Interest rates are beginning to take on a life of their own and we are seeing just how important perception can be in how the market moves. The Fed has not done anything that would alter inflows and outflows in recent months as it is the same amount of capital inflows attributable to them going in as before, but the fact that the rest of the market expects them to slow buying has forced many to get out ahead of the curve and in our opinion really crowded the trade. Our bet is that the Fed does not taper, not even a token taper in September and the fact that the market has reacted this way might force them to refrain from it through the end of the year. It might also be viewed as an opportunity to "punish some speculators" and keep those same market players from moving in a big way against fixed income securities in the future when the real tapering does start.
This should all be kept in mind, especially as interest rates and growth rates (think inflation) play key roles in how investors value such commodities as gold, silver, platinum and oil. Watching the SPDR Gold Shares (NYSEARCA:GLD) might be an interesting pursuit over the next month or so as this all plays out. It might even be a trade around decision time.
Chart of the Day:
Watch for gasoline prices to trend towards $3/gallon again as the holiday weekend approaches. Then we should see a retreat as the summer driving season winds down.
Commodity prices this morning are as follows:
- Gold: $1367.80/ounce, down by $2.30/ounce
- Silver: $23.035/ounce, up by $0.072/ounce
- Oil: $104.22/barrel, up by $0.37/barrel
- RBOB Gas: $2.9465/gallon, up by $0.0088/gallon
- Natural Gas: $3.487/MMbtu, up by $0.027/MMbtu
- Copper: $3.3595/pound, up by $0.053/pound
- Platinum: $1519.50/ounce, up by $0.40/ounce
General Moly (NYSEMKT:GMO) ,a company we have warned readers about since the man behind the company which had agreed to finance their $800 million+ project was locked up in China, finally terminated their agreement with Hanlong Mining Investment. Anyone who believed that this deal was going to be salvaged was fooling themselves and with yesterday's announcement (see press release here) the company is now free to work with others who may be interested in getting this project off of the ground. For readers who are speculators this might now be a viable stock, especially if there are other interested parties who want to invest in the Mt. Hope Project. It might be a tough sell in the current market as commodities have lost some of their draw with the events which have occurred since this previous agreement was entered into, but the upside could be big if the company can find favorable terms.
It has been a tough year to be a General Moly shareholder. With yesterday's announcement after the market close maybe it will get better for shareholders.
Source: Yahoo Finance
Oil & Natural Gas
We were faced with a choice between two good companies two days ago as the oil and natural gas stocks were getting hit. Our choice was whether to invest in PDC Energy (NASDAQ:PDCE) on the pullback or Rex Energy (NASDAQ:REXX), two names we are very bullish on. Based on the prices at that time and looking at what both offered we chose to purchase PDC Energy and wait for a more attractive entry point on Rex Energy in relation to the other names we keep on our buying wish list. Readers should remember that we seek value and many times we have a list with multiple names offering value but it is all relative. How does that value compare to other investment opportunities in regards to value, expected return and risk.
That was a decision made at that moment in time and right now we still have a small gain, even after yesterday's market volatility. On our list of attractive plays offering value we have seen Rex Energy climb and with yesterday's $1.01, or 4.75%) pullback to $20.25/share it is offering one of those pullbacks we have repeatedly told readers must be bought. It has worked all the way up to current levels from the $10/share level where we initially went extremely bullish on the name. One should continue to do that which has worked, and opening positions or adding to positions on pullbacks with Rex has most certainly been the way to play this for over a year.
Breaking above $8/share was key, but $10/share will provide plenty of resistance. Long-term we will probably see these levels again, which is why we recommend caution with these names.
Source: Yahoo Finance
Talk about momentum plays. Trina Solar (NYSE:TSL) has been on a strong run the past few sessions and with yesterday's rise of $1.15 (14.71%) to $8.97/share on volume of 17.3 million it has even this solar bear impressed. We have repeatedly warned our long-term minded readers to stay away from these names as it just does not seem viable when compared to other forms of power generation and the fact that over history these names tend to come and go quite quickly. With the solar names heating back up it is important to remember that this is a trader's market sector and not really an investor's. We always like to remind readers of this when the "going gets good" in the solar stocks.
Disclosure: I am long PDCE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.