DAILY US METALS COMMENTARY 09/19/06

METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -3.10, SILVER -16.00

London Gold Fix $582.50 +1.00 LME COPPER STKS 121,825 ml tns
Unchanged
GOLD stks 7.789 ml oz., -229,973 oz COMEX SILVER stks 105.6 ml oz
Unchanged

OVERNIGHT ACTION: Despite some follow through attempts in Tokyo, European and early US gold prices have softened.

OUTSIDE MARKET DEVELOPMENTS: With a moderate reversal from early gains in gold overnight and world equity markets giving off signs of moderate to significant weakness, the environment isn't exactly conducive to further short covering gains in the gold and silver markets. In fact, with all the metals off and the Dollar marginally higher overnight, the precious metals are confronted with a total shift from the conditions seen on Monday morning. About the only constant from the action Monday, is that oil prices are starting the session off weak again and that would also seem to contribute to the selling tilt. With US housing starts and the PPI report this morning both expected to show slower growth this morning and only minimal increases in inflation readings expected, the scheduled data mostly looks to undermine metals prices today. It is also likely that the looming FOMC meeting is serving to cap the precious metals markets.

Clif Droke
September 18, 2006
©2002 - 2006 Publishing Concepts

Getting ready for the next bull market

With the 8-year cycle behind us and September seasonal weakness almost over we are within reaching distance of the next meaningful bull market in equities. The stock market will soon once again be the "only game in town" compared to other financial investment areas and the lethargy of the past year will gradually be replaced by excitement as the next bull market commences in the fourth quarter and continues into what should be an exceedingly bullish 2007.

It has been two full weeks since the latest major trading cycle has bottomed. Since that time the major indices and financially sensitive stock market sectors have gradually firmed up and are actually showing signs of wanting to move higher into the fourth quarter. The internal indicators (price oscillators) are still mostly in an "overbought" status, which makes a move higher from here without a corrective pullback or pause a low probability. But beyond a short-term "hiccup" we should continue to see improvement in the stock market in the upcoming weeks.

The coming industrial metals downturn
Steve Saville
email: sas888_hk@yahoo.com
Sep 19, 2006

Below is a slightly modified extract from a commentary originally posted at www.speculative-investor.com on 17th September 2006.

The following daily chart shows that December copper futures broke below a short-term trend-line last week. There is significant support in the 3.20s, but if this support gives way then a test of the June low (the 2.80s) will probably follow in fairly quick time.

Unlike the situation in the oil and natural gas markets, the aboveground supply of physical copper remains quite low relative to demand. The short-term risk in the copper market isn't that a moderately-tight supply situation will suddenly turn into a supply glut, but that the price will plunge in response to a mass exodus from commodity-related funds by the investors who piled into these funds over the past couple of years. Even if the commercial demand for copper remained at its current levels the copper price could quickly drop to $2.50, or even to $2.00, if the breaking of some technical support levels caused the money managers who have channeled more than $200B into commodity-linked funds to seriously question the "commodity super-cycle" thesis. On the positive side of the ledger, unless such a decline were accompanied by a significant reduction in demand it would be short-lived. It would, we think, create a wonderful short-term buying opportunity for investors in mining stocks and a good opportunity for 'hedged' copper producers such as Phelps Dodge to exit their short positions.

DAILY US METALS COMMENTARY 09/18/06

METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +3.70, SILVER +17.50

London Gold Fix $581.50 +2.90 LME COPPER STKS 121,825 ml tns
+825 tons
GOLD stks 8.019 ml oz., -588 oz COMEX SILVER stks 105.6 ml oz
+784,456 oz

OVERNIGHT ACTION: London and Hong Kong Gold up marginally on short covering interest.

OUTSIDE MARKET DEVELOPMENTS: With the Dollar slightly lower and world equity markets marginally higher, the outlook for the precious metals markets might be improved from last week. However, oil prices are mixed to weaker and may continue to be a drag and many in the market are looking ahead to this week's FOMC meeting with some concern. While the trade generally thinks that the Fed will pause on rates, seeing a move would certainly rekindle concerns of over tightening, which in the past has been undermining to metals prices. There is also another inflation reading due out this week and considering the mostly muted CPI reading from last week, one can hardly expect much in the way of support from the upcoming inflation reading. However, with the copper market showing signs of strength in the early going today and the equity markets back within striking distance of another upside breakout overnight, the overall environment seems to be moderately less bearish than was seen for most of last week.

Institutional Sentiment & Analysis Weekly 09/16/06
Published Saturday 9/16/2006
By Mark Young of Equity Guardian Group

Short-Term Sentiment:
Positive.

Overall Intermediate-Term Sentiment: Positive.

Individual Investor Sentiment: Positive

Small Speculator Sentiment: Positive

Hedge Fund/Small Manager Sentiment: Very Positive

Longer-term Trend:
Positive.

Intermediate-term Trend:
Positive.

Short-term (one-day) Signal:
None.

We are trading these signals intra-day with KTT subscribers on Yahoo IM--contact us for details.

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THE DOW REPORT
I No Longer Trust the Summer Rally

This was not a bad week for the markets. The Industrials were up 168.66 points or 1.48%. The Transports were up 208.64 points or 4.97%. The S&P 500 was up 20.95 points or 1.61%. As a result, many have e-mailed me this week asking if the Dow theory non-confirmation is really still relevant or valid. Others have asked me if it has been corrected with this week’s advance. I also received e-mails this week informing me that lack of confirmation by the underlying internal strength indicators is no longer applicable. Additionally, I’m receiving a number of e-mails on the 4-year cycle. Some are asking me if it was possible that the June/July lows marked the 4-year cycle low, while others are informing me that the June/July lows marked the 4-year cycle lows and that the markets are now off to the races.

Oil and XOI Corrections

So far in September, blood has been gushing in great torrents from many major commodities. As of this past Tuesday, gold had bled 6.0%, silver 14.1%, and crude oil 9.3% in just the first seven trading days in this month alone. Naturally with prices spiraling relentlessly lower, commodities sentiment fell off a cliff and cratered.

During my work days I always have CNBC on in my office, usually muted so I can concentrate on my research and writing. I do have closed captioning enabled though so text of what is spoken floats across the screen. If I happen to look up and a discussion on commodities is taking place, I usually unmute the TV to see what the analysts have to say. CNBC interviews considered in aggregate offer a good read on prevailing sentiment.

The End of Gold’s Bull Market, Not!

Over the past several days gold prices have plunged by over $60 per ounce and silver prices have dropped by close to $3 per ounce. Popular excuses for the carnage include lessening tensions in Iran, falling oil prices, and diminishing inflation fears. However, I am convinced that the decline has nothing to do with changes in the underlying fundamentals for either metal. In fact, with this week’s release of yet another record high monthly trade deficit and continued evidence of a rapidly deteriorating housing market, those fundamentals have never been better. How then do I explain the sharp recent declines?

DAILY US METALS COMMENTARY 09/15/06

METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -1.40, SILVER -4.50

London Gold Fix $578.60 -14.80 LME COPPER STKS 121,000 ml tns
+2,515 tons
GOLD stks 8.019 ml oz., Unchanged COMEX SILVER stks 104.8 ml oz
+255,680 oz

OVERNIGHT ACTION: More negative action overnight as Tokyo Gold was limit down!

OUTSIDE MARKET DEVELOPMENTS: It seems that persistent weakness in oil prices is promoting liquidation in the metals market, as many funds apparently think that persistently lower oil prices is the wrong environment for gold and silver. With the Dollar initially showing signs of strength today and word equity markets only moderately higher overnight, there doesn't seem to be much change in the outside market influence for the metals and therefore the sellers don't look to be threatened. In fact, with the US scheduled to release a CPI reading for August this morning and the trade largely expecting inflation to remain under control, the liquidation impetus in gold and silver might continue. In fact, against the backdrop of sharply falling oil prices, a minor up tick in the CPI could simply be discounted in the current environment. In short, the broad based commodity liquidation effort might continue to haunt the metals today unless the CPI is hot and the US equity market signals better economic times ahead with an upside extension.

By: Jim Willie CB, GoldenJackass.com

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For specific detailed analysis of the Gold, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and Fed monetary policy, see instructions for subscription to my newsletter research reports, which include stock recommendations positioned to rise in the commodity bull market. Articles in this series are promotional.