2010

May 2, 2010 · Posted in Weekly Posts · Comment

Market conditions have changed at least for the immediate term. Gold, silver and the miners look in great shape and importantly have been moving when the dollar is both up and down and when the stock market is down. This may be the first indication that the seminal move by investors into gold in response to the gathering sovereign debt/fiat currency problem is beginning. But it is only a beginning.

Energy stocks are getting killed as investors sell everything that is energy related in response to the gather catastrophe in the Gulf of Mexico. Make no mistake, until that well is caped - at least a month from now, the ramifications of this spill cannot be over emphasized. As it gains size it will increasingly surround more and more operating rigs and installations forcing them to shut down. An oil or gas rig is a dangerous place at any time but surrounded by oil makes it even more dangerous. Two rigs were shut down this weekend - there will be others. If any pumping facilities are impacted then oil from rigs unaffected by the spill could lose their ability to get oil to market. If the shipping approaches to major harbors are closed we will see transportation disruptions. The fishing industry is obviously in serious trouble. All-in-all - do not underestimate the impact.

Once the dust settles a little the market should start targeting companies a little more selectively. We should see higher oil and at gas prices from this and the domestic, on-shore US producers should out perform the off-shore Gulf of Mexico lot. Companies involved in supporting the clean-up should do well. BP has unlimited liability and it comes directly from their pockets. There is no insurance company.

As for the broader market it is looking very weak at the moment. Our bet is lower prices before we rally again. Use this as an opportunity.

Following are the annotated charts for: USD, Gold, SILVER, HUI, WTIC, XLE, NYSE