Itz Pix Weekend Review

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The NonFarm Payrolls showed a headline loss of -95,000 jobs when almost everyone was expecting a minor gain. This was the largest loss of jobs in three months. July and August were revised lower by a total of 15,000 jobs. But the real jobs number that Itz tracks is the U-6 total employment number...as noted on Itz Twitter update following the BLS release...

U6 -employment 17.1% in Sept up from Aug. 16.7% NOT GOOD http://www.bls.gov/news.release/empsit.t15.htm8:46 AM Oct 8th via web

The unemployment rate was unchanged at 9.6% but the U6 unemployment rose to 17.1% and the highest since last December. The U6 number includes those without jobs and those who are working part time to pay the bills while searching for a job in their field. That means engineers, accountants and bankers are waiting tables or stocking shelves at Wal-Mart until a job appears. Instead of employment improving it is still getting worse. Those out of work for more than six months were 41.7% of the total. Those out of work for less than a month rose to 19.1% and again that trend is moving in the wrong direction.
Seeing a job loss number in the headlines is depressing to consumer sentiment as well as investor sentiment and dims corporate expansion plans. Corporations, like individuals want to see several months of improvement before they take on new obligations. For a corporation to add a $50,000 per year salaried employee it costs them over $90,000 in salary, taxes and benefits. Once the government health care program kicks in that number will be over $100,000 per year. Corporations are thinking hard before they add employees in this environment.

Itz had stated last weekend that the Jobs Report was the pivotal catalyst for the week. The markets churned as it decided what the numbers meant. On one hand investors were concerned that weaker than expected job creation meant the economy was barely crawling forward and there was still risk of continued economic weakness. On the other hand the weak jobs seemed to indicate the Fed would step up plans for a new round of quantitative easing (QE). That would mean a lower dollar and higher stocks . But as the old adage says.... "don't fight the Fed" so traders bought the dip and the market moved higher.
The markets will get some further insight to the Fed this Tuesday,with the FOMC minutes of the meeting that suggested a new quantitative easing program may be headed our way. Those minutes will be decisive.

The Dow Jones broke the 11,000 barrier again...for the umpteenth time, the next level that will truly give this momentum rally another leg up is 11,200. While 10,900 will be near term support. The S&P closed at 1165, Itz has targeted 1225 by year end, which is the completion to the Inverse Head & Shoulders pattern. The week will see hundred of companies reporting Q3 earnings, like Intel, GE, JP Morgan and Google. There are 35% of the S&P 500 stocks trading at or near a new 52-week high. There were 41 S&P stocks that made new highs on Friday.
This market rally in stocks and commodities has been driven by the currency race to devalue and one needs to be cautious that things can just as easily reverse and change momentum to the downside. The dollar is deeply oversold, Itz has 76 as a downside target support. In the Itz Pix the ProShares Ultra Crude Oil etf UCO hit $11 and Itz suggested taking 1/2 the position off the table. Can oil trend higher? Perhaps again watch the Canadian as well as the US dollar, but things are over extended and we could see oil trend lower, after all the is an abundant supply globally.
Bottom line overall Itz remains cautiously optimistic, but with a finger on the sell button.

Dollar, Gold & Oil Update

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Gartman, who also publishes a newsletter on commodities and currencies, said his phone has been ringing off the hook this week with a record number of media questions about the gold rally. His last flood of similar media calls in December preceded a gold price correction of nearly $100 per ounce.
In 10 weeks, gold has gained about $200 an ounce in a rally to Wednesday's all-time high at $1,349.80 an ounce. Bullion has soared more than fivefold from $250 an ounce back in 2001.
Gartman said the gold market is "frothy and due for a material correction," and prices could tumble to $1,200 within two months. Still, he believes the metal's long-term bull trend remained intact.



Louise Yamada, managing director of Louise Yamada Technical Research Advisors LLC, discusses the prospects for Treasuries, the outlook for U.S. equities and the price of gold. Yamada, speaking with Tom Keene on Bloomberg Television’s “Surveillance Midday,” also talks about Federal Reserve monetary policy >>LINK

Dennis Gartman, an economist and editor of the Gartman Letter, talks about his investment strategy in gold and the Swiss franc, and the outlook for U.S. employment. Gartman speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." >>LINK

A look at how high oil will go, with CNBC's Sharon Epperson and Kevin Kerr, Kerr Trading.

Crude Oil Rally Overbought

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The current rebound in the global equity markets as well as the US dollar weakness is driving crude oil prices higher. The falling greenback can make dollar-priced commodities like oil cheaper for buyers holding rival currencies. That tends to stimulate demand and prices.
Bank of Japan's surprise announcement of a zero-interest rate policy, with further monetary easing measures in a bid to combat the harmful strength of the yen and beat persistent deflation.
On Monday, crude oil futures had enjoyed mixed fortunes as Iraq announces a 25% increase in the country's proven oil reserves to 143.1 billion barrels from 115 billion barrels; a sharp rise in proven oil reserves to rank it number three in the world. Platt's reported Russian oil output hit a new post-Soviet era high of 10.12 million b/d, cementing its position as the world's biggest oil producer. Oil may be “overbought” after climbing to an eight-week high and will be vulnerable to a drop if prices fail to rally further, according to technical analysis by Petromatrix GmbH. read
Itz Stock Chartz has been targeting $82.50 resistance up to the August high of $83.05 to take a 1/2 position off of the table on ProShares Ultra Crude Oil ETF $UCO & looking at a possible entry into ProShares UltraShort Crude Oil $SCO. Crude oil may fail to breach the $86.70 a barrel level this week based on statistical analysis used by traders to gauge prices, the Schork Group Inc read story
After the close today API: The American Petroleum Institute reported a rise of 4.4 million barrels in the nation's crude-oil supplies for the week ended Oct. 1. read

Jim Rogers~ Gold Will Hit $2,000: Commodities Rally Still Strong

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Well-known commodities investor Jim Rogers told CNBC, one reason gold will continue to gain is because of what he called the failed policies of the Federal Reserve, its Chairman Ben Bernanke, as well as Treasury Secretary Geithner and other government officials. He said their efforts to prop up the economy have made things worse, not better. "Adjusted for inflation it should be well over $2,000 now."
He also said silver may even be a better buy now than gold because it is well off its historical high, while gold has been setting a series of new peaks lately. Rice will do well among soft commodities, he predicted.

"Look at the things that are cheap. Gold is making all-time highs, silver is still 60 percent below it's all-time highs," he said. "So if I was looking at a precious metal, I would look at the places that are still cheap."

Weekend Review

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The stock market put in the best one-month performance in the last 70 years.... go figure...???
 Last month may have turned out to be a September to remember but will October be a month we will want to forget?
What moved the markets? Consumer Sentiment ended September at 68.2 and that was a significant improvement over the mid month reading at 66.6. That suggests sentiment improved as the month progressed. The big report for Friday was the national ISM or Purchasing Managers Index. The ISM declined to 54.4 in September from 56.3 in August. This is still in expansion territory but it was the fourth decline in five months and the lowest level since November. An interesting highlight of the ISM was the sharp rise in the prices paid component from 61.5 to 70.5. This is the highest level since May and suggests the rising cost of commodities is starting to show up at the producer level. This could be an early warning sign of future inflation. The Purchasing Managers Index (PMI) of China's manufacturing sector rose to 53.8 per cent in September, a relief that global growth was not slowing down.
However, the Big Kahuna coming up Friday is the Nonfarm Payrolls Report. The current estimates from Moody's is for total employment to have risen by 5,000 jobs in September. They believe private employment has risen by 90,000 but government terminations will approach 85,000 jobs. Census employment declined by an estimated 77,917 in the September period. The upcoming week always marks the beginning of the Q3 earnings cycle. Alcoa is the first Dow component to report and they will be on Thursday.
The falling U.S. Dollar helped gold break over the $1,300 level also aiding the rest of the commodity sector higher. Oil finally saw some momentum, as Itz has highlighted over the last few posts. With the dollar quickly getting cheaper it takes more dollars to buy hard commodities like gold and oil. Add in some unrest in Nigeria and Ecuador and a couple tropical storms and it was another short squeeze for the bears. With product inventories at 20-year highs it was definitely not a demand driven rally. Itz is cautious, sure EIA had a drop of 500k barrel reported last Wednesday in it's weekly inventory report...granted October is conversion time for refineries to heating oil...still 500k is not much. Let's see what this week brings, Itz Stock Chartz is expecting some resistance at $82.50 level. We've been long ProShares Ultra Crude Oil ETF $UCO, targeting the $11 level near term.

The window dressing is over and now the funds have to make those hard decisions about what to keep for their fiscal year end on October 31st and what to sell. For the upcoming week, expectations are for the markets to be flat to down. The quarter end retirement fund flows will help support prices the first few days but with the payroll report on Friday there will be some caution about adding to long positions.

Crude Oil Rallies

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Looking at the technicals, that all important 1130; Inverse Head & shoulders Pattern/Neckline gave way as expected. Bottom line more upside to go, near term resistance, ultimate upside target over 1200 on the S&P500. Gold is approaching $1300, more importantly, crude oil is undervalued and should rally off the bullish action in equities as well as silver & copper. Continue to favor ProShares Ultra Crude ETF $UCO. link from Sept 20th post

Watch the Australian Dollar...commodities will follow...crude oil is playing catch up.

Silver Going To $30 - Silver Wheaton (SLW)

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Silver Wheaton Corp (NYSE: SLW) was downgraded by Credit Suisse from “outperform” to "neutral." SLW's shares closed at $26.54 yesterday.

Itz Weekend Review

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What a week in the markets, what looked like a possible topping in equities the market got a shot in the arm from  David Tepper, president & founder of Appaloosa Management.*see post/videos below.
He basically see equities in a win-win scenario, he also commented on the recent Federal Reserve FOMC statement >>link Tepper stated that the Fed wants economic growth and they don't care and actually want inflation...when has the Fed ever taken that stance? Pointing out that M2 money supply for the last 2 weeks has turned up similar to March 2009, which is a leading indicator of the equity markets will follow.

The Fed’s statement shows that deflation is a concern affecting the future course of monetary policy...Fed makes clear that it wants to boost inflation
Changes in money supply have implications both for domestic economic activity and inflation. The Fed ceased publishing M-3, its broadest money supply measure, in March 2006. The SGS M-3 Continuation estimates current M-3 based on ongoing Fed reporting of M-3’s largest components (M-2, institutional money funds and partial large time deposits) and proprietary modeling of the balance. So why is M3 important? Because the money supply controls how much inflation we have.

Been awhile since the Itz Pix portfolio has appeared, one note the UCO holding, those that follow Itz on Twitter know that we've been trading around this and the SCO for several months now. But on a longer term basis see oil trending higher.

Silver At Decade Highs...Silver Wheaton (SLW)

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In recent days there has been an increase awareness of silver and more specifically one mining company, Silver Wheaton. This silver stock has been one of the top performing picks in the Itz Pix portfolio over the the last year. Below is the profile of the company from their website.
Company Profile
Established in 2004, Silver Wheaton has quickly positioned itself as the largest metals streaming company in the world. The company currently has fifteen silver purchase agreements and two precious metals agreements where, in exchange for an upfront payment, it has the right to purchase all or a portion of the silver production, at a low fixed cost, from high-quality mines located in politically stable regions.

Forecast 2010 production, based upon the company's current agreements, is 22.2 million ounces of silver and 20,000 ounces of gold, for total production of 23.5 million silver equivalent ounces. By 2013, annual production is anticipated to increase significantly to approximately 38 million ounces of silver and 59,000 ounces of gold, for total production of over 40 million silver equivalent ounces. No ongoing capital expenditures are required to generate this growth and Silver Wheaton does not hedge its silver production.

Silver Wheaton’s industry-leading growth profile is driven by a portfolio of world-class assets, including silver streams on Goldcorp’s Peñasquito mine in Mexico and Barrick’s Pascua-Lama project straddling the border of Chile and Argentina. The company’s unique business model creates significant shareholder value by providing considerable leverage to increases in the silver price while reducing the downside risks faced by traditional mining companies. Silver Wheaton has an experienced management team with a strong track record of success and is well positioned for further growth.

Silver Wheaton is the largest metals streaming company in the world, and the only company that derives more than 95% of its revenue from the sale of silver. The company has entered into fourteen silver purchase agreements and two precious metals agreements with nine operating partners, including Barrick Gold Corporation and Goldcorp Inc.  

It is estimated that 70 percent of silver production comes as a by-product from base metal and gold mines. This characteristic, along with Silver Wheaton management’s bullish sentiment for long-term silver prices, was the basis for creating Vancouver-based Silver Wheaton in 2004. Silver stream agreements allow Silver Wheaton to purchase, in exchange for an up-front payment, the by-product silver production from a base or precious metal mine that it does not own or operate. The predetermined price that Silver Wheaton pays for future silver production is typically US$3.90 per ounce, with a small inflationary adjustment, ensuring that costs are fixed. This allows the company to stabilize operating costs and reduce downside risk, while providing the upside of significant leverage to the price of silver. Other than the initial up-front payment, no additional capital expenditures or exploration costs are required. Yet, Silver Wheaton benefits from the production and exploration growth of its operating partners.

Silver Wheaton’s low-risk business model, which was designed specifically to create long-term shareholder value, has a number of unique aspects. At its core are multi-year agreements to purchase, at a low fixed cost, all or a portion of the silver production, and a small amount of gold, from high-quality mines in Mexico, Chile, Argentina, Peru, Sweden, Greece, Portugal, Canada and the United States. The company has fixed operating costs, no currency risk, and no ongoing capital expenditures or exploration costs. In addition, a large percentage of the company’s revenue is derived from low-cost and long-life mining operations and it does not sell forward its silver sales. All of this provides significant leverage to increases in the price of silver while mitigating the downside risks associated with traditional mining companies. As a result, Silver Wheaton has an industry-leading growth profile, and it is very well positioned for further, sustained growth.

SLW FACT SHEET

Total cash costs(1) of US$4.03 per silver equivalent ounce, compared
       with US$3.99 per ounce in 2009. Silver Wheaton reports record second quarter earnings

Currently silver is making 30 year highs @ $21.48, Silver Wheaton's costs is around $4.00 per ounce and with silver @ $21 equals $17.00 profit per ounce. So, 23 million ounces this year and increasing to 40 million in 2013...one can see that SLW stock should see further upside. Itz has maintained a $27.50 near term price objective, Itz is raising the 12 month target to $40.