warmongering nations. We are made to live in a state of ignorance, but by our apathy contribute to making sure that such a state continues indefinitely. The individual gunman will soon disappear from our thoughts and we can then settle down to the routine killings that take place every day, carried out collectively on the orders of politicians that we elect.

  1. 11:30 AM ET 3-Month Bill Auction 11:30 AM ET 6-Month... [#106180]
    By: davefairtex (5215 comments) Go to top ↑
    • 11:30 AM ET 3-Month Bill Auction
    • 11:30 AM ET 6-Month Bill Auction
    • 1:00 PM ET 3-Yr Note Auction
    • 2:00 PM ET Treasury Budget
  2. 1 in Accumulation Zone 1 in Buy alert 4 in Distribution... [#106181]
    By: davefairtex (5215 comments) Go to top ↑
    • 1 in Accumulation Zone
    • 1 in Buy alert
    • 4 in Distribution Zone
    • 5 in Sell alert

    Accumulation Zone: Monthly 4, Weekly 1, Daily 8
    Distribution Zone: Monthly 13, Weekly 22, Daily 9

  3. ... [#106182]
    By: Bull Hunter (3552 comments) Go to top ↑
  4. as far as equities are concerned. surprised a bit but not... [#106184]
    By: jack black (2306 comments) Go to top ↑

    as far as equities are concerned.

    surprised a bit but not complaining since I’m long miners.

    • ... [#106186]
      By: Vadym Graifer (4341 comments) Go to top ↑
      • It's all about credibility too. Where is the new debt... [#106187]
        By: Mark H (1363 comments) Go to top ↑

        It’s all about credibility too.

        Where is the new debt trading right now and when will Greece’s economy start to grow again?

        • Re" credibility (or whatever's left of it): while ISDA... [#106191]
          By: Vadym Graifer (4341 comments) Go to top ↑

          Re” credibility (or whatever’s left of it): while ISDA eventual decision boosted it a bit by somewhat validating the CDS market, the very fact that it was a matter of some committee making a decision is telling and frightening.

          In real credible market, it has to be an automatic event: debt is not paid – CDS are triggered, end of story. I doubt CDS had a clause “unless some group of bureaucrats decides otherwise.” The fact that they ruled “no trigger” first time sends a horrible signal and will most likely influence stakeholders’ behavior on the next junction.

          • To add to the ISDA discussion: "Determination committee"... [#106192]
            By: tradylady (205 comments) Go to top ↑

            To add to the ISDA discussion: “Determination committee”… no opportunity for appeal and seated at the table are none other than JPM, GS, MS… Judge and Jury


          • That certainly adds to credibility, eh?... [#106193]
            By: Vadym Graifer (4341 comments) Go to top ↑

            That certainly adds to credibility, eh? LOL

          • ... [#106194]
            By: Mark H (1363 comments) Go to top ↑
          • More to the point, is that now that CDS have shown... [#106200]
            By: aiki100 (143 comments) Go to top ↑

            More to the point, is that now that CDS have shown themselves to have no value whatsoever in terms of credibility, how will that affect investors in sovereign (read peripheral europe) debt?

            I doubt they will touch it (unless at extreme spreads against bunds) and why should they? If contracts can be unilaterally abrogated and any insurance they could buy on such investments is not to be trusted, then the whole issue of funding growth in the troubled euro area just got harder, not easier with this whole deal. That is, unless the ECB thinks it can print the money that private investors would have otherwise provided. You know they are going to try…

          • ... [#106206]
            By: Les (7233 comments) Go to top ↑


            Tavakoli covered this angle on the ISDA’s decision making process a few days ago. Guess who decides when a default is a default.

            Same old, same old.

  5. Couldn't resist sending this. Maybe the next generation... [#106185]
    By: Grym (5469 comments) Go to top ↑

    Couldn’t resist sending this.

    Maybe the next generation will give us real “Change we can believe in” ;-)

    Have a good week


  6. ... [#106188]
    By: Vadym Graifer (4341 comments) Go to top ↑
  7. on a... [#106190]
    By: jack black (2306 comments) Go to top ↑

    on a dip.

  8. Patience pays off. Sold my entire position last week for a... [#106195]
    By: papadynamite (446 comments) Go to top ↑

    Patience pays off. Sold my entire position last week for a nice profit. Just reentered with a full position at the 50% Fibonacci retracement area of $4.55.

    • incredible timing! no position in... [#106198]
      By: NYUGrad (4750 comments) Go to top ↑

      incredible timing! no position in mux.

    • Earnings... [#106199]
      By: tradylady (205 comments) Go to top ↑

      Earnings today?

      • i guess so. what was the... [#106203]
        By: NYUGrad (4750 comments) Go to top ↑

        i guess so. what was the catalyst?

        • a smack down ahead of FOMC tomorrow... [#106204]
          By: 14them34me (295 comments) Go to top ↑

          a smack down ahead of FOMC tomorrow ?

          • not too sure. but mux is down much more than the metal... [#106205]
            By: NYUGrad (4750 comments) Go to top ↑

            not too sure. but mux is down much more than the metal, sector, or peers.

            GLD down .76%
            GDX down 1.6%
            AUY down 2.44%
            MUX down 8.96%

            no position

          • GUY was down as much as >9% earlier Bernanke not saying... [#106208]
            By: 14them34me (295 comments) Go to top ↑

            GUY was down as much as >9% earlier

            Bernanke not saying another QE was the reason a while ago. So I guess people are awaiting for tomorrow with trepidation.

          • I am gutted. -10% in a day. I have to say , last year I... [#106219]
            By: Ventilation Blues (164 comments) Go to top ↑

            I am gutted. -10% in a day. I have to say , last year I went LONG with UXG and ever since I made that decision it went down almost -80%. Now I think I am only about -40% on original purchase, which I guess needs to get to $8 to break even. Everyone speaks so highly of McEwen and I have to agree he is a very wonderful personality and awesome track record. I mostly have to thank him for the hard core education I got from UXG/MUX in how to trade a stock on a company (or in my case , how not to), Yes I should have sold before the merger, Yes I should have bought in when it hit $3 low, YES (and this is my personal greatest crime) I should have followed Bill when he sold his at $6 recently. Every other PM I own has had its bumpy moments but we have always come out smiling , but with McEwen its just been a hard core education and a scary roller coaster ride. In the long term, the knowledge gained from being a McEwen share holder will ultimately make me stronger and a better investor.
            Has anyone got any good news about MUX and its near term prospects or should I just dump this tonight and move onto pastures new?

          • Ventilation. Blues, are you a weak or a strong... [#106220]
            By: dberryclan (687 comments) Go to top ↑

            Ventilation. Blues,

            are you a weak or a strong hand?

            Answer that question and go from there. If MUX follows GG history, it’s a long term hold. “If” that’s possible for you.

          • I trade MUX as a short term trade, sometimes intraday... [#106221]
            By: papadynamite (446 comments) Go to top ↑

            I trade MUX as a short term trade, sometimes intraday depending on what my technical setups indicate. MUX has had a lot of recycle action but generally on the downside. If my short term indicators intraday,RSI 7, Full Sto K14,3 %D3, ADX 14 and MACD 12,26,9 indicate extremes usually on 10 and 15 minute charts, I will act accordingly. This stock, although I like it a lot, is not a buy and hold stock.

          • I remarked elsewhere that it was my impression that hot... [#106223]
            By: Les (7233 comments) Go to top ↑

            I remarked elsewhere that it was my impression that hot money was flowing in and out of key junior miners – MUX is clearly in that basket IMO.

            Will MUX deliver in the long-term? Probably. But that lower high put in at the end of Feb, when the stock couldn’t make 6 bucks, was your cue to lighten up if lighten was what would help you sleep better at night.

            Maybe a stint of education in candlesticks and chart patterns might help you negotiate this sector space, if you are disturbed by the rapid moves?


            It’s idle speculation on my part, but looking at the MUX monthly chart, 2011 appears to have completed a large double top. If Ben doesn’t want to print at this point, and the dollar begins to surge at European sovereign distress, I wonder if we could get MUX at $2?

  9. BRCM - Avian Initiates with a Positive. Target $45 INTC ... [#106196]
    By: Bull Hunter (3552 comments) Go to top ↑

    BRCM – Avian Initiates with a Positive. Target $45

    INTC – Avian Initiates with a Neutral. Target $29

    QCOM – Avian Initiates with a Positive. Target $75

  10. BUT i feel that the elite of hb&b are like vampires in... [#106197]
    By: NYUGrad (4750 comments) Go to top ↑


    i feel that the elite of hb&b are like vampires in all intent and purposes. the human version has long gone, bitten by the demon which claims so many with his lure of riches and pleasure.

    You can not reason with a vampire about to quench his/her thirst when they are standing behind you. Your only options are to fight or run.

  11. MF Global, ie John Corzine, will successfully and legally... [#106201]
    By: bigwad1 (768 comments) Go to top ↑

    MF Global, ie John Corzine, will successfully and legally transfer 1.6 billion from their customers accounts to his own off shore accounts through JP Morgan.
    We didn’t learn anything from Merrill Lynch, AIG, and Lehman!
    Same old, same old……..

  12. I know it goes against the "Grain" (pardon the pun) of free... [#106202]
    By: 14them34me (295 comments) Go to top ↑

    I know it goes against the “Grain” (pardon the pun) of free market, I for one would not like to see the control of Viterra (VT) going to a foreign control. This is a crown jewel in the Global Food Market.

    I applauded the government’s decision of disallowing the Potash takeover. Viterra, similarly, is in a powerful unique position to itself. There is no one else like it, especially now that the Canadian government has just recently dismantled the government-run Canadian Wheat Board (CWB).

    It is a grain handler with a global presence in Canada, US, Australia, New Zealand. When it’s winter in Canada, it’s summer in Australia and New Zealand. In another word, it is climate-diversified and it feeds Asia.

    I’d sooner see a foreign takeover of 1 of the big 5 Canadian Banks than to see a takeover of VT; at least there are 5 major banks, but there’s only 1 of Viterra.

    Here’s my analogy, for what it’s worth, if Gary Bettman were not controlling the NHL, may be the Stanley Cup would remain in Canada!! LOL

    Yeah…I know…this is a digression from the usual topic of discussion here.

    FD – I traded VT, in and out, for years and I just sold all my positions last Friday.

  13. CORE MACHINERY ORDERS (MOM) Japan for Jan Actual: 3.4%... [#106207]
    By: Les (7233 comments) Go to top ↑

    Actual: 3.4% Cons.: 1.6% Previous: -7.1%

    Actual: 0.6% Cons.: 0.6% Previous: 0.5%

    Actual: 39.5 Cons.: 40.8 Previous: 40.0

    Actual: 2.6% Cons.: 2.6% Previous: 3.0%

  14. Utilities +1.2% today while treasuries are pretty flat to... [#106209]
    By: BillySundance (1355 comments) Go to top ↑

    Utilities +1.2% today while treasuries are pretty flat to slightly down. TLT chart looks to me like demand is just waning. TLT not looking like a safety shield during these equity market dips lately. I could see TLT rolling over here a bit – even just a 0.25-0.50% increase in yield could make for a pretty ugly move on the charts (and perhaps coincide with a melt up in stocks?).

    On a personal note, I have a friend that put there home on the market this weekend (midwest – st. louis area). They had only purchased the house about 1.5 – 2 years ago as they moved to town due to a job relocation. They are now selling due to another job offer received with a competitor back in the friends hometown. They listed the house almost exactly at their purchase price and received two bids on the first day. I think this is starting to reflect that a couple years of ultra low interest rates are finally generating an uptick in credit availability. Couple this with some additional consumer confidence due to moderately increased hiring and I personally think that this may be a pretty solid spring for real estate. Not saying we are going back to the roaring 2000′s but I think there is some pent-up demand AND people are starting to fear that they may miss out on these low interest rates if they wait too much longer.

  15. 14them, I don't understand your position. You like VT as a... [#106210]
    By: schnauser (31 comments) Go to top ↑


    I don’t understand your position. You like VT as a Canadian champion, yet you applaud its global diversity, which was the result of buying ABB Grain of Australia. What if Australians had “defended” ABB and not allowed the foreign takeover by Viterra? then VT wouldn’t be the powerhouse it is today. so which is it, defend the national champion, or let the free market create a global champion. you can’t have it both ways.

    • I understand where you are coming from. But VT did acquire... [#106211]
      By: 14them34me (295 comments) Go to top ↑

      I understand where you are coming from. But VT did acquire its position in Australia. So now it builds great value for the company. Without ABB, my view may be different for VT. With some foresight, may be Glencore or someone else should have gone after ABB. It was a wise strategic move on VT’s behalf.

  16. "Not So Lone Gunman" new post up on the Hidden Truth... [#106213]
    By: Jeff B (715 comments) Go to top ↑

    “Not So Lone Gunman” new post up on the Hidden Truth Section.



  17. PM miners, uranium miners, and natural gas (not in a... [#106214]
    By: jack black (2306 comments) Go to top ↑

    PM miners, uranium miners, and natural gas (not in a specific order).

    I’m not touching NG myself, as I was burnt on this in the past and we do have a paradigm shift with hydrocracking technology.

    I’m long the other two, believing we had the intermediate low in end of 2011, but not entirely pleased with the rate of the rebound from the lows.

  18. busy over the weekend (global warming bringing fantastic... [#106215]
    By: Les (7233 comments) Go to top ↑

    busy over the weekend (global warming bringing fantastic weather to Switzerland)but conscious of some charts Robert Sinn brought to my attention Sunday.

    The price of silver is in a very volume heavy zone here. It could advance or decline from such a pivotal area (duh!). See the vol. by price bars that have supported previous down spikes. Looks like solid support, doesn’t it? But how many here are leveraged, and could you withstand a withdrawal below the heavier volume bars at $25 as the PM’s consolidate before the next advance?

    Speaking of consolidations and advances, Louise Yamada had something to say on the huge decade long consolidation in tech along with the tech sectors advance now; also on gold’s present consolidation. Worth a listen:

    Yamada suggested a pullback to the 1300, even 1200 on SPY, before her alarm bells would be raised as to the seriousness of any sell off. Anything above those levels is consolidation in her book. I read something similar from the MHFT:

    So I get the impression that we could became range bound here, with 1300 or thereabouts a reasonable downside target. Today’s efforts to lift higher were pretty pathetic, so I’ll be looking for some further downside tomorrow if important support both IWM and SPY were sitting on is broken.

    That first chart by Sinn led me to the dollar and a monthly chart that could possibly signal a new advance, according to the price consolidation above the monthly 50 and 8 MA support lines, along with TRIX. TRIX is triple smooth to take the kinks out of these volatile currency moves. It suggests an advance in the longer time frame is possible. See attached.

    To be clear, the monthly TRIX indication is at odds with the weekly TRIX indicator – showing the potential for a negative crossover here – so I ain’t about to sell the farm.

    But it did give me occasion to think about the last time we were in such a state of affairs and someone phrased gold as the canon running loose on a tempest plagued ship. I had to ask myself if we’re about to witness such currency movements as Europe slowly sinks and money flees for safer shores?

    Maybe no QE3 now, but would a jacked-up dollar give Ben reason to press the printer’s ‘on’ button again?

    Note the downward sloping channel that Sinn has EURUSD annotated in. I wonder how low that can go?

    Here’s the VIX chart I’m looking at. I don’t look at the VIX number itself, I monitor the ROC. And the ROC is showing bullish divergence to VIX. Pressure building.

    At the coal face in Vad’s room and playing it by the setup.

  19. ... [#106216]
    By: Les (7233 comments) Go to top ↑,1518,…

    Something else to facilitate capital outflows from Europe? Not sure…

  20. I have traded this stock and made some profits in the past... [#106217]
    By: Pierre (96 comments) Go to top ↑

    I have traded this stock and made some profits in the past. But with my current position, I am underwater quiet a bit. I was surprised with the speed of the drop. All the analysts are positive with the lowest target by BMO pegged at $7. See page 5 of this presentation which was last updated on Mar 1, 2012

    The current Enterprise value to Oz of gold in the ground is under $70 for GUY, whereas PMV is about $100 according to a report by Scotia.

  21. Just came across this news while searching for juniors that... [#106218]
    By: Pierre (96 comments) Go to top ↑

    Just came across this news while searching for juniors that are close to PEA or FS,

    Interested to know whether any of the juniors mentioned in this report are worth taking a second look.

    I do not know this person nor I have any investment in his funds. I also do not have any relations with gold report. I hold couple of stocks or options (AEM, KGC) that are mentioned in this interview.

  22. I'm still bullish. Looking at the QQQ daily chart. After... [#106222]
    By: Tremendous11 (74 comments) Go to top ↑

    I’m still bullish.

    Looking at the QQQ daily chart. After the brief but relatively sharp pullback of March 5th and 6th, price is now right back to around (and in fact slightly exceeds) the high set on March 2nd. I don’t think it’s stretching the truth that even the newest of traders would recognize this as a double top.

    Price hasn’t touched the 50 day moving average since late December. I can say with 100% certainty that at some time the price will touch the 50 day average again. I see 3 options. 1st: We could have a correction in price (price drops to the 50 day avg.), 2nd: a correction in time (market oscillates generally between the high and the low that have been set so far this month…and voila price doesn’t hardly change during the next few weeks but the 50 day avg rises the whole time and catches up), or 3rd: The market breaks out to new highs, overdue correction becomes more overdue and we have options 1 or 2 start sometime in the future.

    Option 1 would be more likely if the rise had been steeper such as a parabolic move. Option 2 is likely the most common occurrence. But,
    given the long duration of moderately strong momentum of the move so far this year (or looking at it more mathematically, the slope of the rise in price), I think the odds are highest for option #3. With that assumption, a breakout could be imminent or maybe the low of March 6th is approached first with the market breaking out after forming a double bottom.

  23. "The metals are coiling for a move. The odds favor an... [#106224]
    By: Les (7233 comments) Go to top ↑

    “The metals are coiling for a move. The odds favor an upwards breakout, but there is still the possibility of a drop, most likely if stocks drop as well, most likely in a liquidation driven sell off.”

    I took a look at $gold:$silver and have to ask myself if risk off is about to return. I noted some weeks ago that the $gold:$silver weekly trend looks good for risk on, but having returned to the chart I note some change.

    In the weekly chart $gold:$silver is testing 8MA resistance. You can see why I use $gold:$silver and not $silver:$gold in that descending trendline of resistance which extends back to 2009. I think it was Sinn who posted that.

    But looking at the daily $gold:$silver chart, I note the bullish divergence in ROC, along with zero line resistance that ROC is about to cross. ROC returning to positive territory would indicated a likely outperformance of gold relative to silver, which is not a bullish signal.

    I see quality miners like MUX getting smacked down. I see a couple of traders and TA’s like Yamada, who despite seeing the present gold consolidation as a healthy correction, also noted the probability for a 10% correction in equities.

    Perhaps no vicious correction or cycle change about to occur, but reason to be cautious is there, especially if you’re overly leveraged and overly long at this point. JMO

    • Perhaps the move in MUX is just mean reversion. Look at... [#106225]
      By: davefairtex (5215 comments) Go to top ↑

      Perhaps the move in MUX is just mean reversion. Look at MUX:GDXJ for some perspective. GDXJ actually did pretty well yesterday.

      Then again, looking at how mild dollar moves are causing PM to wither right now in asia, maybe it was a tell.

      • thinking a big picture out loud Dave. There does appear to... [#106227]
        By: Les (7233 comments) Go to top ↑

        thinking a big picture out loud Dave. There does appear to be a pivotal point here. Silver is at equilibrium price in a zone of heavy trading volume and the dollar is toying with 80. Which way from here… *shrug*.

        But I won’t be surprised or devastated if PM’s are down from here and further consolidation continues for a potential pullback and consolidation, before breaking out to new highs YoY in 2013 and onward, as Armstrong modeled as one potentiality in 2012.

        Note the potential descending channel that GDXJ might be trapped in. I’d wanna see higher low, higher high to break that trend. Note the stronger selling volume relative to buying volume in the post-christmas bounce.

  24. The... [#106226]
    By: Les (7233 comments) Go to top ↑

    The biggest boys in the global pond rerouting away from Europe to US and other growth markets, with default on credit payments and consolidation the catchwords. I wonder when capital will follow…

  25. Les, Ventilation Blues, Pierre, Certainly MUX and the... [#106228]
    By: Juniorgoldminerseeker (228 comments) Go to top ↑

    Les, Ventilation Blues, Pierre,

    Certainly MUX and the juniors are the most volatile of rides and not healthy areas to apply short term leverage. The best stocks if you buy at the lows, the worst if you ride down from the highs, one reason I don’t usually like buying momentum, but then what is “value” in such a speculative sector?

    As Athan raised at the weekend the juniors can feel like a horserace pure and simple and a lot of fast money I’m sure moves in and out daily pretty much on that basis, even if it is chasing a jockey like McEwen, the flows are extreme and lead to extreme highs and lows and pain if you buy excitement rather than fear.

    The coiling moves Les mentions for gold and silver, certainly for the market to raise more capital than ever in the junior sector and then have it written down to offer subsequent bargains to insiders seems possible, a 5th wave down to flush out any hot money.
    I would point to the much larger “deflation” money flows to corporate bonds referenced the other day as an opposite possibility, or perhaps “big money” is right.
    I take some comfort from the recent flight from Comex gold by speculators.

    I would wonder about the probabilities of 2 hard 5 waves down in the space of 3 years. The junior sector got hot by the end of 2010 but has fallen/consolidated substantially throughout 2011, see Pinetree PNP.TO referenced Sunday, all the while gold increasing in price and importantly for the miners and juniors the 3 year average gold price, the basis of much valuation work, rising all the time.

    The 500 level on the HUI and determining fakedown or real moves below it seem key.
    There have been 5 or more tests at this level over the past 6 months.
    Les’s chart readings since the December lows make me nervous here.
    I see others who point to a huge 4 year cup and handle just completing a handle for an enormous potential move but we all see what we want to see until we are wrong I guess.
    While printing seems inevitable it does not have to be imminent; in an election year where it is deeply political and there are tales of recovery perhaps printing can only come in extremis with visible cracks and deflation; or prevention is key? Plenty of retail confusion here!

    While MUX has become a traders stock, as much as we admire the jockey, there are others out there delivering production, likely production and cashflows which seem stronger. Even at the smaller junior level there are strong stocks.

    Here are two I have not yet purchased due to not liking to chase strength, but wondering whether strength in this market is the thing to find! In any collapse they will surely fall too.
    They do feel a little “hot” but stocks like RIO in a similar situation, emerging/growth producer with exploration potential, have progressed in a horrible 2011 junior market (FD own RIO)
    In a sector loaded with declines and “overhead resistance” here we have stocks with clear air above them.

    Scorpio Gold and Lachlan Star, both approx $100m market cap, so not pennies, and both with good stories and the emerging producer theme I was looking for here the other week.
    Lachlan moved with a Dundee research note and follow up of a 100% move
    followed up with a Feb report on the Lachlan site

    By the time companies are progressing to prodution there is a little less horserace about it. Gold prices will be key and of course execution risks of which there are plenty. (LSG previously discussed bumps in the road, though new PEA for incremental volume would justify company market cap – FD long LSG)

    Pierre and I have talked of PEA / DFS studies which also take a little of the pin in a page from the sector, but still with great risks.

    A good example would be Sandspring SSP who announced NI-43 101 PEA the other day, one Les has previously looked at I believe.

    The chart shows a junior stock going through the full exploration, promotional cycle (select 5yr chart)- disclosure I sold to take UK tax losses having ridden up and down to a loss – dumb. Looking to re-buy at some stage, either dumber or smart?…

    So an exploration stock at possible price support or broken?
    The end of this cycle has just seen the company look to raise $25m to follow up the recommendations of a PEA, preliminary economic assessment.

    That assessment is a 215 page body of work attached here on their website,”current technical report” – can’t attach the PDF here,

    something a little more than a horserace now, but still enormously speculative and directed by the risk on/off climate aswell as the gold price.

    So what is there after the speculation cycle to date, for a $120m market cap?

    1) The sums invested already in exploration and study of the property have some value.
    2) A PEA reviewing possible production by 2015, also making all kinds of recommendations and analysis, including sensitivities to fuel prices etc.
    3) Page 159 of the PEA linked above shows the 5% NPV of the project on a range of gold prices: I offer no opinion on the validity of these but they are reported for $1400-$2000 “optimistic” gold prices as $800m – $2.2bn after tax. Clearly NPV accounts for both capital cost and projected net income. Of course those gold prices and costs have to apply over the full life of mine to deliver to NPV.
    4) Smarter investors than I will calculate an “option value” to exposure to gold prices in these situations and further weigh risks and probabilities, Guyana country risk etc.
    5) At the bottom of their price cycle to date looking to raise $25m

    I guess that is why capital is attracted to junior exploration and development. $120m vs $2.2bn. Rick Rule at Global Resource/Sprott I take to be serious in the sector and discusses the values available vs PEAs and the revaluation potentials at subsequent DFS, definitive feasbility studies.

    The stock price chart is why at times it is right to be extremely cautious.
    We should all consider how much lower the lows will go after a year’s decline in many of these situations. PMV in 2008 reached pennies even though it is now a well respected $300m stock.

    If the gold/silver coil breaks to the downside then I am sure lower,and the juniors will have anticipated the metal price; if it breaks to the upside then I can imagine rotation from safe corporate and government bonds and safe producer gold stocks to look at low priced developers which might become acquisition targets, as Bill discusses, then newer exploration stocks which might replace them.

    I’m uncomfortable enough to find buying very hard and perhaps that gives possibility to the latter.
    Or I need one last hard down to flush me out permanently, it felt like that in December 2011.

    High risks, high rewards. Buying fear or greed?