Will Your Favorite Oil Company Go Bankrupt?

By Justin Spittler

Oil companies are getting desperate. If you’ve been reading the Dispatch, you know oil is in a horrible bear market. The price of oil has crashed 69% since June 2014. Last month, oil hit its lowest price since 2003.

The world has too much oil..…
For years, many folks thought the world was running out of oil. The price of oil soared more than 1,200% from 1998 to 2008. The “Peak Oil” crowd saw this as proof that oil production was in terminal decline. They were very wrong. “Peak Oil” believers failed to understand that high prices would create huge incentives to develop new ways to produce oil. Oil companies developed new methods like “fracking” to unlock billions of barrels of oil that were once impossible to reach. U.S. oil production has nearly doubled over the last decade. Last year, it hit its highest level since the 1970s. World oil production levels are also near record highs.

The world isn’t consuming oil fast enough..…
The global economy produces about 1.7 million more barrels a day than it needs. With U.S. oil reserves at their highest level since the Great Depression, companies are running out of places to store the extra oil. To deal with the surplus, companies have started storing oil on tankers floating at sea and in empty railcars. Other companies are selling barrels at huge discounts just to get rid of them.

Low oil prices have hammered major oil companies..…
The world’s five biggest oil companies—Exxon (XOM), Chevron (CVX), Total S.A. (TOT), BP (BP), and Royal Dutch Shell (RDS.A)—have fallen an average 34% since June 2014. Oil services companies, which supply “picks and shovels” to the oil industry, have crashed, too. Schlumberger (SLB), the world’s largest oil services company, has plunged 36% since 2014. Halliburton (HAL), the world’s second biggest, has plunged 53%.

Oil companies have cut spending to the bone..…
Companies have walked away from billion dollar projects. They’ve sold pieces of their businesses. As Dispatch readers know, some have even cut their prized dividends. The industry has laid off more than 250,000 workers since oil prices peaked. Last year, oil and gas companies cut spending by 22%. Reuters reports that the industry could cut spending another 12% this year.

On Thursday, Halliburton laid off 5,000 workers..…
It’s now laid off 29,000 workers, more than a quarter of its workforce, since 2014. Like most companies in the oil business, Halliburton is struggling. Its sales have fallen four straight quarters. Last year, the company lost $671 million, its first annual loss since 2004. The latest round of layoffs suggests Halliburton doesn’t expect business to pick up anytime soon.

The oil market is cyclical..…
It goes through big booms and busts. Right now, it’s going through its worst bust in decades. Eventually, the oil market will boom again. After all, the world needs oil. Companies that survive this bust should deliver huge gains during the next boom. If you can buy great oil companies near the bottom, you could set yourself up for huge gains when the next boom comes. So…is this the bottom?

According to The Wall Street Journal, one third of U.S. oil producers could go bankrupt this year. To be profitable, many companies would need the price of oil to get back up $50. With oil at $32.84 a barrel on Friday, those companies are in trouble. We expect a wave of bankruptcies to rip across the oil industry. This would likely trigger another leg down in oil stocks. So we’re not ready to buy oil stocks yet.

Instead, we recommend “stalking” your favorite oil companies..…
Nick Giambruno, editor of Crisis Investing, just added a world-class oil company to his watch list.
If you don’t know Nick, his specialty is buying beaten-down assets during a crisis. Most investors run away from crisis. But if you can keep your head and buy when everyone else is panicking, you can often pick up a dollar’s worth of assets for a dime or less.

Shale oil stocks are in crisis today. Even the largest shale companies have been obliterated. Major shale oil producer Apache (APA) has plunged 51% since June 2014. Anadarko (APC), another larger shale company, has plummeted 65%. Shale oil is more expensive to extract than conventional oil. And at today’s prices, most shale oil projects can’t make money.

Many shale companies borrowed too much money during oil’s boom times. Now that oil is in a bust, they can’t generate the cash flow to pay back their debts. Last month, investment bank Oppenheimer & Co. Inc. warned that half of all U.S. shale oil producers could go bankrupt before oil prices recover. To survive, these companies would need the price of oil to more than double.

Nick has found a shale company unaffected by these problems. It’s a world-class shale oil company that has virtually no risk of going bankrupt. However, its stock has gotten extremely cheap along with all other shale oil stocks. Nick says this company has “trophy assets in the major U.S. shale basins. It has a solid balance sheet.

And, unlike many of its peers, it didn’t over leverage itself during the last boom.” The company also has the industry’s highest profit margins. Nick plans to buy this company at once in a generation prices. He will tell Crisis Investing readers when it’s time to pull the trigger.

In the meantime, Nick is investing in Cuba..…
As you may know, the U.S. has had a trade embargo against Cuba since 1962. The embargo bans all trade, making it illegal for Americans to invest in Cuba. But that could soon change. About a year ago, Cuba and the U.S. announced they were working to repair diplomatic and economic relations. In August, the two countries reopened their embassies in each other’s capitals. President Obama is going to Cuba next month. He will be the first sitting president to visit Cuba since Calvin Coolidge in 1928.

Nick thinks the embargo could soon “become a page in the history books”..…
The end of the embargo will create the “potential for enormous profits,” as Nick explained in Crisis Investing.

When the embargo goes away, American tourism to Cuba will explode. The International Monetary Fund estimates there could be up to 10 million visits from Americans every year as soon as the embargo comes down.

Today, it’s still illegal to invest in Cuba. But Nick has a “back door” way to profit from the opening up of Cuba’s economy. Nick’s investment in Cuba legally trades on the NASDAQ stock exchange. It should deliver huge gains when the embargo is lifted…which may happen very soon. You can get in on Nick’s Cuba investment by signing up for Crisis Investing. You’ll also learn about the world class shale oil company on Nick’s watch list. Click here to begin your risk-free trial.

Chart of the Day

Shale oil stocks have been decimated. Today’s chart shows the performance of the Market Vectors Unconventional Oil & Gas ETF (FRAK). This fund tracks 50 companies involved in the shale oil and gas industries. FRAK has crashed 65% since June 2014. Last month, it hit an all-time low. As we mentioned, most shale oil companies simply can’t make money right now.

The article Will Your Favorite Oil Company Go Bankrupt? was originally published at caseyresearch.com.

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Everything You Need to Know About the SP 500 Until Christmas

By Andrey Dashkov

When I need to clear my mind, I put on my beat up Saucony sneakers and drive to nearby Deer Lake Park in Burnaby, British Columbia. After a couple of miles, though, as my body gets into a rhythm, my mind wanders back to the thought that occupy it for hours each day: where will this market go next?

And I’ve thought a lot about what went on this summer. Since June 1st:

•  S&P 500 is up 2.7%, having set a new record high in September;

•  MSCI World index is down 0.5%;

•  10 year Treasury yield is down from 2.54% to 2.50%;

•  Brent Crude 0il is down 12.8%; and

•  Gold is down 2.2%.

The Bureau of Economic Analysis reported that the U.S. economy expanded by 4.6% year on year in the second quarter, up sharply from the first quarter’s disappointing 2.1% annual decline. Consensus estimates for annual GDP growth in the third and fourth quarters of this year are about 3%.

The stage seems to be set for the fifth straight year of positive economic growth in the US; however, we’re always cautious about government supplied information, especially during an election cycle.

At the moment, macro developments seem closely intertwined with stock market performance. Instead of slumping, the market was rather vibrant this summer. The S&P 500 showed resilience, reaching higher highs after a dip in late July and early August that coincided with increased uncertainty surrounding the Ukrainian crisis.

Geopolitics aside, the market was supported by GDP growth, which in turn was underpinned by strong corporate profits and margins. In fact, in the second quarter, the S&P 500 set a new record for profit margins: 9.1%. So much for “sell in May and go away.”

Expanding earnings and margins are great news on the fundamental front. Of the trends we observed this summer, at least two will benefit S&P 500 companies’ profitability. Cheaper oil may keep energy costs down, while consumers are more than willing to swipe their debit and credit cards. In August, consumer confidence jumped to its highest level since October 2007, having increased for four months in a row.

Loose Money Helping Stocks in the Short Term

The Fed has done its part, too. Long-term effects of its prolonged loose monetary policy aside, it’s hard to argue that it hasn’t helped stocks in the short term. With Treasury rates still low, debt options abound, and companies can obtain cheap funding for things like capital expenditures and buying back shares.

In the first quarter, 290 companies from the S&P 500 bought back shares at a cost of $159.3 billion, 59% more than a year ago. Dividends are up as well: in the first quarter, S&P 500 companies spent a record $241.2 billion on dividends and repurchases together, according to Standard & Poor’s.

Second quarter share repurchases were estimated at $106 billion, according to Financial Post. That’s much lower than first-quarter repurchases (though the official numbers aren’t out yet) and down 10% year on year.

Buyback Frenzy Is a Net Positive for Share Prices

However, the most important takeaway is that the cumulative effect of the recent buyback frenzy was positive for share prices and dividends. With fewer shares, it’s easier for companies to maintain dividend payments. Higher share prices may drive down dividend yields, but companies tend to increase dividends over time, which makes up for that in part. And despite the S&P 500’s significant growth over the past five years, dividend yields have not decreased as much as one would expect.

The chart below tracks the S&P 500’s median dividend yield since the first quarter of 2009.

The median dividend yield decreased just slightly over this period: from 1.9% in 1Q09 to 1.7% in 2Q14, and it’s held relatively steady over the past three years.

The good news is that S&P companies aren’t stretching their balance sheets too thin to cover these dividend payments—these payments are backed by earnings. The median dividend payout ratio (the ratio of dividends paid to net income), although up from five years ago, still looks solid.

S&P companies can successfully cover their dividends with earnings, so there’s no reason to fear that they’ll have to borrow to keep paying them. However, a lot of investors worry about leverage. On one hand, financial leverage boosts return on equity (ROE), and prudent borrowing can be a positive for investors. On the other hand, large amounts of leverage leads to volatility in earnings, a less stable balance sheet, and risk that affects valuations.

Debt and Cash Both Up

These are legitimate concerns, but our next chart shows that in the past five years, S&P companies have increased debt while also accumulating a lot of cash on their balance sheets.

Debt and cash grew at about the same pace during the last couple of years. There were many reasons for this trend, but two interrelated ones stand out: the abundance of cheap debt that S&P companies took advantage of (why spend your own cash when you can finance on such great terms and pay it back over a long period?); and the desire to keep interest on that debt as low as possible by making credit rating agencies happy and holding a lot of cash in the bank.

If a correction is in the cards for the near term, this cash, increased earnings, and the support coming from share buybacks will provide some cushion for these companies’ valuations.

Why We’re Not “Permabears”

So what’s ahead? I wish I knew. There are a lot of market bears out there who say this rally will come to a halt sooner rather than later, and the S&P will fall off a cliff. I stay away from calling tops and bottoms and wonder how many pundits actually have any skin in the game. Going short the market requires timing; so any “permabear” who puts money where his mouth is may lose a lot if his timing is wrong.
I’m not saying the rising market is somehow “wrong.” There are solid company level fundamentals and positive macro-level data points here and there that support a significant part of its growth.

Your Plan to Profit

We’re pragmatists at Miller’s Money. Quantitative easing and basement-level interest rates have flooded the market with dollars and eroded yields, but you should use these circumstances to capture some of the benefits they’ve created. No, you can’t earn much on CDs. No, dividend yields might not beat inflation (at least not all of them, and certainly not every estimate of inflation). And yes, the current rally will eventually end, one way or another. We just don’t know when or how. No one does.

What matters is that even in this situation you can protect your financial well being by sticking to our core strategy: diversify geographically and across sectors; and invest in assets that provide robust yield relative to risk and have the potential to rise in price. You can learn more about the Miller’s Money Forever core strategy here—a time-tested plan designed for seniors, savers and like-minded conservative investors.

The article Everything You Need to Know About the S&P Until Christmas was originally published at millers money.

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See you in the markets!
Ray's Stock World

Beware of Flashy Stock Repurchases When The Market Is on The Rise

By Andrey Dashkov

Retail giant Bed Bath & Beyond just announced plans to buy back another $2 billion in shares, which the company will start doing after it completes its current share repurchase program. You’ve seen it before: Press releases emphasize that buybacks return value to shareholders, analysts sometimes rely on repurchases to spot a stock to write up next, and management likes to tout their focus on shareholder returns. But what’s the real story? Why would a company buy its own shares?


There are but a few situations when returning cash to shareholders instead of paying dividends or investing in new projects is prudent:

• The company has largely exhausted investment opportunities that would generate a positive net present value (NPV).
• The stock is trading below its intrinsic value; or
• The tax on dividends is so high compared to the capital gains tax that it makes sense to boost the share price and let shareholders enjoy the extra return instead of receiving heavily taxed dividends.

When these situations happen we support repurchases. In the reality, however, managers often have their own reasons to buy back shares; let’s look at the more popular ones.

First, management’s compensation is often based on share price performance or earnings based metrics like earnings per share (EPS), which buybacks are designed to boost.

Second, higher share price increases the value of a company’s options. Managers are often shareholders, too, but unlike you and me, they have direct access to the Treasury. When managers own a lot of their own company’s stock, they may have too much skin in the game. This may skew their preferences toward increasing the share price at the expense of long term business growth.

Third, share buybacks became a standard (and often abused) signal to the market that: a) the company’s stock is undervalued, and b) that management takes care of the shareholders. Both of these statements may be correct in isolation, based on the company’s fundamentals and management practices. Nonetheless, a buyback should not convince you that either is true.

One additional reason is often overlooked. Many a CEO has been fired for an acquisition that did not work out. When the decision is made to dump the acquisition, it is accompanied by a write off against earnings, sometimes worth billions of dollars. Wall Street armchair quarterbacks are quick to point out how much better off shareholders would have been if they had just paid out what they lost in dividends. Buying back company shares, with all the accompanied hoopla, is less likely to be a career threatening move.

Linking the two subjects together makes for nice copy; however, keep it in perspective. For example, a technology company that realizes their product line is becoming obsolete will often make acquisitions to increase their product line market share, or move them into a new business with long term potential. Buying back company stock, then having to go into the market and borrow at high interest rates, might be the exact wrong move. The key is making the right acquisitions for the company to continue to grow and pay dividends for the next generation.

In fact, managers have proven to be pretty bad stock pickers even when they have only one stock to pick. As my colleague Chris Wood showed in A Look at Stock Buybacks, managements have bought shares of their own companies at pretty bad times in the past. Moreover, the expectations of higher valuation based on higher EPS did not always materialize. Even though a lot of investors use P/E as their main gauge of value (which they shouldn’t), there is no convincing evidence that buybacks can support high valuation multiples in the long term.

Your Bottom Line

 

History has shown that the only value-creating buybacks were the ones carried out when stocks were deeply undervalued. In those instances, the repurchases helped companies outperform the market. But overall the optimism and confidence inducing press releases that accompany buybacks should be taken with a huge grain of salt.

As a rule of thumb, beware of increased buybacks when the market is on the rise (everybody is an investment guru when everything is going up) or when management compensation is closely tied to the share price performance or earnings based metrics. Companies with better corporate governance may fare better when it comes to managing conflicts of interest, but there is a significant vested interest there that investors should be aware of. Don’t mistake noise for a sign is all.

When it comes to returning value to shareholders, we appreciate companies that invest in long term projects—or pay dividends. Despite the potential tax implications, the yield strapped investors may be better served with a special dividend these days than with a promise of a better price in the future.

Learn more ways to cut through press rhetoric by signing up for our free weekly e-letter, Miller’s Money Weekly, where my colleagues and I share timely financial insight tailored for seniors and conservative investors alike.

Sign up here, and we’ll send a complimentary copy straight to your inbox every Thursday

The article Beware of Flashy Stock Repurchases When The Market Is on The Rise was originally published at Millers Money

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Understanding Covered Calls

By Dennis Miller

The strategy I’m writing about today is one of my favorite, guaranteed moneymakers. These are trades we can all easily make, requiring no capital outlay and guaranteed to make a profit or you don’t make them. What’s the catch? We might occasionally find ourselves lamenting how much more money we might have made.


Experienced investors have likely figured out that I’m talking about a stock option called a “covered call.” Buying options is for speculators, and that’s not what I’m talking about today. I want to show you the one and only option trade that meets my stringent criteria for comfort.
Covered calls:

• Are easily understood;
• Are easy to implement;
• Require no market timing to make your predetermined profit; and
• Require minimal time for investors to manage.

In addition, you can calculate your profit clearly at the time of the trade (if there’s no hefty gain, you pass on it); the risks are financially and emotionally manageable; and the upside potential is excellent with covered calls. Let’s begin with the boilerplate stuff first before we discuss strategy.

There’s an options market that allows people to buy and sell options on stocks. Speculators have made millions of dollars trading options without owning a single share of stock. That’s the wrong place to be with your retirement nest egg. I’m going to show you how an average investor with an online brokerage account can supplement his income in a safe, easy, responsible, and conservative manner.

Let’s start with a basic premise: money is consistently made on the sell side of the transaction. Selling one type of option is the only strategy that will meet our stringent criteria.

Before we proceed, here’s a need-to-know glossary for covered calls:

Stock option. An option is a right that can be bought and sold. There are markets for trading options in an orderly manner. Two transactions may occur between the buyer and seller. The first is the transaction when the right (option) is sold. The second transaction is “optional” and at the discretion of the buyer. If the buyer exercises his right (option), the seller is required to complete an agreed-upon stock transaction. Today we’re focusing on covered call options.

Covered Calls. When you sell a covered call, the buyer purchases the right to buy a certain number of shares of stock which you own, at an agreed upon (strike) price, at any time before the option expires (known as the expiration date). The option buyer is not obligated to buy your stock; he has the right to do so. You’re obligated to sell the stock if the buyer exercises the option. The term for this is your stock gets “called away.” Regardless, you keep the money you were paid when you sold your option.

There are four elements to an option transaction:

1. the price of the option in the market (what you can buy or sell it for);
2. the number of contracts (each contract is 100 shares);
3. the price of the underlying stock (referred to as strike price); and
4. the expiration date.

Option price. This is the price the option is bought or sold for. This changes as the price of the underlying stock moves in the market and the time frame moves closer to the expiration date. Readers will see that there are two prices: “bid” and “asked,” just like stocks. When you sell an option, this completes the first part of the transaction. The money changes hands and is yours to keep, regardless of what happens later. Cha-ching!

Strike price. This part of the transaction is agreed upon when the option is bought/sold. Let’s assume the buyer purchased a call (a right to your stock) at a strike price of $55/share. Should the buyer choose to exercise his option, the buyer pays you $55/share, and you (through your broker) deliver the stock, regardless of the current market price of the stock.

Expiration date. Options generally expire on the third Friday of every month. When looking at the options trading platform on any major stock, you’ll find options available for several months in advance. You’ll notice that the longer the remaining time, the higher the price of the option.

At the time the stock option is bought/sold, all of the elements above are agreed upon. The buyer has until the expiration date to exercise his option. The numbers of shares and selling price have already been determined. If your stock is called away, you’ll see the cash come in to your brokerage account, and the shares will automatically be delivered to the buyer.

Never sell a call option without owning the underlying stock; it’s much too risky for your retirement nest egg.
Option contract. An option contract is for 100 shares of the underlying stock. Options are sold in contracts, and the prices are quoted per share. For example, if you see an option price of $1.15, the contract will cost $115 ($1.15 x 100 shares). If a buyer/seller wants to have an option on 500 shares, he buys five contracts.

There are two types of options: puts and calls. We’re going to discuss the only option strategy that meets our stringent, conservative criteria: selling a covered call.

Why would an investor buy a call option? Buyers of call options are generally speculators who believe that a stock will appreciate above the strike price before the option expires. If they guess right, they can make a lot of money.

The vast majority of call options expire worthless. The rules are simple. Don’t sell an option unless you own the underlying stock. (This is referred to as a “naked call”.) Don’t buy options—period!

A Savvy Strategy

We’ll use a fictional company – ABC Products – for an example. Say we bought the stock in October 2012 for $40; the market price one year later (in November 2013) was $55/share. Why would we want to sell a covered call?

In November, ABC was $55/share. We’ll say its current dividend is $0.55/share. The March call option at a strike price of $57 is selling for $1.10/share—twice as much as the current dividend.

Assume that on December 20, you either called your broker or went online and brought up ABC in your trading platform. You would have seen the current bid and asked prices. Assume it sold for $1.10/share.
Now, one of four things could have happened:

1. The stock didn’t go over the $57 strike price, so the stock was not called away. In approximately 90 days, you’d have received $0.55/share in dividends, plus $1.10 for the option, for a total of $1.65. You just added more than double the dividend to your yield without spending a penny more of your investment capital. What do we do when the option expires? Look for another juicy opportunity for the June options and do it again!
2. Let’s take the worst case scenario: the market tanked. You had a 20% trailing stop in place. You got stopped out at $44—$11/share lower than the November price. But wait a minute, what about the covered call? The value of the option would also have dropped and sold for mere pennies. If you got stopped out of the stock, you could have bought back the option at the same time. For the sake of illustration, say you bought it back for $0.04. You netted $1.06/share profit. Instead of losing $11/share, your loss became $9.94. If you didn’t buy back your option, you’d have had huge risk exposure should the stock jump back up. It isn’t worth the risk, so you’d spend the few pennies it takes to close out your position.
3. You wanted to exit your position before the expiration date. If the stock rises above the strike price of the option, generally the price of the option will move right along with it. If the stock moved to $59/share, you would “buy to close.” The market price should be close to $2/share; however, that would be offset by the fact that you sold your stock for $59.00 share. If the stock remained stagnant or started to drop and you wanted to exit your position, the market price of the option would decline more rapidly. You’d likely buy back your option at a profit.
4. The most difficult situation emotionally is when the stock rises well above the strike price and gets called. Let’s assume that in March, ABC has appreciated to $59/share. Your option is called at $57 (the strike price). You make a profit of $2/share from the time you sold the option, plus the $1.10/share for the option and the $0.55 dividend, for a total of $3.65/share. For the 90-day time frame, you earned 6.3% on your money ($55/share), or 24.9% on an annualized basis, net of brokerage commission. Yet we’ll lament the fact that you could have made more.

In each case, you haven’t invested any more capital. You make 100% profit on the call in two cases. The worst case is you generally break even on the options should you want to exit early. In the vast majority of cases, selling covered calls is straight profit on top of your dividends.

Here are some guidelines:

• Sell covered calls for stocks you own and would gladly keep.
• Sell covered calls to expire after the dividends are paid.
• Sell covered calls at a strike price above the current market price of the stock, referred to as “out of the money.”
• Don’t lament the times your stock gets called. You took a nice profit, and there are plenty more opportunities out there.
• Use stocks that are heavily traded, as they are more liquid.
• To calculate gains for any stock and option price combination, please use our option calculator, which you can download here.

Selling selected covered calls is a great way to turbocharge yield without any additional investment. At the same time, it will mitigate a bit of risk. If you have a 20% trailing stop in place and the stock gets stopped out, your 20% will be offset by the profit you made on the option sale. While most investors are starved for yield, you can find yield in the safest and easiest manner possible.

Each month, we look at the Miller’s Money Forever portfolio and recommend and track covered calls on some of our positions. If you're not a current subscriber, I highly recommend taking advantage of our 90-day, no-risk offer. Sign up at the current promotional rate of $99/year, and download my book and all of our special reports—really take your time and look us over. If within the first 90 days you feel we're not for you, feel free to cancel and receive a 100% refund, no questions asked. You can still keep the material as our thank-you for taking a look. Click here to subscribe risk-free today.

The article Covered Calls was originally published at Millers Money

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Forget The Experts, Trade The Trends And Sleep Good

I know, you hear it every day on the "alphabet" TV channels. These are tough times, what are you to do? Your portfolio is in the brink!

What you do is change your mind set. Stop investing, at least for now. And what I mean by that you should stop listening to the "experts" and become a trader. A trader who relies on trends. And believe me you can do this and sleep good at night.

My life as a trader changed upon meeting Adam Hewison and the guys at Market Club and INO.Com. Adam has a simple system for following the trends that has changed my life. The Market Club subscription is worth every penny, but Adam will let you sign up for a free account that will notify you daily of the trend of all of the stocks you include in your free account.

Here is a small example of what it looks like.....

Early this week the Chinese government announced a "Stimulus Package" that caused all of the commodities and especially the metals to pop. Let's say you have a position in Freeport McMoran, ticker FCX, and you are thinking "do I sell this rally, or back up the truck because it's off to the races"? Let's look at the chart from my free portfolio that was emailed to me.....

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FREEPORT-MCMORAN COPPER & GOLD (NYSE:FCX) Strong Downtrend Up Arrow

Smart Scan Chart Analysis confirms that a strong downtrend is in place and that the market remains negative longer term. Strong Downtrend with money management stops. A triangle indicates the presence of a very strong trend that is being driven by strong forces and insiders.

Based on a pre-defined weighted trend formula for chart analysis, FCX scored -100 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

-10 Last Hour Close Below 5 hour Moving Average
-15 New 3 Day Low on Tuesday
-20 Last Price Below 20 Day Moving Average
-25 New 3 Week Low, Week Ending October 25th
-30 New 3 Month Low in October
-100 Total Score


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I quick look at the chart makes this a simple call to sell FCX on the rally caused by the catalyst created by the Chinese announcement. It is not even close, Freeport McMoran is trending down. And wouldn't you know it, FCX lost 10% right out of the gate this morning.

If you subscribe to the Market Club you will also be supplied your buy and sell signals with the Triangle Trading method. Again, worth every penny.

So forget what the experts are telling you and trade the trends. Take your life back and make money in any market.

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Extreme Market Commentary For Wednesday Evening

GENERAL STOCK MARKET COMMENT
The U.S. stock indexes closed sharply lower today as traders experienced a post election hangover after pushing index prices sharply higher on Tuesday. News today from ADP that projected a very weak U.S. jobs report on Friday also reminded traders how sick is the U.S. economy, with recovery nowhere close at hand. There are still early technical clues to suggest market bottoms are in place. However, as the weakening economic news continues to trickle into the marketplace, it will be hard for the stock market bulls to get excited about sustaining any solid uptrend in prices. Do remember that during serious economic weakness or recession that generally the stock market puts in a low well before all the bad economic news is reported.

INTEREST RATES

December U.S. T-Bonds closed up 1 26/32 at 117 6/32 today. Prices closed near the session high on more short covering and flight to quality buying amid a big sell off in the stock market today. A bullish double bottom reversal pattern has formed on the daily bar chart. Bulls have fresh upside near-term technical momentum.

ENERGY MARKETS
December crude oil closed down $5.35 at $65.18 a barrel today. Prices closed near the session low today. A sharply lower U.S. stock market pressured the crude today. Crude oil bears still have the near-term technical advantage. Prices remain in a 3 1/2 month-old downtrend on the daily bar chart.

December heating oil closed down 1,086 points at $2.0530 today. Prices closed near the session low. Bears still have the near-term technical advantage. A 3 1/2 month old downtrend is in place on the daily bar chart.

December (RBOB) unleaded gasoline closed down 1,077 points at $1.4250 today. Prices closed near the session low today. There was not follow-through buying interest today and a bullish "key reversal" up was not confirmed on the daily bar chart. The bears are still in technical control. Prices are still in a 3 1/2 month old downtrend on the daily bar chart.

December natural gas closed up 4.1 cents at $7.26 today. Prices closed nearer the session high and closed at a fresh four week high close on more short covering in a bear market. The bulls have some fresh upside near term technical momentum but need to do more upside work to begin to suggest that a near term low is in place.

CURRENCIES
The December Euro currency closed down 15 points at 1.2916 today. Prices closed near mid-range. Bears still have the overall near term technical advantage amid still no strong technical clues that a market low is close at hand. Prices are still in a 3 1/2 month old downtrend on the daily bar chart.

The December Japanese yen closed up 116 points at 1.0152 today. Prices closed near the session high today. No serious chart damage has been inflicted recently. Bulls still have the near-term technical advantage.

The December Swiss franc closed up 18 points at .8605 today. Prices closed nearer the session high today. Short covering in a bear market was featured again today. Bears still have the near-term technical advantage.

The December Canadian dollar closed down 96 points at .8576 today. Prices closed nearer the session low after hitting a fresh three week high early on. Bulls still have some upside near term technical momentum to begin to suggest that a market low is in place.

The December British pound closed down 6 points at 1.5886 today. Prices closed nearer the session low. Bears still have the near term technical advantage. Prices are still in a six week old downtrend on the daily bar chart.

The December U.S. dollar index closed up 13 points at 85.50 today. Prices closed near mid range today. No serious chart damage has occurred recently and the bulls still have the overall near term technical advantage. There are no strong early technical clues of a market top being close at hand.

PRECIOUS METALS
December gold futures closed down $16.20 at $741.10 today. Prices closed near the session low today. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured gold today. Bears still have the overall near term technical advantage.

December silver futures closed up 27.0 cents at $10.40 an ounce today. Prices closed nearer the session high today and closed at a fresh three week high close. Bears still have the overall near term technical advantage. Prices are still trading below a 3 1/2 month old downtrend line on the daily bar chart.

December N.Y. copper closed down 1,460 points at 181.20 cents today. Prices closed near the session low today. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured copper today. Copper bears still have the near-term technical advantage. Prices are still in a four month old downtrend on the daily bar chart.

SOFTS
March sugar closed down 4 points at 12.67 cents today. Prices closed nearer the session high today. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured sugar today. Prices are still trading below a 2 1/2 month old downtrend line drawn from the August and September highs.

December coffee closed down 50 points at 116.20 cents today. Prices closed nearer the session low today but did poke to a fresh four week high early on. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured coffee today. Coffee bears still have the overall near-term technical advantage.

December cocoa closed down $27 at $1,972 today. Prices closed near the session low today. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured corn today. Cocoa bears still have the overall near term technical advantage.

December cotton closed down 203 points at 44.29 cents today. Prices closed near the session low today. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured cotton today. The cotton bears still have the solid near term technical advantage. Prices are still in a 7 1/2 month old downtrend on the daily bar chart.

January orange juice closed up 315 points at $.8600. Prices closed near the session high today. More short covering was featured. Bears still have the overall near term technical advantage. However, prices have been trading sideways for four weeks and that does favor the bullish camp as it suggests a bottoming process.

January lumber futures closed up $4.00 at $209.50 today. Prices closed near the session high and were supported by more short covering in a bear market. Lumber bears still have the overall near-term technical advantage.

GRAINS
December corn futures closed down 21 1/2 cents at $3.91 1/2 today. Prices closed near the session low. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured corn today. Bears gained some fresh downside technical momentum today. Corn prices are still trading below a four month old downtrend line on the daily bar chart.

January soybeans closed down 54 1/2 cents at $9.04 1/2 today. Prices closed near the session low today. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured beans today. Soybean bears remain in overall near term technical command and gained fresh downside momentum today.

December soybean meal closed down $12.80 at $265.00 today. Prices closed near the session low today. Bears still have the overall near-term technical advantage.

December bean oil closed down 195 points at 34.02 cents today. Prices closed near the session low today. Bean oil prices are still in a four month old downtrend on the daily bar chart. Bears still have the near term technical advantage.

December Chicago SRW wheat closed down 35 1/4 cents at $5.37 1/4 today. Prices closed nearer the session low today. Mostly bearish "outside markets" sharply lower crude oil prices and sharp losses in the stock market pressured wheat today. The bulls had gained some fresh upside technical momentum, but lost it today. The wheat bears have the overall near term technical advantage and regained downside momentum today.

LIVESTOCK
December live cattle closed up $0.42 at $94.27 today. Prices closed near the session high today and did close at a fresh three-week high close on more short covering and bargain hunting buying interest. While the bears do still have the overall near-term technical advantage, the bulls have gained upside momentum recently to begin to suggest a near-term low is in place.

November feeder cattle closed up $0.15 at $100.65 today. Prices closed near the session high today and poked to a fresh four-week high on bargain-hunting buying and short covering. The bulls have gained technical momentum recently to begin to suggest a near term low is in place.

December lean hogs closed up $0.05 at $54.47 today. Prices closed near mid-range today. Prices set a fresh contract low early on today. Hog bears still have the near term technical advantage, amid bearish cash market fundamentals. Prices are still in a three month old downtrend on the daily bar chart. There are no clues of a market low being close at hand.

February pork bellies closed down $0.85 at $83.80 today. Prices closed near mid-range and did poke to a fresh contract low. Bears still have the near-term technical advantage. Prices are in a six week old downtrend on the daily bar chart.

Paulson's Bazooka, Out Of Ammo

After weeks, well months of government "cures" for the market and the economy, we are pretty much right where we are started. The one thing that has done the American public any good is the "gas relief bill" that we wrote ourselves. Most of Washington is on vacation and obviously in no hurry to make any changes. They were sure in a hurry to put a lien on our grand childrens future before they took their fall recess.

Just get use to this market, it will be this way for some time. After more than a month of runs on the hedge funds just wait until retail customers get their statements for October, the runs on the Mutual Funds are just getting started.

I don't want to be negative but you have to be honest with yourself. I get emails from investors and traders everyday whose one thought is like that of a small child. Can we go now? Is It Safe to go in now? I admire Warren Buffett so much. But I thought he did the public such a dis-service writing in a major newspaper that "It's Time To Buy". Mr. Buffett joining the market cheerleaders is just wrong.

Am I saying "Go Short Young Man". I am not suggesting that to anyone that does not already have a short plan in place. But of course I will be shorting this market on every rally since that is where the trend is taking us. Especially the NASDAQ. The long term investors that are starting to buy are after large cap companies with great dividends and a great history of paying them. And the NASDAQ has very few of those.

Be careful at there, and don't poke your head out. You know what might happen!