Friday, November 28, 2014

Must-See Oil Charts & News

The big story is that OPEC basically did nothing at its meeting.
“We will produce 30 million barrels a day for the next 6 months, and we will watch to see how the market behaves,” OPEC Secretary-General Abdalla El-Badri told reporters in Vienna.
And OPEC is doing nothing for a good reason. If OPEC cuts production, it actually helps the North American oil producers they are competing against.
"OPEC has relinquished the role of balancing the market. If they had cut production and prices had increased then they would, by definition, be losing market share. They would be encouraging and supporting further shale production. For them, short-term pain for long-term gain.”
The nail in the coffin had to be that Russia ruled out a deal on a production cut with OPEC. Nobody loses more from low oil prices than Russia.

This sent oil plunging, as you can see from this chart ...

In fact, oil is on its way to its biggest weekly drop in three years.

So who is vulnerable? This chart is from last year, and new technology is lowering the costs in the shale fields all the time. However, here are some likely suspects for pain ...

And here is a chart from Citigroup showing the average cost of US shale oil plays.

And if you follow THIS LINK you can see a (very busy) chart purporting to show the break-even cost of every drill project in the world.

How about individual companies?

Here is a list of 10 US shale oil stocks getting crushed the most on Friday's shortened trading day.

And who are the winners? Well, as subscribers to my $10 Trigger Alert know, I like airlines as a winner from lower oil prices. And sure enough, airline stocks are flying high on Friday.

Will OPEC's hard-line stance have the effect it wants? So far, estimates of US production aren't falling yet.
U.S. oil production has risen to 9.077 million barrels a day, the highest level in weekly data from the Energy Information Administration going back to 1983. Output will climb to 9.4 million next year, the most since 1972.
For investors already holding oil stocks, there’s no question that Friday will be a terrible day. But this is also a time for investors to begin considering the long-term opportunity once oil prices bottom.

Some other news of interest...

Tuesday, November 25, 2014

Let's Look at that IWM (Small-Caps) chart again

In early November, I posted a chart of the Russell 2000 iShares (IWM), talking about how MACD on the weekly chart was giving a big ol' buy signal. This, combined with seasonal factors, mean it was a really smart time to go long small-caps.

Let's see how that worked out.

Visit to see more great charts.

(Updated chart)

Lookin' good so far. Stay the course, my friends.

Small-Caps & Micro-Caps Start to Play Catch-Up

Here's a chart you'll probably find interesting. As you can see, the major indices have all posted similar gains in the past month. But starting on November 19th, small-caps and micro-caps started to accelerate.
Visit to see more great charts.
(Updated chart)

This is probably the start of the Santa Claus rally, which, like Mall Christmas decorations, seems to come earlier every year. And what comes next? The January Effect! I recently wrote an article about that for the Free Market Cafe's Daily Grind. You can read that HERE.

See also: The current market rally is well below average in both duration and magnitude. Via Chart of the Day

Monday, November 24, 2014

Chart of the day: Beer, Beer, BEER!

Americans Now Drink More Craft Beer Than Budweiser.

That is NOT including Bud Light. Just Budweiser.

Read the whole story HERE.

US stocks tend to outperform stocks in the rest of the world when the dollar is strong.

Just remember that a stronger dollar will weigh on S&P 500 earnings. And read the rest of the story HERE.

And this chart of U.S. crude oil production is being called "The Chart of the Year."

"The most important reason why oil prices are falling is because of the dramatic increase in recent years in US crude oil production ... and US oil production is expected to increase further by 1 mmb/d in 2015 and 0.6-0.7 mmb/d per year in the years to 2020. In other words, expect a continued increase in oil supply going forward."

Read the rest HERE.

One more thing: The always excellent Phil Flynn says that the world is oversupplied by 2 million barrels a day, so even if OPEC cuts by 1 million bpd on Thursday, it may not make a dent in the global oil glut 

Wednesday, November 19, 2014

Small-Caps Weaken, Consumer Goods Pick Up

Check out this chart from for $RUT

Visit to see more great charts.

I'm waiting for the usual December end-of-year outperformance in small-caps.  However, that group peaked on November 12th and has underperformed both the Dow and the S&P ever since.  

When it comes to industries, healthcare is outperforming.  Consumer good are just starting to turn up.

The Bottom Is Falling Out of OPEC's Price Basket

Chart du jour ...

Some more good charts here.

Thursday, November 13, 2014

2 Charts on Gold & 1 Kick-Ass Song

You'll notice that I am not blogging as much as I used to. That's because I have new projects that are consuming my time. And when it comes to writing things for fun (like this blog) or for money (my other writing) then money usually wins out. I have a wife and 2 kids.

Anyway, we've soft-launched my new publication, $10 Trigger Alert. It seems to be going well. The stocks are going up. What nice change from natural resources.

That doesn't mean gold, silver, oil & gas, and other natural resources still don't interest me. Of course they do. Here are some things I find interesting ...

#1: Gold miners' reserves pricing assumes big rally ahead
From the story:

According to a survey by consulting firm PwC for its new Gold, Silver and Copper Price Report 2015, 60% of gold mining companies expect the price of gold to head lower in the next 12 months. That compares to 7% last year.

Despite this pessimism however, gold miner's longer term assumptions assume a strong recovery in the gold price from today's levels.

When asked what gold price companies are using to determine reserves, the average among respondents was $1,241 per ounce, with a range of between $950 and $1,350. For resources, the average was $1,331 per ounce with a range of between $950 and $1,600.

Note: I have a an interview HERE where I talk about the future haircuts miners are going to have to take, among other things, if the price of gold doesn't go higher soon.

#2: India Back to Being World's Top Gold Consumer

India reclaimed its world’s top gold consumer crown from China as demand for jewelry surged almost 60% in the third quarter of the year, fresh data from the World Gold Council (WGC) shows.

Global demand, however, fell to its lowest in nearly five years as Chinese buying slid by a third and gold jewellery, the biggest single area of consumption, dropped 4% to 534 tonnes.

Overall, India —which had lost his position as the world’s No.1 gold consumer to China in 2011—bought 39% more gold in the run-up to Diwali and the start of the traditional wedding season.

Gold smuggling into India has skyrocketed since the government ratcheted up restrictions and taxes on legitimate imports of the precious metal. According to the council, about 200 tons of gold came through unofficial route last year and a similar quantity is also expected this year.

Note: See how they buried the bad news in the second paragraph?  World gold demand has dropped to its lowest level in 5 years. Fu-u-u-u-u-u-u ....

#3. Gold Chart Sure Looks Like It's Going Lower

I made this chart of the GLD, which tracks the percentage movements in gold pretty closely, on Stockcharts this morning. No one has a crystal ball. But it sure looks like gold is consolidating after a breakdown.  Such consolidation usually resolves in the direction of the previous move.

How much lower? If you liked gold at, say, $1,000, you're probably going to get a chance to love it again.

I would love to be wrong on this, by the way. By all means, feel free to show me up so bad I make Dennis Gartman look good.

That said, there are plenty other places to make money. I'll give you one example. The fact that oil is folding like an old tent means a lot of opportunities to make money.  That's what we're doing in $10 Trigger Alert. And we've also positioned for it in Oxford Resource Explorer. And those picks are doing quite splendidly.

Also remember that nothing goes down forever. Have money ready when the bottom comes.

Wednesday, November 5, 2014

Oil War, Gold Down, Silver Down Even More

Some stuff I'm reading today.

U.S. Returns Fire in Saudi Arabia's Oil War
The U.S. may buy crude (for the Strategic Petroleum Reserve) to offset a price collapse caused by Saudi dumping and support U.S. shale producers. It could also go further, tacking on a tax on Saudi oil, an issue that would at some point go before the world trade council.

BHP Signs Deal to Sell $50 Million of Lightly Processed Crude Without Official Permit.
A major energy company will soon sell U.S. oil abroad without explicit permission from the government, another sign that the decades-old federal ban on crude exports is crumbling.

BHP Billiton’s deal to sell about $50 million of ultralight oil from Texas to foreign buyers without formal government approval is likely to be only the first of many such moves as energy companies seek new markets and higher prices for the surge of crude now pumped in the U.S.

People in the industry said the U.S. Commerce Department, which oversees oil exports, has been encouraging companies to pursue independent exports without having to issue new rulings permitting it, a process being called “self-classification.

The department didn’t respond to requests for comment. Department officials have maintained that there has been no change to U.S. oil-export policies.

Refiners and other buyers of light oil across Asia are interested in American condensate so they can diversify their supply from the Mideast.

Silver Falls 5% to a New 4.5-Year Low. Gold Breaks Support

Gold sunk below $1,150 per ounce on Wednesday to its lowest since mid-2010, opening the way for a fall to $1,000 as a surging dollar and stronger share prices weaken the investment case for non-yielding bullion.

Silver fell even harder to hit its cheapest since February 2010 at just above $15 an ounce.

No. 1 gold ETF sees biggest monthly outflow this year in October
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, saw an outflow of over $1 billion of metal last month as investors lightened holdings in anticipation of a further price drop from current four-year lows.

Tuesday, November 4, 2014

The Seesaw of Pain -- Gold and the Dollar

The US dollar is on a tear. And that is weighing on gold.

Visit to see more great charts.
Updated chart

Your Must-See Oil Chart of the Day

The Saudis lowered their oil prices again, and West Texas Intermediate Crude (the US benchmark) for December delivery fell $1.95 to $76.83 a barrel this morning. Intraday, that's a three-year low. And last night's close was the lowest close since August 2nd 2010. Let's look at a chart ...

(Update chart)

Morgan Stanley estimates the average breakeven oil price for these US plays to be around $76-$77 per barrel. Goldman Sachs puts that number at closer to $75. Read that story HERE.

Here are some useful stories I've written on oil recently.

3 Things You Must Know About Oil Prices. Published on October 17th, this one is on target.

Nice Oil Cartel You Got There. Be a Shame if Something Happened to It. Published on October 16th, this explains why the Saudis are thumbing their nose at the rest of OPEC.

The Energy Sector Says 'Merry Christmas'. Published on October 23rd, this explains what kind of stocks you should be buying now.

We've seen this coming. We've positioned for it. You should be positioned for it, too.