Oil and gold continue to get hit, and we suspect that this shall be a developing trend of lower lows on a YTD basis for the two until Europe can figure out if they want to live in chaos or normalcy moving forward. Believe it or not, but as hard as commodities are getting hit, natural gas was actually up $0.01 yesterday and is now trading at $2.51. This all as the US Dollar Index is up big in the last five days, so big in fact that the past five days actually account for 1/6th of the index's gain over the past 12 months. It is never good when you have a dual threat to overcome and right now commodities have to face the headwinds of both a rising US $ and a slowing world economy - and that is a tough task to overcome.
Oil & Natural Gas
Chesapeake Energy (CHK) traded 65 million shares yesterday on news that their loan will actually be $4 billion rather than $3 billion. Investors were not pleased sending shares lower by $0.87 (5.61%) to close at $14.65/share. The company also had their debt downgraded and sticking with the trend of bad news, the company also set a new 52-week low of $14.31/share during trading yesterday. Also, there is no sign of Icahn yet.
We are most perplexed by the situation at SandRidge Energy (SD) as shares continue to fall heavily; shares fell $0.50 (7.46%) to close at $6.20/share yesterday. Volume was strong at 20 million but shares were down on the higher end of the spectrum when compared to peers in the industry. That is what you get with a high beta stock, you live by that and you get tortured by it too - it's the way of the markets. Not sure if it is good news or simply means that bad news is ahead, but we are not at or extremely close to a 52-week low here. Put whatever weight you want behind that last statement, but SandRidge is showing a bit of strength simply avoiding that nasty trend of setting lower new 52-week lows on a daily basis like many small E&P plays out there.
Patriot Coal (PCX) really put the hurt on the coal arena yesterday, ending the day at $3.94/share down $0.89, or 18.43%. The news which dragged the whole sector down was a revised sales outlook that the company issued in response to a potential default by a customer which was locked in a contract to pay higher prices than the current coal prices. This is not good for Patriot and could potentially signal bad news for the rest of the players, but one must remember that the industry sells a lot of their product to large companies with investment grade credit ratings. With that said, we still do not like the whole sector at these prices.
Alpha Natural Resources (ANR) had a big day on the heels of the Patriot Coal news setting a new 52-week low in the process. Volume shot up to two times normal at 26 million and shares finished the day at $11.92 down $1.24 (9.42%). The stock and the sector are still going lower, we remain on the sidelines regardless of what others think because up to this point we have be correct and we shall stick to our guns until we see evidence or data that suggest we change our thoughts.
We would like to bring to our readers' attention that Freeport-McMoRan (FCX) was down $1.65 (4.81%) to close at $32.65/share on volume of 23 million. That in itself is not important but the fact that it is now approaching the range where we said we would be buyers a few months ago is, and we want to adjust that today. Those comments were made when we figured the shares could trade this low based on Africa and Asian tax issues for the company, but with Europe and those issues now present we think that this is not the bargain it once was at these prices so we are taking that recommendation off the table today. If Europe is temporarily fixed again, our thinking will change again but this morning we would not have this on our watch lists to trade if it fell lower.