I hope you followed my suggestions in last week’s column concerning gold and silver. If you did, you should be sitting pretty. Gold has plunged as much as $42.70, or 3.2 percent in just a week. 

Silver, platinum and palladium are also getting hit, just as I warned, with more losses to come.

But that should be music to your ears. Why? 

Because that is how bull markets are built. They climb higher, then selloff, then climb higher yet again. Rarely, if ever, do real bull markets go straight up (or real bear markets go straight down).

It’s just one of those things that most investors never understand, mentally or emotionally. 

And it’s one of those things that even most traders don’t figure out, because most of them don’t have the necessary experience especially with their own money on the line.

To me, a trader is not a trader unless they have had at least 15 years’ experience with their own money on the line. Anything short of that is a rookie.

But that’s beside the point for today.  There is more carnage coming in the precious metals — and it’s already causing the next crash in the mining sector.

Yes, you heard that right. With very rare exceptions, most miners are about to be toppled over again. They’re likely to give up as much as 100% of their recent gains, if not more.

But also keep in mind what I said last week and in other published works: It is never the first move up that determines whether or not you are looking at a real bull market.

Instead, what is almost always the all-determining factor is the first pullback.

How much does it pullback? How fast does it pullback? What is the pattern of the pullback? Are previous resistance levels now becoming support?

Price fluctuates, all the time. Thing is, most analysts, investors and traders do not have the patience, objectivity, or experience to analyze price — the language of the market — no less the timing element …

Which is precisely why the majority of investors, traders and analyst are wrong the majority of the time.

Am I tooting my own horn? I guess I am, in a way, and pardon me for doing so. But I am sick and tired of all the inexperienced analysts and talking heads who are out there … and how much money it costs innocent investors.

I’m not always right either, but over time, my track record is considered by many to be unparalleled. Especially in the precious metals and mining sector.

How important is the first pullback? Well, just consider the following:

 It was the first pullback that allowed me to be one of the first, if not THE first, to predict the great 11-year-long bull market in gold way back in 2000.

That empowered me to accurately call virtually every major turn in the precious metals market since then …

 Including gold’s major pullback in 2008, when I screamed buy, buy, buy, just before gold took off from $650 to $1,921!

 And that also gave me the ability to warn you that a failed rally attempt in September 2011 signaled a brand new bear market for gold, just two weeks after gold hit $1,921!

Analyzing the first pullback that comes after a major rally … or, conversely, the first rally in a potential new bear market …

Is a major component of the many models I use. So you can bet your bottom that I am watching the metals — and the miners — like a hawk right now. 

Because if the pullbacks pan out as I expect them to, then I’m going to be all over many of the best remaining miners in the world for my subscribers, with companies such as …

Miner A: This core, diversified portfolio includes companies like this, a senior miner with over 90 million ounces of proven gold reserves. 

At a gold price of $1,250, that’s an asset base of more than $118 billion. 

What’s more, buying shares in this company gives you great leverage on the price of gold. It’s almost like buying gold at just $15.51 an ounce — at an 98.73% discount to today’s gold price. 

My year 2020 target: An easy quadruple.

Miner B: Another gem of a miner I’ll soon be recommending has only about 9 million ounces in gold reserves, yet those reserves are currently valued at a mere $1.66 per ounce! 

Talk about leverage. When you buy this producing senior miner you are effectively paying $1.66 per ounce of gold, a whopping 99.86% discount from today’s gold price.

My year 2020 target: A quintuple.

And that’s just for starters. 

In fact, if you are a Real Wealth member, you’ll be getting the details on these two miners in the March issue, publishing on Friday, March 18.

Until next week, best wishes,

Larry

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.

Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

On Friday, crude oil gained 1.24% as rig count declined to the lowest level ever. Thanks to this news, light crude hit a fresh March high, but will we see further rally in the coming week?

In our last Oil Trading Alert, we wrote the following:

(…) earlier today, the IEA, said that non-OPEC output would fall by 750,000 barrels per day (bpd) in 2016 compared to its previous estimate of 600,000 bpd. Additionally, U.S. production alone would decline by 530,000 bpd in 2016. Thanks to this news, crude oil futures extended gains in a pre-market trading, hitting a fresh high of $38.95, which suggests that the commodity could also move higher after the market’s open and even approach the barrier of $40 later in the day (especially if today’s Baker Hughes report would be bullish).

As it turned out, on Friday, crude oil extended gains and hit a fresh high of $39.02 after the Baker Hughes report showed that the total number of U.S. oil rigs dropped by 9 to 480 for the week ending on March 4, which was the lowest level in history (the previous lowest record came on April 23, 1999 when the rig count slipped to 488). On top of that, the number of active U.S. oil drilling rigs dropped by 6 to 386, which was the 12th consecutive week of weekly declines. Thanks to these numbers, light crude re-tested the major resistance levels, but will we see further rally in the coming week? Let’s take a look at the charts and find out what can we infer from them.…continue reading HERE

The price of oil may finally have bottomed, and there is “light at the end of what has been a long dark tunnel,” in the markets, according to the latest Oil Market Report from the International Energy Agency, released on Friday morning.

Oil prices have crashed from highs of more than $100 a barrel in mid-2014 to as low as $27 in January, wiping out more than 70% of the commodity’s value.

But prices have started to recover over the past month, this week passing above $40 a barrel for the first time in 2016.

The IEA says this slight recovery points to oil “bottoming out” and finally ending its run of long-term losses. “It is clear that the current direction of travel is the correct one, although with a long way to go,” the Oil Market Report said.

….continue reading HERE

Today’s videos and charts (double click to enlarge):

US Dollar & Stock Market Video Analysis

Gold & Silver Bullion Video Analysis

Precious Metal ETFs Video Analysis

Trader Time Swing Charts Video Analysis

SFJ Individual Stock Core Positions Video Analysis

Thanks,

Morris

While some business / economic publications, like NewsMax are saying that, “Oil is pulling away from the market’s biggest storm in seven years,” I say, “Don’t believe it.” Not for one second. The real storm begins near the middle of March.

Because people saw that the price of oil rose and stabilized in February and that stocks followed in lockstep, they were quick to conclude the worst is over. The final days of February were, in fact, nothing more than the calm before the main storm. People were, as usual, too quick to sigh in relief, and that relief is likely to make the upset even worse when they find out how wrong they were to think the worst is over. When people believe the worst is over, and suddenly things grow even worse than they already were, they are more likely to panic.

We have seen this pattern of human naiveté again and again during the so-called “recovery” from the Great Recession. What really happened in February was a little consolidation, as both oil and stock caught their breath after a long first leg down in prices, but the worst pressures that I’ve been predicting were never set to come in February, but to start in March.

I am amazed at how these publications continue parroting each other’s statements that the Saudis and Russians achieved a great agreement to resolve the problem of an oversupply of oil. While NewMax points out the many swings the argument took last month and even that the Saudis and Russians really only agreed not to make the problem worse, the article still seems to come down on the side that this agreement means the oil market has now stabilized and prices will rise to $40 a barrel very shortly.

As I’ve laid out in my last article (so won’t go into much detail here), the so-called “pact” between Saudi Arabia and Russia accomplished the exact opposite of what all the parrots are squawking about.

US oil production stays at forty-three year high

While Saudi Arabia and Russia actually teamed up to make it clear they will not reduce oil production by a single drop to help solve the oil supply problem, four OPEC members, other than Saudi Arabia, also agreed not to make any production cuts. So, oversupply is absolutely certain to continue.

What some people don’t realize is that the United States has actually been increasing production during this time. The last time the United States pumped at this present rate was 1972. US oil production has grown 82% since 2008, rising 8% last year alone.

Shale-oil producers may be holding up better than the Saudis anticipated because the major oil producers have the muscle and reserve to make it through the present price wars by changing the focus of their current business activities. They are finding bargains in drilling costs now as the smaller producers go out of work and people become willing to work for the major producers for less. This is a good time to drill new wells because drilling produces no oil anyway, making it a good time to devote money in that direction. In a large oil company’s planning, it is something that has to be done for future production, so ramp it now by focusing assets in that direction while the costs are lower, and you’ll be set to make big money when prices move back up and those wells become ready for actual production. All of which means, the major US oil companies are increasing their production capacity as the smaller companies around them fail. The failure of small companies also makes for a good time to get good prices on equipment.

It has never been the large oil producers that have been likely to go out of business. The problem is with the numerous small companies that cannot afford to weather a long storm. At least forty smaller companies have shut down since 2014. The rapid growth of many small contractors in the oil industry that fed the US job expansion during the “recovery” period will continue to shrivel, so this consolidation of businesses is bad news right at the heart of the “recovery.” The bonds they have used to finance their expansion will continue to go bust. Many jobs have already evaporated along with the small companies that have blown away in the dusty oil fields.

Not all major oil companies, however, are weathering the storm well. Oil production giant, Halliburton, for example, has already cut over 26,000 jobs since its 2014 peak. Halliburton speaks a very different story to the dominant theme in mainstream media that the worst is over:

“Our industry has turned down faster than anyone ever expected,” Halliburton CEO Dave Lesar and President Jeff Miller said in a memo to employees obtained by CNNMoney. The execs said it’s now clear that business opportunities will be “much worse than anticipated” coming into the year…. Halliburton has also attempted to cope with cheap oil by consolidating facilities in 20 countries and closing down operations altogether in another two countries. The oil downturn has sent Halliburton’s profits plunging. Its stock price has lost more than half its value since mid-2014 when crude prices peaked. – CNN Money

26,000 jobs cut by just one company is no small dent in the recovery, and Halliburton doesn’t sound like its outlook for the industry is as good now as it was at the start of the year.

In December, production rates finally did start to fall a little in the US as the toll taken by the initial storm finally started to become visible. Production rates are still falling. While the industry is finally starting to feel the crush, that’s not going to be enough reduction in production to help the price of oil in the near future. The US decline in production is minor so far, and the coming combined storms are major.

This month, three storms will converge upon those businesses who focus on the production side of oil.

March madness begins in the maintenance season for oil

I’ve been pointing out for the past couple of months that we were nearing the oil industry’s huge annual maintenance season. This month, we enter it. The big refineries typically shut down a number of operations in March, after heating oil demands and oil-fired electricity demands are down and before summer travel demands for gasoline, diesel, and jet fuel all rise, in order to make repairs throughout their refineries.

It’s a time when there is naturally less demand for oil, so the industries go into maintenance mode. The amount of refining that gets done this time of year drops. That means the backup of oil due to oversupply to the refineries should become worse this month.

It is during this time that I think oil prices could touch down into the high teens, causing more already-marginal companies to throw in the towel. Numerous small contractors in the oil business will find the toughening situation breaks them, and that means more failing bonds and more strained banks.

Shale Boom, Shale Bust: The Myth of Saudi America In 2014, something went terribly wrong with this rosy scenario of “Saudi America.” An unexpected collapse in the price of oil is bankrupting the oil patch, destroying jobs and threatening plans for a renewable energy future.

Iran marches on

Iran is marching forward without a flinch in its plans to ramp up oil production and sales to 2,000,000 barrels per day. They now anticipate hitting that number in March if you combine their crude and condensate sales (fine liquid oil that condenses out of natural gas). That is sooner than they projected a month ago.

While Saudi Arabia and Russia agreed not to expand production further, Iran now rightly points out that the talk of oil production cuts was always “a joke.” There was never a chance, as I also pointed out on this blog, that either the Saudis or the Russians were going to voluntarily cut production in the price war they are using to try to recover market share from rapidly expanding US producers. Their pact really says, “Oversupply will end when enough US companies go out of business.”

With Iran promising to expand production this month (and already succeeding in doing so), and with oil refineries not being able to do much refining, the backup of crude could get large enough to quickly reach the point where there are no tanks left for storing oil or natural gas. That is the major inflection point at which everyone will be forced to slow production temporarily but only because they cannot sell oil at all. I expect that major backup to cause the next severe downward leg in oil prices.

Stocks have been marching in lockstep, so they are likely to also plummet with the greater drop in the price of oil, causing the next leg in the crash of the stock market. As I’ve said all along, that crash will unfold in numerous downward legs, separated by smaller rallies, over the course of a year to a year-and-a-half.

Revelers during the Ides of March will be stunned

While many are blowing their party whistles on the oil-price-stabilization bandwagon, I do have some company in my dire predictions for a short-term oil price crash. Deloitte said in a report a week ago that 75% of oil exploration companies could default on their debt, ending in bankruptcy, where they either restructure their debts or, in the worst cases, go out of business.

Another person who sees the coming storm as I do is John Kilduff, founding partner of Again Capital, which specializes in energy trading:

We’re in the red zone, and we’re about to go over the goal line here for that actual pain point…. The rich are going to get richer, but companies like Chesapeake, unfortunately I think, is among the road kill, Goodrich Petroleum…. We are definitely going to see [$18/barrel oil]…. Now you’re seeing refineries go into maintenance…. Oil is going to back up big time in the system here. – Nightly Business Report

As I’ve said, the increased backup of oil will be caused by the perfect storm coming in on the convergence of three different fronts: 1) the agreement by Russia and Saudi Arabia to maintain full-tilt production converging with 2) the post-sanction arrival of Iran back into the marketplace just as 3) the oil industry goes into maintenance mode and so needs even less oil, not more.

Kilduff says he thinks BP is another company that is going to wind up deep enough in distress that it will be bought up by some other massive conglomerate. Kilduff also predicts Chesapeake — a major oil producer and the second largest natural gas producer in the US — will go under. Chesapeake lost more than $14 billion last year on the downturn. It says it will sell off many of its assets this year to pay down its debts. So, the major fire sales are also beginning.

According to Kilduff, we are, just this month, reaching that ultimate pain point. A desert storm is gathering over the oil fields.