Energy & Commodities
Consider this chart of crude oil. It’s one of the ugliest charts I’ve seen in a while.
While oil is trying hard to hold the $80 level, it will soon fail to do so. Instead, a shocking decline lies ahead for oil, one that will see it plunge to below $60 a barrel.
Keep your eyes on the $77.33 level. Once that gives way, oil will spin a lot of heads as it tumbles hard. Only a weekly closing above $92.87 would turn the immediate trend around for oil.
As for U.S. stocks, don’t expect much upside there either. While the broader U.S. stock markets are in a new long-term bull market, they remain vulnerable to the downside in the short term.
There’s simply too much global uncertainty right now, and I see the Dow falling to at least 11,500 and possibly 10,500 — before any sustainable rally develops.
My view:
- Continue to keep most of your liquid funds in cash, ready to be deployed on a moment’s notice, but as safe as can be right now. The best way: A short-term Treasury-only fund in the U.S., or equivalent.
- Despite gold’s weakness, hold on to all long-term gold holdings. You do not want to let go of those. Long term, gold is heading to well over $5,000 an ounce. Short term, gold is heading lower. Consider inverse gold ETFs, such as the ProShares UltraShort Gold (GLL), to hedge your long-term holdings.
- Consider prudent speculative positions to grow your wealth. Like those I have recommended in myReal Wealth Report, which are doing great right now as silver falls, as the euro struggles, and more.
Most of all, don’t let the pundits on Wall Street kid you. The Fed will not prop up the markets for the elections … Europe will not be able to solve its sovereign-debt crisis … corporate earnings have seen their best for the current cycle … and there are more dangers to your wealth right now than there have been in the recent past, since at least 2008.
So stay cautious, but ready to pounce on new opportunities as they unfold.
Best wishes,
Larry
P.S. My Real Wealth Report subscribers have side-stepped the crash in gold and silver mining shares … have hedged up most of their gold holdings from much-higher levels … and they are also enjoying pretty nifty gains in their speculative positions, including inverse ETFs on silver and the euro.
Wouldn’t you like to join them? All you have to do is click here to start your risk-free Real Wealth Report trial today!
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The next real gold rush won’t be on a far flung asteroid. It will be under the sea.
In fact, The Wall Street Journal said earlier this month that underwater mining could be a $500 trillion business someday.
That means underwater mining stocks, which are cheap now, could be headed for monster gains.
Scientists now project there are over 10 million tons of gold to be found by sifting through the seas – but don’t go out with your shovel and sifter. Most of the gold is buried under a mile of water.
And that is just the gold.
Underwater mining companies also hope to extract copper, nickel, ore, silver, zinc, and even rare earth metals.
So for those of you who are worried that the earth will run out of these minerals, underwater mining should calm your fears.
“It’s unimaginable to think we’ll need to rely on asteroids from space to supply the Earth with metals,” Scott McLean, chief executive of Ontario-based mining company HTX Minerals Corp., told The Journal. He said the idea is “interesting, it is visionary to think about these things,” but he concludes: “The Earth’s mineral bounty is immense, and it will continue to provide for millennia.”
Underwater Mining: Tapping the Unknown
There is very little that is known about what exactly lies at the bottom of the ocean and how much of it there is. Yet engineers and scientists are coming up with newer ways to find out what is hidden below and how to extract those resources.
Last year scientists from the University of Tokyo discovered an estimated 80 billion to 100 billion metric tons of rare-earth deposits in the Pacific Ocean, or almost a thousand times more than current proven recoverable onshore rare-earth reserves, as estimated by the U.S. Geological Survey.
And the interest in underwater mining is booming on a global scale.
Over the last year, the International Seabed Authority, an independent body set up by the United Nations to control mining in international waters, signed four new contracts with groups interested in exploring the ocean floor, says Adam Cook, an ISA marine biologist.
That is a jump from the eight contracts previously, six of which were signed over 12 years ago, Cook said. The new contracts include agreements with state and private organizations from Japan, Korea, Russia and China.
Previously, underwater mining was too expensive and beyond our technologies to see to fruition. But recent advances in robotics, underwater drilling, computer mapping, and record high commodity prices now make underwater mining an attractive possibility.
And there are some Canadian companies already testing the waters.
The Top Underwater Mining Stocks
Nautilus Minerals Inc. (TSE: NUS): Thought to be the first to mine, Nautilus suffered a setback Friday, June 1 when the company announced that funding issues would delay its scheduled projects. This highlights the fact that the initial costs for underwater mining are still a major risk for investors, especially in the short term.
However, the Toronto-based Nautilus dealt with financing issues after the 2008 crash and this year signed its first customer for high-grade copper and gold that it expects to mine almost a mile below the South Pacific, in several sites off the coast of Papua New Guinea. Nautilus reported that one of its prospective undersea deposits in the Pacific Ocean has the capacity to yield ore with an average 7.5% to 8% of copper, compared with 0.6% at an average onshore mine.
Nautilus stock took a hit following the funding announcement and tumbled more than 60% to $0.94 over the next few days before rallying to its current price of $1.27. This might be the time to buy the dip as it traded above $3.00 just less than a year ago and has an average target price of $3.80.
Diamond Fields International Ltd. (TSE: DFI): Based in Vancouver, British Columbia, Diamond Fields plans to use a ship or platform fitted with an almost mile-long hose to vacuum up fine silt suspended near the bottom of the Red Sea by 2014. The company says the silt contains copper, silver, zinc and trace amounts of gold.
The stock is currently a penny stock trading at $0.06. Yet, it traded at $0.40 not more than a year ago and over $0.75 prior to the recession.
DeepGreen Resources: Also based in Vancouver, DeepGreen announced that Swiss-based Glencore International PLC ( LON: GLEN), a commodities trader, agreed to buy half of the nickel and copper it plans to process from tennis-ball-sized nodules sitting nearly three miles below the water’s surface between Hawaii and Mexico. The nodules contain about 30% manganese, a metal used in the manufacturing of steel, along with cobalt, nickel and copper. DeepGreen hopes to begin production by 2020.
….read more HERE]
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More “Hot Button” Articles by Ozzie Jurock:
21 ways to make your home sell faster
When selling a home (or anything else for that matter), the marketing effort must be coordinated on all fronts.
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Is it a good idea to buy foreclosure property in the US? And other questions answered by Ozzie Jurock.
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(scroll down for post close comments). FVOI stands for Futures Volume and Open Interest. It is computed like On Balance Volume with the only difference being that open interest (the number of open gold futures contracts) is added into the calculation. FVOI (the red line) is a great tool to tell if the price of gold has gotten ahead of itself or if there is latent strength during gold declines. As you can see in the weekly chart above, FVOI normally tracks very well with gold. It is during times of divergence that the real value of the FVOI is found.
The current divergence is continuing to show that there is positive action going on with regard to the accumulation of gold futures contracts as the FVOI remains just below its recent high while the price of gold tries to rebound off of its early June low. While gold has been chopping around in seemingly directionless trade, the FVOI is still in a tight range just below its high. This is still a bullish configuration that tells us that gold contracts are being accumulated here. Once this accumulation phase is completed, we expect gold prices to move sharply higher.
Also from Mark Leibovit’s VR Gold Letter’s extensive Gold News Raw:
Gold will climb 22% to a record by yearend as the global economy slows from the weight of too much debt, says Eric Sprott, the founder and chairman of Canadian fund manager Sprott Inc. (SII)
“I just can’t imagine the demand for gold is going down,” he said in a July 9 interview at Bloomberg’s Toronto office. “I don’t personally see a solution to the problem that we’re in, the financial leveraging issue that we all have where everybody wants to shed debt and there’s no buyers.”
All the above comes from Mark’s 24 page VR Gold Letter which you can read more about HERE
Post Close Comments
Ed Note: As you know Mark Leibovit is one of Michael Campbell’s favorite analysts and here’s a good reason why. I get all of Mark’s services, and one thing stood out glaringly in his VR Trader Platinum service. Of the 31 recommended stocks that Mark has liquidated since June 4th/2012 81% of them were closed at a profit. The 6 that were closed at a loss, the losses were very smalll, specifically -.12 cents, -8 cents, -7 cents, -.30 cents , – 2 cents and a “big” -$1.25 on a $39 stock. Moreover of the 8 stocks Mark is currently long, only one is showing a loss at today’s close of – 6 cents.
Now for Mark’s closing commens for today:
The stock market is trading modestly lower after retail sales disappointed and following reports that Democrats will let the US go over the “fiscal cliff” if Republicans refuse to raise taxes on the wealthy. But the market is being supported by a better than expected manufacturing survey and hopes for Fed stimulus. The Dow is down 32, S&P down 2, and NASDAQ down 4.
Financials are steady (XLF -0.1%) after Citigroup (C +1.2%) reported better than expected earnings.
Industrials are the biggest losers (XLI -0.7%) after General Electric (GE -1.1%) was downgraded by Morgan Stanley.
Natural resource stocks are also weak (XLB -0.6% and XLE unchanged) as the weak economic data hurt commodity demand.
Treasuries rallied to record highs after the disappointing retail sales report. The long bond future is up 1 2/32 to 152 8/3
The US Dollar Index is trading lower after the US’s disappointing economic data and the possibility of new stimulus from the Fed. The US Dollar Index is down 0.198 to 83.151.
The European Central Bank wants to impose losses on owners of Spanish debt even though finance ministers agreed not to do so.
The Euro is up 0.13% against the Dollar.
Precious metals are getting support from a flight to safety, but industrial metals are down on those demand concerns. Gold is up 4.30 to 1593.70 and silver is up 0.03 to 27.37, but platinum is down 12 to 1416, palladium is down 6 to 578, and copper is down 0.0165 to 3.4875.
Oil is getting support from continued unrest in Syria and its political implications. Crude oil is up 0.36 to 87.46.
Retail sales fell 0.5% in June, well below forecasts for a 0.2% increase. It was the third consecutive decline in sales, the first time that has occurred since 2008.
The Empire State manufacturing index rose from 2.3 to 7.4 in July. Economists expected a smaller rebound to 5.0.
The International Monetary Fund reduced its forecast for global GDP growth by 0.1% this year and 0.2% next year. The IMF now expected GDP to expand 3.5% in 2012 and 3.9% in 2013.
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CANADIAN NEWS:The Canadian market is down modestly, just like the US market. The TSX is down 8 or less than 0.1% and the TSX Venture is down 5 or 0.4%.
The Canadian Dollar is down slightly as traders move to safer currencies. FXC is down 0.12 to 97.88.
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This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of VRTrader.com may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. VRTrader.com staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control.
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With last week’s powerful finishing stroke, the U.S. stock market continued to thumb its nose at reality, rampaging higher on economic news that seems to be getting worse by the day. Around mid-week, readers of the Wall Street Journal could have glimpsed a perfect storm gathering on the horizon. Numerous articles spread across two inside pages summed up a darkening global economic picture. We learned that China’s economy is decelerating at a rapid pace, Europe’s is dead on arrival despite blather about further stimulus, and even a lean and muscular Brazil has cut interest rates to get in step with increasingly desperate central banks around the world. In the U.S., a carefully spun recovery story was starting to unravel just in time for the election with warnings that Q2 earnings are going to stink. It would appear that the jobless “recovery” is finally starting to take its toll on consumer spending. Henry Ford was right after all:business prospers only when companies are hiring workers and paying them well. Meanwhile, so much for the notion that a lean, mean manufacturing sector is going to lead America back to prosperity. In fact, perhaps for lack of products to sell the world, the U.S. trade deficit has begun to grow anew. This problem barely gets a mention in the news these days, presumably because other problems, most particularly stagnant U.S. incomes, falling consumer confidence and intractable unemployment seem more immediate and potentially fatal.
Through it all, and despite a global picture that is as grim as any we can recall, the Dow Industrials finished the week with a 204-point upstroke that was as blithe as it was bizarre. Bearish as we’ve been, we saw it coming. The night before, under the headline “Big Dow Rally Ahead?” Rick’s Picks alluded to a technical picture suggesting that U.S. stocks were poised for a powerful surge – one that could add 500 points to the Dow. With Friday’s explosion, we are already 40% of the way there. Although our gut feeling until very recently was that U.S. stocks would collapse this summer, the charts are telling a different story – and we have eheded them. In particular, our key bellwether, Apple, appeared to be getting traction for a run-up to new all-time highs. If so, it seems not merely likely but practically certain that the company’s shares will lead the broad averages higher. [Click here for a trial subscription that will give you real-time access to our analysis of the stock.] Hard to believe that stocks could embark on a major bull leg, considering the worsening economic picture. Some might infer that it is impossible for the broad averages to collapse, given the tidal swell of funny money that has been unleashed on financial assets by the central banks. It is a gaseous cloud, as far as we’re concerned, and therefore vulnerable to instantaneous collapse. Traders eager to ride the Dow to our target 300 points above current levels should take note of this, with an eye toward the fire escape.
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Trading stocks, options and commodities in these treacherous times calls for great patience and skill. Click here if you’d like to see how Rick’s Picks approaches the challenge.
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