Is It Time to Vacuum Up Bargains

My Aunt Joanne used to have a dog, Duke, who loved to be vacuumed.  It helped that Duke was totally deaf. Since he couldn't hear the vacuum, he just loved the suction. And he was the kind of dog who got thick in the weeds; his fur was full of prickers and stray twigs.

Being deaf was no hindrance for Duke, but it was a great inconvenience for everyone around him. More than once, drivers would come along the dirt road that Aunt Joanne lived on at the time (Bible Hill Road in Hillsboro, New Hampshire) and see Duke lying in the middle of the road, fast asleep. They'd hit their horns. Duke would not stir a hair.

Naturally, they thought Duke was dead.  So, they'd trudge, heavy-hearted, to the nearest house, which belonged to my Aunt. They'd knock at the door, and when Aunt Joanne would bustle up, they'd tell her some version of "Ma'am, I'm terribly sorry, but your dog is dead in the middle of the road."

And she'd sigh, exasperated, and say "that lazy old devil. Just nudge him with your foot, and he'll move along."

The markets are pulling back this morning. Is it time to vacuum up the bargains? 

Good luck and good trades this week.

Chart of the Day -- Winners and Losers from Low Oil Prices

The price of Brent crude fell over 25% from $115 a barrel in mid-July to under $85 in mid-October. Who wins and who loses from lower oil prices? This chart provides some answers ...

Source

• A 10% change in the oil price is associated with around a 0.2% change in global GDP. A price fall normally boosts GDP by shifting resources from producers to consumers.
• Saudi Arabia can survive low prices because, when oil was $100 a barrel, it saved more of the windfall than it spent. The biggest losers are countries that didn't. Notable among these are three vitriolic critics of America: Venezuela, Iran and Russia
• However,Russia now has reserves of $454 billion to cushion against oil-price fluctuations.
• China is the world's second-largest net importer of oil. Every $1 drop in the oil price saves it an annual $2.1 billion. The recent fall, if sustained, lowers its import bill by $60 billion, or 3%. Meanwhile, the cost of goods its exports should remain fairly stable. China is a big winner.
• Energy imports into the European Union cost $500 billion in 2013, of which 75% was oil. So if oil prices stay at $85, the overall import bill could fall to under $400 billion a year.
• America  is simultaneously the world's largest consumer, importer and producer of oil. Analysts at Goldman Sachs reckon that cheaper oil and lower interest rates should add about 0.1 percentage points to U.S. growth in 2015.
• A $20 drop in the world oil price reduces American producers' profits by 20%. Only four-fifths of shale reserves are economic to extract using current technology with Brent around $85. However, that's starting from scratch -- shale oil wells that are already producing will likely keep pumping even if the price falls.

More HERE

It's Friday. Take Your Best Shot (S&P 500 Chart)

"Ronnie, the Bren Gun Girl", poses with the finished product at the John Inglis plant, Toronto, 1941.

Stocks seesawed this week, but we seem to have reached a resolution.

(Updated chart)

Markets showed weakness early this morning due to an Ebola case in New York City, but the market is getting used to Ebola, just like we got used to AIDS and every other terrible thing that has come down the pike.

One gauge of global economic health is the Flash Manufacturing PMIs from around the world. 

Global October Flash Manufacturing PMIs

• China Oct. Manufacturing PMI 50.2 vs. (E) 49.9.
• German Oct. Manufacturing PMI 51.8 vs. 49.5.
• Eurozone Oct. Manufacturing PMI 50.7 vs. 50.0.
• U.S. Oct. Manufacturing PMI 56.2 vs. (E) 57.0.

So far, it seems that fears about the pace of global economic growth were overblown.

Crude oil prices are stuck between $80 and $84. The bounce in crude so far has been weaker than one might expect. That is NOT bullish for crude oil prices.

Nat-gas prices remain weak, even as venerable (if unreliable) weather forecasters warn of the T-Rex of winters. The T-Rex is for Canada, here's the U.S. forecast. Nat-gas price weakness in the face of these forecasts is not good news for nat-gas bulls. What does that tell you about nat-gas supply and demand?

I know what I'm going to do. How about you?

Other links of interest ...

Silver Linings. 
This past weekend, I spoke at the World MoneyShow in Toronto. There were a lot of smart audience questions, especially on silver. That surprised me, because I hadn't presented on silver. But here's what I told the audience: When it comes to silver, there is good news, bad news and plenty of opportunity.

The Energy Sector Says, "Merry Christmas!"
The benchmark U.S. crude oil price is holding in the low $80 range, but I wonder how long before it takes its next leg down. International oil prices aren’t doing much better. These slumping prices are due to rising global supply and a slowing of demand. And it is kicking many oil producers right where it hurts: in the bottom line. But there will be big winners from this slump in oil prices. And if you want to see one of them, look in a mirror. That’s right, you. And me. And consumers all across America.

Pentagon Spends $4 billion for 43 More F-35 Jets. And oddly, the same people who become apoplectic when we want to spend money fixing roads and water systems are perfectly fine with this. Go figure.

Special report: America's perpetual state of emergency.

Since 1976, when Congress passed the National Emergencies Act, presidents have declared at least 53 states of emergency — not counting disaster declarations for events such as tornadoes and floods, according to a USA TODAY review of presidential documents. Most of those emergencies remain in effect.

Why US Anti-Islamic State Propaganda Probably Won't Work.
Why? Because the U.S. State department fails to understand how Islamic State attracts recruits in the first place.

How to start a war and lose an empire (The Russian View).
The American behavior throughout this succession of defeats has been remarkably consistent, with the constant element being their flat refusal to deal with reality in any way, shape or form. Just as before, in Syria the Americans are ever looking for moderate, pro-Western Islamists, who want to do what the Americans want (topple the government of Bashar al Assad) but will stop short of going on to destroy all the infidel invaders they can get their hands on. The fact that such moderate, pro-Western Islamists do not seem to exist does not affect American strategy in the region in any way.

Have a good Friday and a great weekend.

Check out this chart from StockCharts.com for IWM

Here's a chart I'm working on.




(Updated chart)

Mixed Signals Leaves This a Show-Me Market: S&P 500 Chart

Yesterday, the S&P 500 turned lower from its recent downtrend (the Russell 2000 small-cap index did the same thing). If we traded strictly on technicals, this would be a short.

On the other hand, how much is due to some whackaloon shooting up the Canadian parliament. Also, stock prices seem to move in sympathy with oil prices recently. Transports sold off big yesterday, despite the fact that lower oil prices is good news for transports. So, maybe there's a bit of hysteria in the market right now.


(Updated chart)

I've put two momentum indicators on the chart to show the mixed signals. 

I often use RSI for short-term momentum. and it banged its head, looking like it will turn down. That seems bearish.

MACD is better for the longer-term trend. And it just gave a buy signal.

See what I mean about mixed signals?

I was going to add a new recommendation today, but I think it's best to wait and see how this sorts out.

3 Stories on Gold

Story #1: Russia Says "Da" to Gold!

Russia's central bank is buying gold. A lot more gold. Take a look at the chart.

Russia's central bank purchased another 37.33 tonnes of gold in September, bringing its gold holdings to almost 1,150 tonnes and is the seventh month in a row it has increased it gold reserves, and noticeably its biggest monthly increase yet.

Story #2: Gold Miners Are Hedging Gold Production Forward.
This is mainly due to the Russians as well. The volume of gold sold forward by mining companies jumped 61 percent in the second quarter after Russia's Polyus Gold added a major new hedge position.

Story #3: China Consumed More Than Twice as Much Gold in 2013 as the World Gold Council Estimated.
The World Gold Council offered its assessment at 1,066 tonnes. Koos Jansen just translated the the 2014 China Gold yearbook by the China Gold Association, and he came up with 2,199 tonnes.
What's more, while China is consuming less gold this year, "the country’s gold demand this year looks to be heading for close to 1,900-2,000 tonnes a fall of perhaps around 10-15%, far short of some of the big decline figures quoted by non-gold-savvy media wonks."

Chart of the Day: UPS Goes Vroom-Vroom!

Check out this chart from StockCharts.com for UPS.


(Updated chart)

The stock reports earnings in two days. The holiday season is normally strong for UPS. It's extra-strong this year because falling gasoline prices are putting more money in consumer's pockets. Oxford
Resource Explorer subscribers are up nicely if they bought it at my recommended entry price.