Posted by steve101 on 28th of Jan 2013 at 08:16 pm
We track market valuation figures and
use them as a metric for making calls about the overall state of
the market. As of last night's close, our overall market
overvaluation and overvalued by 20% or more figures have reaches
levels which have been correlated with market pull backs in the
past.
We now calculate that 61.67% of stocks
are overvalued and 24.2% of stocks are overvalued by 20% or
more.
Whenever we see levels in overvaluation
levels in excess of @ 60% for the overall universe and/or 27.5% for
the overvalued by 20% or more categories, we issue a valuation
watch. ValuEngine has issued a market valuation watch as of
today, January 28th.
This is a time for investors to keep a close eye and the
market and to consider booking some profits and perhaps hedging
against a move to the downside.
CHAPEL HILL, N.C. (MarketWatch) — The stock market is likely to be
higher at year’s end.
That, at least, is the conclusion I draw from the recent behavior
of corporate insiders, who are behaving in ways that suggest the
correction’s bottom is at hand.
Consider the latest insider data, courtesy of the Vickers Weekly
Insider Report, published by Argus Research. The indicator that
they calculate on which I place particular attention is a ratio of
all shares that insiders have recently sold in the open market to
the number that they have purchased.
For the week that ended last Friday, this sell-to-buy ratio stood
at 1.58 to 1, which is less than half the average level over the
last decade of 3.4 to 1.
At the bull-market high earlier this fall, in contrast, the
insiders’ sell-to-buy ratio got as high as 6.86 to 1.
In other words, at least when measured according to this indicator,
the insiders are more than four times more optimistic about their
companies’ shares now than two months ago. This much insider
enthusiasm is a good sign.
In fact, since the bull market that began in March 2009, there have
been just three occasions prior to now in which the sell-to-buy
ratio dropped below 2 to 1. Each came within a few weeks of a
significant low in the market.
The accompanying table shows the comparable sell-to-buy ratios that
prevailed during the weeks in which those lows were actually
registered. Notice that the current reading of 1.58 to 1 is lower
than two of those three comparable readings.
Week ending...
Vickers’ Sell-to-Buy Ratio
6/4/2012
1.67 to 1
10/3/2011
1.04 to 1
7/5/2010
1.83 to 1
When I last wrote about insiders’ behavior three weeks ago, I
interpreted their actions to suggest that — even though the
correction then underway was likely to be relatively shallow and
not the beginning of a major new bear market — the decline still
had more to go.
Read Oct. 31 column: Insiders providing a ray of sunshine.
Mark Hulbert is the founder of Hulbert Financial Digest in
Annandale, Va. He has been tracking the advice of more than 160
financial newsletters since 1980. Follow him on Twitter
@MktwHulbert.
The death of the traditional PC has been a major trend that has
overtaken the market in 2012. It came fast, and though many
analysts were skeptical that it could happen so suddenly, it has
wrought huge effects on the businesses involved.
Intel (NASDAQ:
INTC ), Dell (NASDAQ:
DELL ), Hewlett-Packard (NYSE:
HPQ ), Microsoft (NASDAQ:
MSFT ) and most certainly AMD (NYSE:
AMD ) have all felt the effects of the titanic shift in
the industry.
Shares of Intel slumped lower Monday morning, before later
rebounding (perhaps pulled higher by the rally in the broader
market). The company was halted in the premarket, as it announced
that its CEO would retire in May. Intel has yet to name a
successor.
Intel's CEO Paul Otellini has been on the job since 2005, so his
retirement might just be a normal, periodic transition in the
company's management. But given the company's recent performance,
traders may speculate that he might have been ousted. Shares of
Intel have shed about a third of their value since May, trading
down from near $30 to around $20.
Intel has been the dominant player in the PC chip business for
years. It formed the "tel" portion of the "Wintel" neologism.
However, as the demand for PCs has fallen -- PC demand is expected
to
decline by 1.2 percent this year -- demand for Intel's
chips has likewise declined.
AMD has faced similar problems, but to an even worse extent. AMD
competes directly with Intel in the chip department, but is a minor
player in both market share and size of the company. AMD shares
have dropped below $2, and there have been reports that management
could be entertaining thoughts of selling the company. AMD has shot
down those reports, but the collapse in AMD's shares is
undeniable.
Dell and HP, as the end-producers of Wintel machines, have likewise
suffered. Dell reported disappointing earnings last week, sending
shares briefly below the $9 mark.
HP is set to report earnings Tuesday afternoon. If Dell is any
indication, HP shareholders might anticipate more disappointment
late Tuesday.
Both HP and Dell have attempted to shift their business strategies
to avoid the secular trend, but evidently they haven't changed
quickly enough. Dell has tried to move into the enterprise sector,
shifting away from the consumer sales business.
Meanwhile, HP has also tried to reinvent itself, naming Meg Whitman
CEO in the fall of 2011. Whitman's predecessor, Leo Apotheker,
planned to spin-off HP's PC business; Whitman cancelled that
plan.
Then there is, of course, the company at the heart of the PC
market: Microsoft itself.
In October, Microsoft released Windows 8 -- the most ambitious
redesign of its dominant operating system in at least 17 years.
Windows 8 attempts to go where no one has gone before: create an
operating system that's equally as good on a touch screen as it
being controlled with a mouse and keyboard.
With this design, Microsoft has made it clear that it realizes the
attractiveness of the mobile space. Windows 8 is still very much a
PC operating system, but Microsoft has gone out of its way to cater
to the mobile market.
With the Technology sector getting crushed lately, many are
wondering why. One reason may be the fact that it has so much
international revenue exposure.
Yearly members have access to our
International
Revenues Database, which shows the percentage of revenues that
each stock in the Russell 1,000 gets both domestically and outside
of the US. We calculated the average international revenue
exposure for each stock by sector and graphed the results below.
As shown, the average stock in the entire Russell 1,000 gets
29.8% of its sales outside of the US. The average Technology
sector stock, however, gets 53.7% of its sales outside of the US.
With European and Asian growth concerns front and center
these days, it's no surprise that the sector with the most exposure
to these parts of the world is taking the biggest beating.
Posted by steve101 on 26th of Sep 2012 at 08:11 pm
Figure 3 is a weekly chart of the
SP500. The indicator in the lower panel measures all the assets in
the Rydex bullish oriented equity funds divided by the sum of
assets in the bullish oriented equity funds plus the assets in the
bearish oriented equity funds. When the indicator is green, the
value is low and there is fear in the market; this is where market
bottoms are forged. When the indicator is red, there is complacency
in the market. There are too many bulls and this is when market
advances stall. Currently, the value of the indicator is 71.73%.
Values less than 50% are associated with market bottoms. Values
greater than 58% are associated with market tops. It should be
noted that the market topped out in 2011 with this indicator
between 70% and 72%.
QE – infinity is the wow factor of last week’s announcement, but
it really isn’t anything new. Ever since QE2 came on the
radar screen back at Jackson Hole 2010, the Fed has been
implementing some sort of liquidity operation nearly 90% of the
time. Starting with the
expectationof QE2 back in August, 2010, the markets have
been focusing on and influenced by QE in some form or
another. QE – infinity didn’t start last week. It
started in August, 2010, and it has been with us for 97 out of the
last 108 weeks. The only difference between last week’s QE3
announcement and the past 2 years is that the Fed is acknowledging
that QE will be open ended even though it has been essentially open
ended for the past 2 years anyway.
The next figure is a weekly chart of the SP500. The yellow
vertical line is Jackson Hole 2010 when Ben Bernanke hinted at
QE2. The green vertical line is the actual FOMC meeting where
the Fed announced a $600 billion program to purchase
Treasurys. The red line is the completion of that program
(QE2) in June, 2011. Then the markets went 11 weeks without
any kind of intervention or liquidity operation. Oops!
That wasn’t such a good idea. September, 2011 brought us
Operation Twist (the dark gray vertical line) and June, 2012 saw
the extension of that program (the light gray vertical line).
The green vertical line is Jackson Hole 2012. The blue
vertical line is the start of QE3.
Posted by steve101 on 10th of Aug 2012 at 08:42 pm
The market is in a triple zigzag
pattern. This is the preferred count. In this count the upside is
very limited. If this is the correct count the market is likely to
complete the 5th wave by Wednesday at the latest, possibly as early
as Monday. If the SPX makes a new high about 1422, that would set
up an expanded megaphone pattern on the monthly chart, which we
would view as very bearish. The sentiment data supports a PRIMARY
WAVE TWO top, just as we saw when it hit 1440 in 2008. NDX timers
are aggressively long.
Management sentiment is high and
confidence in continuation of the up move is high. The AAII bull
ratio shows individual investors have rebounded from 34% bulls to
57% which is in the range seen in the 2008 PRIMARY 2 high. The VIX
closed at 14.74 right on the downtrend line showing complacency.
PRIMARY WAVE 3's aggressively gap down due to some kind of external
event (Europe?, Bank crisis?) and trend aggressively to the
downside giving up hard fought gains that took months to achieve in
a matter of days.
I have to
say that I just did a google search since I didn't see Terry's
update recently and discovered your note. I am so glad he found you
before he passed away, so that you may continue the legacy he
established. I began following Terry around 2008, so about five
years, and I poured through his archives at the time. I remember
being astonished when he referred to you and posted the SLV charts
you had sent him. It was clear then that, like Marty Schwartz you
had carried his ideas forward, but unlike Marty, there was an
educational bone in you that wanted to share your discovery with
others versus focus on using it solely to enrich yourself. I tried
so hard to be able to go to your joint Nantucket seminar, and was
frustrated that my trip was thwarted by the strong re-emergence of
the Lyme disease I had picked up on the Vineyard. I am feeling
considerably better now, and actually put a lot of time into
researching the disease and creating manuals for the libraries to
assist people with this chronic illness in getting better. And that
is where my time went since last summer.
The emails I
exchanged with him were a source of pride for me, because I knew
Terry didn't bother to respond to people who wasted his time, and
didn't have some thought behind a comment or question or
interesting information to share. I am deeply saddened by his
death. I loved him and his professorial warmth, similar to Dean
LeBaron, of Batterymarch fame, who wowed me when he spoke at the
Harvard Business School back in the late 1980's, and wowes me still
on his blog. Terry you wowed me right to the end. Parker, I believe
you will admirably fill his shoes and make him look down and feel
proud that he found you, when he sees you moving things forward.
Posted by steve101 on 20th of Jun 2012 at 10:09 am
With regard to the Federal Reserve, we do expect further monetary
interventions, but doubt that further intervention will
substantially stabilize, much less reverse, the
Goat
Rodeo of challenges that the economy faces. Specific
options, in order of likelihood, are a) re-opening dollar swap
lines to increase the ability of European banks to access liquidity
in the form of U.S. dollars; b) extending the length of the "Twist"
program (whereby the Fed has sold much of its short duration
holdings and replaced them with longer maturity Treasuries) by 3-6
months; c) "sterilized" QE3, whereby the Fed would purchase
long-term Treasury securities, but require the proceeds to be held
as reserve balances on deposit with the Fed. At close to 18 cents
of base money per dollar of nominal GDP, and core inflation still
running well above 2%, there is not much likelihood of massive,
unsterilized quantitative easing. But I doubt that anything short
of that will be satisfying to investors.
CHAPEL HILL, N.C. (MarketWatch) — Contrarians
believe that a correction in excess of 10% is unlikely anytime
soon.
That’s because there is little evidence of the stubbornly held
bullishness that is the typical hallmark of major tops. Investors
may worry about a replay of the serious market breaks that began in
each of the last two years around this time of year, but at least
from a sentiment perspective, there is little similarity.
Get Your Natural Gas Shopping List Ready: Eric Nuttall
TICKERS: ARX, ECA
Source: George S. Mack of
The Energy Report (4/19/12)
Natural
gas is cheap, but it's going to get cheaper. Eric Nuttall, lead
portfolio manager of the Sprott Energy Fund, expects the bottom to
fall out of the natural gas market as soon as this summer. But he's
not all doom and gloom. In fact, he argues that natural gas is
about to give investors the buying opportunity of the decade. In
addition, Nuttall forecasts spectacular growth for oil-weighted
juniors. In this exclusive interview with
The Energy Report, he urges investors to get their shopping lists ready for a
massive sale in natural gas names.
The Energy Report:Eric, in your Q411 market commentary for Sprott Energy
Fund, you describe 2011 as a challenging year. What made the market
so difficult for investors?
Eric Nuttall:There were several factors: First,
the weather failed to cooperate in Canada, where we had a very
extended breakup in southeast Saskatchewan. We had epic levels of
rainfall. We also had raging forest fires in parts of Alberta. The
weather led to a low level of activity for much of the first half
of 2011, and many companies struggled to fulfill their capex
programs and meet their production targets. Natural gas pricing was
very weak, which is something that I expect for the remainder of
2012. Meanwhile, equity markets were very volatile. There were many
different factors, all of which oil and gas companies had to
contend with.
TER:You commented that despite the fact that, for
the first time in history, the price of Brent crude oil averaged
more than $100 per barrel (/bbl) during 2011, oil stocks
languished. What was the issue here? Are markets fearful of
negative global macroeconomic events?
EN:In a word, yes. European debt issues captivated
the public's attention for much of 2011, specifically worries about
Italy, Portugal, Spain and most obviously Greece. Today, those
fears seem to have abated somewhat, but there's still a tremendous
level of uncertainty. I think there's lingering psychological
trauma from 2008 and 2009 that encourages people to approach the
market from a fear-driven mode as opposed to a greed-driven mode,
meaning the appetite for risk is very low. You can see that in
mutual fund industry money flows, where the only funds that are
really garnering large cash inflows are dividend- or yield-oriented
funds. That indicates retail investors are still worried we'll have
some unexpected event that will lead to a selloff similar to the
one markets experienced in 2008 and 2009. Most people simply can't
afford to endure another one of those.
TER:Let's shift our focus to oil price action. Oil
is up about 3–5% over the past 12 months, but it's basically flat.
Is this a period of consolidation? What does that mean for
equities?
EN:It is a period of consolidation, and share
prices today reflect that industry environment. Many stocks have
descended well over 20% within the past two months. We've
experienced a sharp selloff even though oil prices have remained
very strong, and it feels like the market is oversold despite
strong fundamentals. Although we had a poor U.S. employment number
for March, I think people missed out on the operative word, which
is "growth." Gross Domestic Product growth in China may be slowing
to 7.5%, but by my math that still portends an approximate 400,000
barrel per day (400 Mbblpd) increase in oil demand.
Nonetheless, some midcap stocks with market caps of under $1
billion (B) are growing production by over 50% with cash flow
margins of over 50% and solid balance sheets. Yet they are trading
under four times their enterprise value, which is very cheap. These
strong underlying fundamentals and extraordinarily inexpensively
priced stocks present a bit of a dichotomy.
TER:You've discussed general market sentiment, but
what is your outlook? Are you bullish over the next 12–18 months?
EN:Yes I am. The world economy continues to grow,
and the world oil market remains tight. We're eating through
worldwide capacity, including some of OPEC's vapor barrels.
TER:Speaking of OPEC, political tensions between
the U.S. and Iran seem to have created a premium in oil. Electoral
politics further elevate these tensions. Could this result in a
selloff in the period leading up to the November 2012 election?
EN:I would agree that there seems to be a
political risk premium of around $15–20 built into the current oil
price, although supply is in fact down about 800 Mbblpd since Iran
sanctions were put in place. But as far as how the election may
affect price action, my crystal ball isn't that clear.
TER:Do you expect your sub-$1B market cap
companies to continue their pace of 50% production growth?
EN:Without question. Many companies have put on
some hedges, and I'm a big proponent of that because investor risk
tolerance has decreased since the 2008–2009 period. Hedging used to
be a negative stigma for junior oil producers, the rationale being
that if the price of oil went above their hedges, they'd be
penalized; and if the price of oil dropped, the share price would
still go down despite the protection of the hedges. In today's
environment, people are more comfortable if an element of cash flow
has been protected so that capex programs are guaranteed
irrespective of the underlying commodity price.
That said, I'm looking at many of these companies that are
sitting on 10–15 years of drilling inventory, and in parts of
Canada they can get 5% royalty incentives for upwards of the first
60–80+ Mbbl oil produced, depending on the well. The first couple
of years can be wildly economic. The situation is that there is a
strong commodity price, and for companies with hedging in place and
extended drilling inventory for 10, 15 or even 20 years, the
outlook of that growth rate is well maintained.
TER:So is this the sweet spot in energy right now?
EN:That's a good question because it leads me to
my current strategy. Even with the risk premium for oil prices we
discussed, I feel that fundamentals will remain strong. Thus, I
want to be invested in oil through the subset of roughly
$300M–1B-market cap stocks that have been severely penalized in
spite of the very strong price of oil in Canada.
With natural gas, however, the fundamentals are
extraordinarily weak, and the outlook for the next several quarters
looks bleak. I expect this summer to be extraordinarily volatile
and weak for natural gas stocks. I don't think people appreciate
just how terrible the current situation is and what's likely coming
in the next couple of quarters. This summer, I expect the market to
reach a point of maximum pessimism, with Canadian gas pricing below
$1 per thousand cubic feet (/Mcf) and U.S. pricing below $2/Mcf. In
a scenario of maxed-out physical storage, natural gas could become
a no-bid. I think storage levels both in the U.S. and Canada will
fill, and that may lead to a massive selloff. Ultimately, that
could potentially lead to the investment opportunity of a decade.
TER:You're talking about classic economic theory,
where a no-bid would halt production and a rebound would eventually
follow.
EN:Yes. What's happened is that we've had the
warmest winter in about 60 years. It's been an incredibly hot
winter, which has led to very little heating demand in conjunction
with, for a number of reasons, high levels of production. With
demand so low, supply continues to increase, and now we are at a
900 billion cubic feet surplus, which is unbelievably shocking.
Canadian storage today is around 83% full and we haven't even
started the injection season yet. All things considered, it's just
a terrible outlook for the next couple of quarters. And yet when
you look at these natural gas stock prices, they're expensive. Even
at a higher gas price, I still think the stocks are overvalued. I
would not be surprised to see a selloff of another 10%, 20% or 30%
in many of these names.
TER:How do you interpret rumors of possible Asian
demand for Canadian natural gas, an eventuality many analysts are
hinting at? For example,
Bloombergrecently reported that the CEO of Malaysian,
state-owned Petroliam Nasional Bhd (Petronas) says he wants to make
a $5B Canadian acquisition in the next three months in order to
secure natural gas supplies for Asia.
EN:In that case, I think people are
misinterpreting what the gentleman meant. If you were sitting in
his seat, the least logical thing to do if you're planning a
corporate acquisition would be to foreshadow your move. What I
think he meant is that he intends on forming a joint venture (JV)
agreement with a company, such as an
Encana Corp. (ECA:TSX; ECA:NYSE). I see the $5B
number he mentioned was more of a reference to drilling costs; I'd
be surprised if it referred to an outright corporate acquisition.
There's a tremendous amount of product on the market right now, and
given how capital-constrained many of these natural gas companies
are today, the JV is a more likely scenario. Companies like
ARC Resources Ltd. (ARX:TSX)and EnCana are
aggressively looking for partners to assist them on drilling.
TER:Asian demand aside, what catalysts should
investors be watching for if they want to participate in the
possible buying opportunity in natural gas you discussed earlier?
EN:That's a great question. One may have to be
patient, but the potential returns will incentivize being patient
in terms of your investment time horizon. First of all, we'll
likely have to wait for winter to get a sense of what the heating
demand is for next year. Continued decreases in the natural
gas-directed rig count would be another indicator. Finally,
capitulation by investors in these stocks as they fall
precipitously on very large volumes and in large blocks would be a
key catalyst. People will just throw in the towel. The ultimate
catalyst may even be gas going no-bid, when things frankly could
not get any worse.
TER:Rock bottom, in other words. Do you have any
closing thoughts?
EN:In summary, I would say the underlying
fundamentals for oil remain strong, assuming the world doesn't slip
into a global recession, which I think is very unlikely. Stocks
have been extraordinarily weak over the past couple of weeks and
months, but if one can be patient, these stocks represent a very
good opportunity. As for natural gas, there will be a selloff in
equities in the next couple of quarters, and investors need to have
their shopping lists ready because these names are going to go on
sale.
TER:Thank you, Eric. I enjoyed this very much.
EN:Likewise. Thank you.
Eric Nuttallis a portfolio manager with Sprott
Asset Management (SAM). He joined the firm in February 2003 as a
research associate and was subsequently promoted to research
analyst in 2005, associate portfolio manager in 2008 and then to
portfolio manager in January 2010. He is co-manager of the Sprott
Energy Fund along with Eric Sprott, and also co-manages the Sprott
2010 Flow-Through Limited Partnership with Allan Jacobs. In
addition to his responsibilities for those two funds, Nuttall
supports the rest of the Sprott portfolio management team by
identifying top-performing oil and gas investment opportunities.
Further, he contributes towards internal macro energy forecasts,
and his insight into emerging unconventional plays has been covered
in several financial publications such asThe Wall Street
Journal, Asia
andBarron's.
Nuttall graduated with high honors from Carleton University
with an Honors Bachelor of international business.
For those of you who have been watching the price chart of
natural gas… that probably seems strange. As you can see in the
chart below, the price of natural gas has been trending down for
years…
What explains the historic and dramatic collapse of natural
gas prices? As you'll recall from our extensive reporting over the
years, a series of innovations – horizontal drilling and hydraulic
fracturing (or "fracking") – has led to huge new oil and gas
discoveries in areas (usually below 5,000 feet) impossible to tap
economically. The result has been a flood of new supply – supplies
many, many experts believed would never be exploited.
In 1995, the U.S. produced just a little more than 23.7
trillion cubic feet of gas. That rate of production stood
essentially unchanged for more than a decade. Even as late as 2006,
we were still only producing 23.5 trillion cubic feet of natural
gas. You will recall the doomsters talking about "peak oil" – the
view that domestic production of hydrocarbons would never increase.
But starting in 2007, production began to soar, reaching more
than 26.8 trillion cubic feet in 2010 and 28.6 trillion cubic feet
in 2011 – a 22% increase over 2006. Demand for energy rarely grows
much faster than the economy as a whole. Our economy has been
mostly stagnant since 2007, which means natural gas supply in the
U.S. has vastly outpaced demand.
The same trends of increased production are occurring in many
places in the world. Globally, the supply of natural gas has
increased from around 96 trillion cubic feet in 1995 to more than
141.6 trillion in 2010 (the latest data available). That's almost a
50% increase.
And these vast new global supplies form the foundation for
the single biggest current opportunity in the natural gas
boom.
For most investors, the opportunity unfolding in natural gas
will be one of the best investment opportunities of the next
decade.
I know that my enthusiasm for natural gas is unusual in a
financial world driven by day-traders, chart-readers,
momentum-followers, and other types of financial astrologers. But
my rationale is far easier to understand than the mumbo jumbo I
frequently see posited as financial advice…
I prefer to buy high-quality assets when they're trading for as
close to free as possible.
And right now, natural gas is so cheap that many companies
are simply flaring it off – they're burning it – rather than
bothering to pipe it across the country and sell it. Not only that,
but right now, you can buy natural gas reserves in the stock market
for
free.
And wouldn't you know it… just as the price of natural gas
has fallen far below its cost of production, Wall Street is
suddenly interested in shorting it. A recent headline in the
Wall Street Journalsays it all: "As Natural Gas Cools,
Trading Sizzles." The article quotes Sid Perkins, a natural gas
broker in Houston: "Over the past month, we have actually seen much
more interest from traders and funds than at any point over the
past year
." Daily trading volume of natural gas futures is up 31%
over last year on the Chicago Mercantile Exchange. Total open
interest on the New York Mercantile Exchange is up 20% over last
year. Most of the big firms are shorting.
Sooner or later, the price of natural gas will rebound
sharply… and not just because it always has in the past. What will
propel natural gas prices over the medium term (say, five years) is
an economic truism: It's impossible for a surplus of
energyto exist for long. As prices fall, more and more
uses for natural gas will appear. At some price, natural gas
becomes competitive with other forms of energy.
A barrel of oil has 5.825 million British thermal units (Btu)
of energy. (Btu is the standard measure of energy content across
fuel types.) One thousand cubic feet (MCF) of gas contains just a
little more than 1 million Btu – approximately a 6:1 relationship.
Thus, on an energy-equivalent basis, you might expect natural gas
to trade for one-sixth the price of oil – or about $16 per MCF
today.
But of course, oil is more highly prized as a fuel source
because it's more easily portable and thus a better fuel for
transportation. Historically, the rule of thumb was that natural
gas would generally trade about one-tenth the price of oil. That
would imply a natural gas price today of about $10 MCF.
As you probably know, natural gas now trades for less than $2
per MCF, a price that's lost all relationship with its utility in
the world's economy. There's no reasonable fundamental explanation
for the size of the spread between oil prices and natural gas
prices. Natural gas is trading at the
lowestprice I've ever seen compared to the price of oil.
There are few things in life I know with certainty… But I know
this:
Barring the end of the world, the price of oil is going to fall
and the price of natural gas is going to rise.
The big problem with the natural gas markets isn't that
there's too much gas. You really can't have too much energy. People
will always consume it, if it's cheap enough.
The real problem with the natural gas markets is there's no
global distribution.
While the global economy has grown over the last decade
(creating new demand for energy)… and natural gas supplies have
soared… our ability to
transportnatural gas hasn't grown enough to equalize the
global markets. That's why gas is so cheap in the U.S., but so
expensive in Asia and Europe.
We have some parts of the world with far too much gas… and
some parts of the world with far too little gas. Given the
economics, I believe the best and surest way to profit is likely to
be from owning the liquefied natural gas (LNG) tankers that will
distribute natural gas to markets around the world. There's going
to be a huge boom in these ships, which are expensive to build and
operate.
So instead of focusing on the gas production companies… I
think investors should focus on the distribution end – the LNG
shipping companies. Fortunes will be made as entrepreneurs and
investors build the ships and pipelines necessary to take advantage
of the higher price of LNG across the world's markets.
It's not going to happen overnight… but years down the road,
there will eventually be a large, global distribution system for
natural gas. Prices around the world will converge. And those
holding the best distributions assets will make a fortune.
Good investing,
Porter Stsnberr
y
THIS GREAT ENERGY BARGAIN KEEPS GETTING CHEAPER…
The "oil-to-gas" ratio continues to soar to extraordinary
highs…
Regular
DailyWealthreaders know how new drilling technologies have
allowed us to access huge new supplies of domestic natural gas.
This supply surge has pushed gas to
bargain-basement levels.
Like its energy cousin oil, natural gas has many uses. It's
used as a building block to make chemicals, fertilizers, and
plastics. It's also used to fire power plants and heat homes and
factories.
And it's becoming widely used as a
motor fuel.
Over the past year, we've shown you how falling natural gas
prices have produced a series of new highs in the oil-to-gas ratio.
This ratio compares the cost of oil versus natural gas.
Years ago, this ratio drifted between six and 10. Sometimes,
the ratio would even spike to 14, which indicated really cheap
natural gas. In January, the ratio spiked to 35… then it spiked to
47 in March… and just this week, the ratio struck another all-time
high of 52.
We state again: U.S. natural gas is the greatest energy
bargain on the planet… and it's becoming one of America's greatest
economic strengths.
The chart below
shows the cumulative advance-decline (A/D) line for the S&P 500
over the last twelve months. The cumulative A/D line is
simply a running total of the daily number of net advancers (number
of stocks up in a day minus number of stocks down) in the S&P
500. At the end of March, the cumulative A/D line hit new
bull market highs but then pulled back after the calendar turned to
April. In the last few days, though, the cumulative A/D line
has rebounded after falling slightly below its low from early
March. If today's rally holds, the cumulative A/D line will
have made a short term higher high, setting the stage for a run to
prior bull market highs.
The charts below
show the cumulative A/D line for all ten S&P 500 sectors, and
just like the overall market, they have all pulled back from their
bull market highs with varying degrees of magnitude. One
glaring standout, however, is the Energy sector. While the
nine other sectors are within close range of their bull market
highs, the energy sector has been decimated. It is now the
only sector with a negative cumulative A/D line over the last
twelve months.
Based on the aggregated intelligence of 180,000-plus investors
participating in
Motley Fool
CAPS, the Fool's free investing community, natural gas-focused
explorer
Ultra Petroleum(
NYSE:
UPL) has earned a coveted
five-star ranking.
With that in mind, let's take a closer look at
Ultra's business
and see what CAPS investors are saying about the
stock right now.
On CAPS, 97% of the 1,476 members who have rated Ultra believe the
stock will outperform the S&P 500 going forward.
A
few weeks ago, one of those bulls, fellow Fool Buck
Hartzell (
TMFBuck),
tapped Ultra as a particularly timely opportunity:
Gas is at $2.50 and it's been down for sometime. I believe if it
stays down demand will increase vs. oil etc. Why would you pay $4
per gallon when you can run a car on natural gas and pay $1 per
gallon? If demand doesn't pick up, supply will eventually go
offline. [Ultra] is very profitable at $5 gas, which I think we'll
see in not too long.
Capping a new opportunity The conga line of green tech failures is growing longer, but
I don't expect
Capstone Turbineto
join them. Particularly since it's betting on
oil and gas companies to become an important component of
its growth plans.
Oil and gas drillers use its microturbines to power their rigs in
remote areas, and its 1,000-kilowatt unit microturbines are
well-suited for utility substations and larger commercial and
industrial facilities. It recently sold its first such unit to an
unnamed oil and gas producer, and just sold two more orders
totaling approximately 10 megawatts in the Eagle Ford shale play.
The turbines generate low-emission electricity onsite to power the
plants' pumps and infrastructure systems instead of flaring the
waste gas produced as a byproduct of the drilling process.
The natural gas industry is giving off conflicting signals these
days. Many drillers, like
Ultra Petroleum (
NYSE:
UPL) and
Qwiksilver Resources (
NYSE:
KWK) , are
cutting back on production, but vertical rig counts have
started inching up again (horizontal rigs, which moved up last
week, fell again) and inventories remain at record levels.
Capstone points to wins in the Eagle Ford and Marcellus regions, as
well as those made in remote oilfields in Russia and Africa, as
proof the energy sector will be its biggest growth driver. With 94%
of those rating Capstone on CAPS expecting it to outperform the
market averages, it seems they're looking for oil and gas companies
to power its future, too.
Joe interviews Paul to find out what
stock he'd like to own. Paul's pick is
Range Resources, a low-cost natural gas producer with a
commanding position in the Marcellus shale, along with other
liquids-rich plays. While investors would probably do OK over
the
long term even at today's price, Paul prefers to wait for
a pullback to buy this great company. The long term future is
bright.
Range Resources Corporation 's (
RRC ) first quarter 2012 production volume experienced a
20% improvement from the year-earlier period, mainly on the back of
sustained accomplishment from the company's drilling
program.
The company's first quarter production averaged 655.5 million cubic
feet equivalent per day (MMcfe/d), comprising 78% natural gas, 16%
natural gas liquids (NGLs) and 6% oil. Oil production expanded 36%,
NGL rose 20% and natural-gas production increased 19% on a
year-over-year basis. Range's high liquid-rich spending level was
responsible for the relative increase in oil and natural-gas
liquids production.
In April last year, Range sold all of its 52,000 acre Barnett Shale
properties for $900 million in order to focus on its Marcellus
Shale assets. Excluding the impact of the sale, production would
have risen 50%.
For the first quarter, Range's total price realization, on a
preliminary basis (including the effects of hedges and derivative
settlements) averaged $5.19 per Mcfe, down 14% year over year. The
overall price comprised NGL at $46.20 per barrel,
crude
oil at $83.54 a barrel and natural gas at $4.01 per Mcf.
In February, Pennsylvania imposed stringent regulations and charges
for natural gas drilling after drillers were blamed for the
contamination of local water supplies. The new law entails a flat
annual impact fee on shale gas producers. Hence, in the first
quarter of 2012, Range Resources expects company-wide production
taxes of $13.6 million in total. Additionally, the company will
also witness a one-time expense of about $24 million in the
upcoming quarter, based on the required payment for wells drilled
last year and in the previous years.
Range Resources displays a diversified high-quality asset base
across the low-risk/long-reserve Appalachian assets and
large-volume/rapid-payout Gulf Coast properties. Given a dominant
presence in the Marcellus Shale play, we believe that the large
acreage holdings will support several years of
oil
and
gas drilling in the fast-growing fields. The company remains
well on track to reach its 2012 production growth target of 30% to
35%.
The company is seeking to ramp up the output of NGLs (such as
ethane, propane and butane) and oil, which are better price takers
than natural gas. In a low natural gas price environment, Range
Resources' record production, declining unit costs and the sale of
non-core properties will be beneficial over time.
However, considering the company's exposure to volatile natural gas
fundamentals, interest rate risks and the uncertain macro backdrop,
we maintain our long-term Neutral recommendation. Headquartered in
Fort Worth, Texas, Range Resources competes with
EQT Corporation (
EQT ),
SM Energy Company (
SM )
and
Ultra Petroleum Corp. (
UPL )
The community is delayed by three days for non registered users.
ValuEngine issues market watch today. Their model indicates risk of significant pullback now high
Posted by steve101 on 28th of Jan 2013 at 08:16 pm
Most telling chart I've seen in months. Not timing oriented, but if you had to choose long or short with all your capital after seeing this. Which would you choose?
Posted by steve101 on 4th of Dec 2012 at 11:26 pm
Insider behavior points to imminent rally
Posted by steve101 on 21st of Nov 2012 at 12:12 pm
MARK HULBERT Archives | Email alerts
Nov. 21, 2012, 8:02 a.m. EST
Insider behavior points to imminent rally
Commentary: Insiders buying more, selling less
Stories You Might Like
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — The stock market is likely to be higher at year’s end.
That, at least, is the conclusion I draw from the recent behavior of corporate insiders, who are behaving in ways that suggest the correction’s bottom is at hand.
Consider the latest insider data, courtesy of the Vickers Weekly Insider Report, published by Argus Research. The indicator that they calculate on which I place particular attention is a ratio of all shares that insiders have recently sold in the open market to the number that they have purchased.
For the week that ended last Friday, this sell-to-buy ratio stood at 1.58 to 1, which is less than half the average level over the last decade of 3.4 to 1.
At the bull-market high earlier this fall, in contrast, the insiders’ sell-to-buy ratio got as high as 6.86 to 1.
In other words, at least when measured according to this indicator, the insiders are more than four times more optimistic about their companies’ shares now than two months ago. This much insider enthusiasm is a good sign.
In fact, since the bull market that began in March 2009, there have been just three occasions prior to now in which the sell-to-buy ratio dropped below 2 to 1. Each came within a few weeks of a significant low in the market.
The accompanying table shows the comparable sell-to-buy ratios that prevailed during the weeks in which those lows were actually registered. Notice that the current reading of 1.58 to 1 is lower than two of those three comparable readings.
When I last wrote about insiders’ behavior three weeks ago, I interpreted their actions to suggest that — even though the correction then underway was likely to be relatively shallow and not the beginning of a major new bear market — the decline still had more to go. Read Oct. 31 column: Insiders providing a ray of sunshine.
• Bernanke: Cut a deal to avoid the fiscal cliff
• GOP senator says he'll break no-tax pledge
• What a fiscal-cliff plunge would cost you
• Greenspan: Markets will crater if cliff talks fail
• Rex Nutting's plea: Stop calling it a fiscal cliff
• Robert Powell: Retiring on fiscal cliff's edge
• Clinton: U.S. budget deal vital to global role
• Wal-Mart eyes fiscal cliff in earlier dividend
Based on how they have behaved since then, I would conclude that there is now a good possibility that a tradeable rally is imminent.
Click here to learn more about the Hulbert Financial Digest.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980. Follow him on Twitter @MktwHulbert.
article posted yesterday talks about intel, and AMD
Thoughts on INTC? Seems to be nearing support levels.
Posted by steve101 on 20th of Nov 2012 at 02:33 pm
2012: The Year the PC Died
Article Tools:
Referenced Stocks
The death of the traditional PC has been a major trend that has overtaken the market in 2012. It came fast, and though many analysts were skeptical that it could happen so suddenly, it has wrought huge effects on the businesses involved.
Intel (NASDAQ: INTC ), Dell (NASDAQ: DELL ), Hewlett-Packard (NYSE: HPQ ), Microsoft (NASDAQ: MSFT ) and most certainly AMD (NYSE: AMD ) have all felt the effects of the titanic shift in the industry.
Shares of Intel slumped lower Monday morning, before later rebounding (perhaps pulled higher by the rally in the broader market). The company was halted in the premarket, as it announced that its CEO would retire in May. Intel has yet to name a successor.
Intel's CEO Paul Otellini has been on the job since 2005, so his retirement might just be a normal, periodic transition in the company's management. But given the company's recent performance, traders may speculate that he might have been ousted. Shares of Intel have shed about a third of their value since May, trading down from near $30 to around $20.
Intel has been the dominant player in the PC chip business for years. It formed the "tel" portion of the "Wintel" neologism. However, as the demand for PCs has fallen -- PC demand is expected to decline by 1.2 percent this year -- demand for Intel's chips has likewise declined.
AMD has faced similar problems, but to an even worse extent. AMD competes directly with Intel in the chip department, but is a minor player in both market share and size of the company. AMD shares have dropped below $2, and there have been reports that management could be entertaining thoughts of selling the company. AMD has shot down those reports, but the collapse in AMD's shares is undeniable.
Dell and HP, as the end-producers of Wintel machines, have likewise suffered. Dell reported disappointing earnings last week, sending shares briefly below the $9 mark.
HP is set to report earnings Tuesday afternoon. If Dell is any indication, HP shareholders might anticipate more disappointment late Tuesday.
Both HP and Dell have attempted to shift their business strategies to avoid the secular trend, but evidently they haven't changed quickly enough. Dell has tried to move into the enterprise sector, shifting away from the consumer sales business.
Meanwhile, HP has also tried to reinvent itself, naming Meg Whitman CEO in the fall of 2011. Whitman's predecessor, Leo Apotheker, planned to spin-off HP's PC business; Whitman cancelled that plan.
Then there is, of course, the company at the heart of the PC market: Microsoft itself.
In October, Microsoft released Windows 8 -- the most ambitious redesign of its dominant operating system in at least 17 years. Windows 8 attempts to go where no one has gone before: create an operating system that's equally as good on a touch screen as it being controlled with a mouse and keyboard.
With this design, Microsoft has made it clear that it realizes the attractiveness of the mobile space. Windows 8 is still very much a PC operating system, but Microsoft has gone out of its way to cater to the mobile market.
Read more: http://community.nasdaq.com/News/2012-11/2012-the-year-the-pc-died.aspx?storyid=191244#ixzz2CnE9EO6Y
What the three peaks and a domed house guy is saying
Posted by steve101 on 8th of Nov 2012 at 09:34 pm
down
Here is a daily bar chart of the cash S&P 500 going back to the start of 2012.
Last week the market rallied to kiss its 50 day moving average (black wavy line) and then dropped to new lows for the move down which began from the September 14 top. As you know I think this market is headed down at least into the 1310-20 zone where the current drop would equal the size of the March-June 2012 drop (blue dash rectangles).
However a drop that low would put the S&P well under its 200 day moving average (red wavy line). Since the bull market had already lasted 42 months at the September high such a down side penetration of the 200 day moving average has bearish implications. In this situation I would expect the drop to 1310-20 to be followed by a rally which would carry the S&P back to its 200 day and to its 50 day moving averages.But after that rally I would expect the market to continue lower.
A drop as big as the 2011 drop would carry the S&P down to 1170-90. George Lindsay's three peaks and a domed house formationhas been a good context within which to interpret the market's action for nearly two years now. The downside target for the 3pdh is the October 2011 low near 1080.
International Revenue Exposure Hurting Technology?
Posted by steve101 on 10th of Oct 2012 at 10:23 am
International Revenue Exposure Hurting Technology?
With the Technology sector getting crushed lately, many are wondering why. One reason may be the fact that it has so much international revenue exposure.
Yearly members have access to our International Revenues Database, which shows the percentage of revenues that each stock in the Russell 1,000 gets both domestically and outside of the US. We calculated the average international revenue exposure for each stock by sector and graphed the results below. As shown, the average stock in the entire Russell 1,000 gets 29.8% of its sales outside of the US. The average Technology sector stock, however, gets 53.7% of its sales outside of the US. With European and Asian growth concerns front and center these days, it's no surprise that the sector with the most exposure to these parts of the world is taking the biggest beating.
Money in Leveraged long funds last friday hit an extreme only seen one other time in last 15 years
Posted by steve101 on 26th of Sep 2012 at 08:11 pm
Figure 3 is a weekly chart of the SP500. The indicator in the lower panel measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall. Currently, the value of the indicator is 71.73%. Values less than 50% are associated with market bottoms. Values greater than 58% are associated with market tops. It should be noted that the market topped out in 2011 with this indicator between 70% and 72%.
Figure 3. Rydex Total Bull v. Total Bear/ weekly
Very nice QE history
Posted by steve101 on 21st of Sep 2012 at 01:01 pm
QE – infinity is the wow factor of last week’s announcement, but it really isn’t anything new. Ever since QE2 came on the radar screen back at Jackson Hole 2010, the Fed has been implementing some sort of liquidity operation nearly 90% of the time. Starting with the expectationof QE2 back in August, 2010, the markets have been focusing on and influenced by QE in some form or another. QE – infinity didn’t start last week. It started in August, 2010, and it has been with us for 97 out of the last 108 weeks. The only difference between last week’s QE3 announcement and the past 2 years is that the Fed is acknowledging that QE will be open ended even though it has been essentially open ended for the past 2 years anyway.
The next figure is a weekly chart of the SP500. The yellow vertical line is Jackson Hole 2010 when Ben Bernanke hinted at QE2. The green vertical line is the actual FOMC meeting where the Fed announced a $600 billion program to purchase Treasurys. The red line is the completion of that program (QE2) in June, 2011. Then the markets went 11 weeks without any kind of intervention or liquidity operation. Oops! That wasn’t such a good idea. September, 2011 brought us Operation Twist (the dark gray vertical line) and June, 2012 saw the extension of that program (the light gray vertical line). The green vertical line is Jackson Hole 2012. The blue vertical line is the start of QE3.
Figure 1. SP500/ weekly
In essence, we have had QE- infinity for the last 2 years. We just didn’t know it.
3 peaks and domed house
Domed house scenario officially dead now?
Posted by steve101 on 17th of Aug 2012 at 05:38 pm
WEDNESDAY, AUGUST 15, 2012
Lindsay update
The big example began at the February 2011 top, the first of three peaks, and in my view it has not yet been completed. This example of three peaks and a domed house is labeled with blue numbers which highlight highs and lows corresponding to those in the schematic below the bar chart. At the moment I think the market is headed up to a top which will eventually be labeled as point 21. The June 4 low is point 20.
There is a smaller example of the three peaks and a domed house visible on this chart which I have labeled with red letters. Point 3 of this smaller formation is also point 19 of the bigger formation although I did not label it explicitly to avoid cluttering the chart. The important implication of this smaller formation is that its domed house would bring the market above the highest of its three peaks. This is one important consideration which supported my view that the bigger formation had not yet seen its point 23, a view from which I haven't yet wavered.
A rough and ready rule for timing point 23 in a big formation like the one labeled by blue numbers is that it should occur about 7 months and 10 days after point 14. In this example that projection called for point 23 in late July but the market was not yet at new highs then. When that time projection fails the next alternative is to count 7 months and 10 days from point 15 which in this chart is where the green 3 appears in the smaller formation. Point 15 occurred in late February and thus projects point 23 for early October. Right now that seems to fit pretty well with my interpretation of the technical position of the market which I still see as quite strong. If I am right about this point 23 should develop pretty close to or even a bit above the 2007 top at 14,279 intraday.
Once point 23 is in place I think a drop below the June 4 low near 12,000 will develop. This is the minimum expectation based on the minor formation labeled by the red letters. Normally the completion of the blue formation would call for a drop to below the October 2011 low. But the development of a minor 3PDH starting from point 19 in the blue formation suggests that the October 2011 low, point 10 of the bigger formation, will not be broken on the drop from point 23.
Lindsay's 12 year period from high to low calls for a low around 12 years and a few months after any important top. The peak of the internet bubble in 2000 produced a top in the Dow in January 2000. The June 4, 2012 low was 12 years 5 months after the 2000 top but I do not think this was the 12 year period low unless these two 3PDH formations are not really what they seem to be. A low in November- December would be at the outer limits of a typical 12 year period from high to low. On the other hand the September 2000 secondary high in the Dow could be used to time a low in early 2013 via the 12 year period.
Steve and Matt. What do you think? Comments below sent to me by someone I correspond with. Not sure where he got them from:
Posted by steve101 on 10th of Aug 2012 at 08:42 pm
If you know about Terry Laundry's work in the markets since the 70's and his track record
Posted by steve101 on 23rd of Jul 2012 at 11:23 pm
Parker,
I have to say that I just did a google search since I didn't see Terry's update recently and discovered your note. I am so glad he found you before he passed away, so that you may continue the legacy he established. I began following Terry around 2008, so about five years, and I poured through his archives at the time. I remember being astonished when he referred to you and posted the SLV charts you had sent him. It was clear then that, like Marty Schwartz you had carried his ideas forward, but unlike Marty, there was an educational bone in you that wanted to share your discovery with others versus focus on using it solely to enrich yourself. I tried so hard to be able to go to your joint Nantucket seminar, and was frustrated that my trip was thwarted by the strong re-emergence of the Lyme disease I had picked up on the Vineyard. I am feeling considerably better now, and actually put a lot of time into researching the disease and creating manuals for the libraries to assist people with this chronic illness in getting better. And that is where my time went since last summer.
The emails I exchanged with him were a source of pride for me, because I knew Terry didn't bother to respond to people who wasted his time, and didn't have some thought behind a comment or question or interesting information to share. I am deeply saddened by his death. I loved him and his professorial warmth, similar to Dean LeBaron, of Batterymarch fame, who wowed me when he spoke at the Harvard Business School back in the late 1980's, and wowes me still on his blog. Terry you wowed me right to the end. Parker, I believe you will admirably fill his shoes and make him look down and feel proud that he found you, when he sees you moving things forward.
All the best to you my friend,
Warm regards and condolences....
Steven E. Cabana
Stock Market Trends & Observations
07/14/12 – Terry Laundry 1939-2012 © ™
Rest in Peace, Terrence Laundry 1939-2012
Posted July 13, 2012 by Parker Binion
With a heavy heart, I am sad to announce that Terry passed away last night. The news came as a shock to us. Paula and I SKYPED with Terry yesterday, and he was chipper and excited about our upcoming projects.
Paula has been busy trying to reach American Shareholder clients and Terry’s friends all day. I have been helping her with that task. Unfortunately, I don’t yet have the software to recreate Terry’s Daily Chart, so there is no technical update except to say today’s bounce was expected from the abnormally high Volume-Weighted TRIN reading earlier in the week. If history holds, the odds favor that this bounce will be short-lived, and we will roll over again next week.
Please bear with us as we transition in Terry’s absence. Right now, we are focused on the funeral arrangements. We will announce those as soon as they are set in case anyone wants to attend. After the burial, we will make plans for the future — both for T Theory, Inc. as well as American Shareholders.
Many of you have followed Terry for decades. Some only months. Either way, our hearts are with you today.
**********************
I had been a follower of Terry since 1974 and always found his ideas special. He was the type of person that I liked, always with fresh new ideas and never a follower of old hackneyed approaches. He will be missed by me and many others for his original thinking and always sharing his ideas with the world.
Terry, you will be missed by me for the rest of my life.
Terry was a Marine and graduate of MIT (tough and smart). He applied some of his engineering expertise to studying momentum in the stock market, which led to his discovery of the T-Theory (aka Magic T-Theory in an earlier time).
Below is a past history of Terry’s mega Ts. They were uncannily accurate and could keep you on the right side of the market during a major move in the market. If you weren’t a follower of his method, you missed a bright shinning light.
Parker Binion is Terry’s successor and I wish him success. He has some very big shoes to fill.
Fed options today in order of likelihood from Hussman
Posted by steve101 on 20th of Jun 2012 at 10:09 am
With regard to the Federal Reserve, we do expect further monetary interventions, but doubt that further intervention will substantially stabilize, much less reverse, the Goat Rodeo of challenges that the economy faces. Specific options, in order of likelihood, are a) re-opening dollar swap lines to increase the ability of European banks to access liquidity in the form of U.S. dollars; b) extending the length of the "Twist" program (whereby the Fed has sold much of its short duration holdings and replaced them with longer maturity Treasuries) by 3-6 months; c) "sterilized" QE3, whereby the Fed would purchase long-term Treasury securities, but require the proceeds to be held as reserve balances on deposit with the Fed. At close to 18 cents of base money per dollar of nominal GDP, and core inflation still running well above 2%, there is not much likelihood of massive, unsterilized quantitative easing. But I doubt that anything short of that will be satisfying to investors.
Did not trigger Matt look at your numbers.
Triggered by a hair
Posted by steve101 on 18th of May 2012 at 04:33 pm
Overlap of wave one SPX high
Posted by steve101 on 18th of May 2012 at 03:59 pm
Does an overlap of the 1292.62 wave one high in SPX negate a new high now that it has occurred, or does it have to close below that number?
This had already occurred on the Russell.
article compares sentiment in May 2010, 2011 with now. Big difference
Posted by steve101 on 9th of May 2012 at 10:56 am
Mark Hulbert Archives | Email alerts
May 9, 2012, 12:01 a.m. EDT
Major correction unlikely
Commentary: Contrarians don’t foresee a 10% correction
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Contrarians believe that a correction in excess of 10% is unlikely anytime soon.
That’s because there is little evidence of the stubbornly held bullishness that is the typical hallmark of major tops. Investors may worry about a replay of the serious market breaks that began in each of the last two years around this time of year, but at least from a sentiment perspective, there is little similarity.
I argued as much a month ago, when early-April turmoil precipitated the first round of predictions that 2012 would follow 2010’s and 2011’s script. ( Read my Apr. 11 column, “Only modest correction ahead.”)
Market pullback: Time to get in or get out?
With U.S. markets down for several days in a row, should you stay or should you go? Photo: Getty Images.
Even though stocks rose to a new bull market high on the first trading day of May, the market has declined for five straight sessions since then. So we are now in the midst of round two of such predictions.
Since I devoted my month-ago column to what my sentiment readings showed for general stock market timers, for this column I’ll discuss the sentiment of timers who focus on the Nasdaq market in particular. Consider the average current exposure among such timers (as measured by the Hulbert Nasdaq Newsletter Sentiment Index, or HNNSI).
This average currently stands at just 5.9%, which means that the average timer is recommending that clients allocate nearly all of their Nasdaq-oriented portfolios to cash. No stubbornly held bullishness here, in other words.
To appreciate how different today’s sentiment climate is with what prevailed in each of the last couple of years, consider the data in the accompanying table.
Two things jump out from the table. First, unlike the situation that prevailed earlier this month, the April tops in both 2010 and 2011 were accompanied by very high levels of bullish enthusiasm.
Secondly, after the first five trading days of those two years’ corrections, the HNNSI had not dropped very much. In fact, in 2010 it actually grew. Since the beginning of this month, in contrast, the HNNSI has fallen quite dramatically.
None of this guarantees that the market won’t suffer a serious correction, needless to say. Sentiment is not the only thing that makes the financial markets tick, after all.
Nevertheless, according to contrarians, a major top — whenever one does come to pass — will most likely be accompanied by a lot more bullish exuberance than we’ve witnessed in recent weeks. And in the wake of the market’s initial decline from that top, the typical timer will stubbornly hold on to his bullishness.
Article on Natural Gas predicts no bid bottom, stock drop up to 30% more into summer, followed by buying opportuntinity of decade
Posted by steve101 on 22nd of Apr 2012 at 01:13 pm
Get Your Natural Gas Shopping List Ready: Eric Nuttall
TICKERS: ARX, ECA
Source: George S. Mack of The Energy Report (4/19/12)
Companies Mentioned: ARC Resources Ltd. - Encana Corporation
The Energy Report: Eric, in your Q411 market commentary for Sprott Energy Fund, you describe 2011 as a challenging year. What made the market so difficult for investors?
Eric Nuttall:There were several factors: First, the weather failed to cooperate in Canada, where we had a very extended breakup in southeast Saskatchewan. We had epic levels of rainfall. We also had raging forest fires in parts of Alberta. The weather led to a low level of activity for much of the first half of 2011, and many companies struggled to fulfill their capex programs and meet their production targets. Natural gas pricing was very weak, which is something that I expect for the remainder of 2012. Meanwhile, equity markets were very volatile. There were many different factors, all of which oil and gas companies had to contend with.
TER:You commented that despite the fact that, for the first time in history, the price of Brent crude oil averaged more than $100 per barrel (/bbl) during 2011, oil stocks languished. What was the issue here? Are markets fearful of negative global macroeconomic events?
EN:In a word, yes. European debt issues captivated the public's attention for much of 2011, specifically worries about Italy, Portugal, Spain and most obviously Greece. Today, those fears seem to have abated somewhat, but there's still a tremendous level of uncertainty. I think there's lingering psychological trauma from 2008 and 2009 that encourages people to approach the market from a fear-driven mode as opposed to a greed-driven mode, meaning the appetite for risk is very low. You can see that in mutual fund industry money flows, where the only funds that are really garnering large cash inflows are dividend- or yield-oriented funds. That indicates retail investors are still worried we'll have some unexpected event that will lead to a selloff similar to the one markets experienced in 2008 and 2009. Most people simply can't afford to endure another one of those.
TER:Let's shift our focus to oil price action. Oil is up about 3–5% over the past 12 months, but it's basically flat. Is this a period of consolidation? What does that mean for equities?
EN:It is a period of consolidation, and share prices today reflect that industry environment. Many stocks have descended well over 20% within the past two months. We've experienced a sharp selloff even though oil prices have remained very strong, and it feels like the market is oversold despite strong fundamentals. Although we had a poor U.S. employment number for March, I think people missed out on the operative word, which is "growth." Gross Domestic Product growth in China may be slowing to 7.5%, but by my math that still portends an approximate 400,000 barrel per day (400 Mbblpd) increase in oil demand.
Nonetheless, some midcap stocks with market caps of under $1 billion (B) are growing production by over 50% with cash flow margins of over 50% and solid balance sheets. Yet they are trading under four times their enterprise value, which is very cheap. These strong underlying fundamentals and extraordinarily inexpensively priced stocks present a bit of a dichotomy.
TER:You've discussed general market sentiment, but what is your outlook? Are you bullish over the next 12–18 months?
EN:Yes I am. The world economy continues to grow, and the world oil market remains tight. We're eating through worldwide capacity, including some of OPEC's vapor barrels.
TER:Speaking of OPEC, political tensions between the U.S. and Iran seem to have created a premium in oil. Electoral politics further elevate these tensions. Could this result in a selloff in the period leading up to the November 2012 election?
EN:I would agree that there seems to be a political risk premium of around $15–20 built into the current oil price, although supply is in fact down about 800 Mbblpd since Iran sanctions were put in place. But as far as how the election may affect price action, my crystal ball isn't that clear.
TER:Do you expect your sub-$1B market cap companies to continue their pace of 50% production growth?
EN:Without question. Many companies have put on some hedges, and I'm a big proponent of that because investor risk tolerance has decreased since the 2008–2009 period. Hedging used to be a negative stigma for junior oil producers, the rationale being that if the price of oil went above their hedges, they'd be penalized; and if the price of oil dropped, the share price would still go down despite the protection of the hedges. In today's environment, people are more comfortable if an element of cash flow has been protected so that capex programs are guaranteed irrespective of the underlying commodity price.
That said, I'm looking at many of these companies that are sitting on 10–15 years of drilling inventory, and in parts of Canada they can get 5% royalty incentives for upwards of the first 60–80+ Mbbl oil produced, depending on the well. The first couple of years can be wildly economic. The situation is that there is a strong commodity price, and for companies with hedging in place and extended drilling inventory for 10, 15 or even 20 years, the outlook of that growth rate is well maintained.
TER:So is this the sweet spot in energy right now?
EN:That's a good question because it leads me to my current strategy. Even with the risk premium for oil prices we discussed, I feel that fundamentals will remain strong. Thus, I want to be invested in oil through the subset of roughly $300M–1B-market cap stocks that have been severely penalized in spite of the very strong price of oil in Canada.
With natural gas, however, the fundamentals are extraordinarily weak, and the outlook for the next several quarters looks bleak. I expect this summer to be extraordinarily volatile and weak for natural gas stocks. I don't think people appreciate just how terrible the current situation is and what's likely coming in the next couple of quarters. This summer, I expect the market to reach a point of maximum pessimism, with Canadian gas pricing below $1 per thousand cubic feet (/Mcf) and U.S. pricing below $2/Mcf. In a scenario of maxed-out physical storage, natural gas could become a no-bid. I think storage levels both in the U.S. and Canada will fill, and that may lead to a massive selloff. Ultimately, that could potentially lead to the investment opportunity of a decade.
TER:You're talking about classic economic theory, where a no-bid would halt production and a rebound would eventually follow.
EN:Yes. What's happened is that we've had the warmest winter in about 60 years. It's been an incredibly hot winter, which has led to very little heating demand in conjunction with, for a number of reasons, high levels of production. With demand so low, supply continues to increase, and now we are at a 900 billion cubic feet surplus, which is unbelievably shocking. Canadian storage today is around 83% full and we haven't even started the injection season yet. All things considered, it's just a terrible outlook for the next couple of quarters. And yet when you look at these natural gas stock prices, they're expensive. Even at a higher gas price, I still think the stocks are overvalued. I would not be surprised to see a selloff of another 10%, 20% or 30% in many of these names.
TER:How do you interpret rumors of possible Asian demand for Canadian natural gas, an eventuality many analysts are hinting at? For example, Bloombergrecently reported that the CEO of Malaysian, state-owned Petroliam Nasional Bhd (Petronas) says he wants to make a $5B Canadian acquisition in the next three months in order to secure natural gas supplies for Asia.
EN:In that case, I think people are misinterpreting what the gentleman meant. If you were sitting in his seat, the least logical thing to do if you're planning a corporate acquisition would be to foreshadow your move. What I think he meant is that he intends on forming a joint venture (JV) agreement with a company, such as an Encana Corp. (ECA:TSX; ECA:NYSE). I see the $5B number he mentioned was more of a reference to drilling costs; I'd be surprised if it referred to an outright corporate acquisition. There's a tremendous amount of product on the market right now, and given how capital-constrained many of these natural gas companies are today, the JV is a more likely scenario. Companies like ARC Resources Ltd. (ARX:TSX)and EnCana are aggressively looking for partners to assist them on drilling.
TER:Asian demand aside, what catalysts should investors be watching for if they want to participate in the possible buying opportunity in natural gas you discussed earlier?
EN:That's a great question. One may have to be patient, but the potential returns will incentivize being patient in terms of your investment time horizon. First of all, we'll likely have to wait for winter to get a sense of what the heating demand is for next year. Continued decreases in the natural gas-directed rig count would be another indicator. Finally, capitulation by investors in these stocks as they fall precipitously on very large volumes and in large blocks would be a key catalyst. People will just throw in the towel. The ultimate catalyst may even be gas going no-bid, when things frankly could not get any worse.
TER:Rock bottom, in other words. Do you have any closing thoughts?
EN:In summary, I would say the underlying fundamentals for oil remain strong, assuming the world doesn't slip into a global recession, which I think is very unlikely. Stocks have been extraordinarily weak over the past couple of weeks and months, but if one can be patient, these stocks represent a very good opportunity. As for natural gas, there will be a selloff in equities in the next couple of quarters, and investors need to have their shopping lists ready because these names are going to go on sale.
TER:Thank you, Eric. I enjoyed this very much.
EN:Likewise. Thank you.
Eric Nuttallis a portfolio manager with Sprott Asset Management (SAM). He joined the firm in February 2003 as a research associate and was subsequently promoted to research analyst in 2005, associate portfolio manager in 2008 and then to portfolio manager in January 2010. He is co-manager of the Sprott Energy Fund along with Eric Sprott, and also co-manages the Sprott 2010 Flow-Through Limited Partnership with Allan Jacobs. In addition to his responsibilities for those two funds, Nuttall supports the rest of the Sprott portfolio management team by identifying top-performing oil and gas investment opportunities. Further, he contributes towards internal macro energy forecasts, and his insight into emerging unconventional plays has been covered in several financial publications such asThe Wall Street Journal, Asia andBarron's. Nuttall graduated with high honors from Carleton University with an Honors Bachelor of international business.
Natural Gas Fundamentals article w charts, argues to buy tanker companies that will transport the gas versus gas companies themselves
Posted by steve101 on 20th of Apr 2012 at 10:06 am
For those of you who have been watching the price chart of natural gas… that probably seems strange. As you can see in the chart below, the price of natural gas has been trending down for years…
What explains the historic and dramatic collapse of natural gas prices? As you'll recall from our extensive reporting over the years, a series of innovations – horizontal drilling and hydraulic fracturing (or "fracking") – has led to huge new oil and gas discoveries in areas (usually below 5,000 feet) impossible to tap economically. The result has been a flood of new supply – supplies many, many experts believed would never be exploited.
In 1995, the U.S. produced just a little more than 23.7 trillion cubic feet of gas. That rate of production stood essentially unchanged for more than a decade. Even as late as 2006, we were still only producing 23.5 trillion cubic feet of natural gas. You will recall the doomsters talking about "peak oil" – the view that domestic production of hydrocarbons would never increase.
But starting in 2007, production began to soar, reaching more than 26.8 trillion cubic feet in 2010 and 28.6 trillion cubic feet in 2011 – a 22% increase over 2006. Demand for energy rarely grows much faster than the economy as a whole. Our economy has been mostly stagnant since 2007, which means natural gas supply in the U.S. has vastly outpaced demand.
The same trends of increased production are occurring in many places in the world. Globally, the supply of natural gas has increased from around 96 trillion cubic feet in 1995 to more than 141.6 trillion in 2010 (the latest data available). That's almost a 50% increase.
And these vast new global supplies form the foundation for the single biggest current opportunity in the natural gas boom.
For most investors, the opportunity unfolding in natural gas will be one of the best investment opportunities of the next decade.
I know that my enthusiasm for natural gas is unusual in a financial world driven by day-traders, chart-readers, momentum-followers, and other types of financial astrologers. But my rationale is far easier to understand than the mumbo jumbo I frequently see posited as financial advice… I prefer to buy high-quality assets when they're trading for as close to free as possible.
And right now, natural gas is so cheap that many companies are simply flaring it off – they're burning it – rather than bothering to pipe it across the country and sell it. Not only that, but right now, you can buy natural gas reserves in the stock market for free.
And wouldn't you know it… just as the price of natural gas has fallen far below its cost of production, Wall Street is suddenly interested in shorting it. A recent headline in the Wall Street Journalsays it all: "As Natural Gas Cools, Trading Sizzles." The article quotes Sid Perkins, a natural gas broker in Houston: "Over the past month, we have actually seen much more interest from traders and funds than at any point over the past year ." Daily trading volume of natural gas futures is up 31% over last year on the Chicago Mercantile Exchange. Total open interest on the New York Mercantile Exchange is up 20% over last year. Most of the big firms are shorting.
Sooner or later, the price of natural gas will rebound sharply… and not just because it always has in the past. What will propel natural gas prices over the medium term (say, five years) is an economic truism: It's impossible for a surplus of energyto exist for long. As prices fall, more and more uses for natural gas will appear. At some price, natural gas becomes competitive with other forms of energy.
A barrel of oil has 5.825 million British thermal units (Btu) of energy. (Btu is the standard measure of energy content across fuel types.) One thousand cubic feet (MCF) of gas contains just a little more than 1 million Btu – approximately a 6:1 relationship. Thus, on an energy-equivalent basis, you might expect natural gas to trade for one-sixth the price of oil – or about $16 per MCF today.
But of course, oil is more highly prized as a fuel source because it's more easily portable and thus a better fuel for transportation. Historically, the rule of thumb was that natural gas would generally trade about one-tenth the price of oil. That would imply a natural gas price today of about $10 MCF.
As you probably know, natural gas now trades for less than $2 per MCF, a price that's lost all relationship with its utility in the world's economy. There's no reasonable fundamental explanation for the size of the spread between oil prices and natural gas prices. Natural gas is trading at the lowestprice I've ever seen compared to the price of oil. There are few things in life I know with certainty… But I know this: Barring the end of the world, the price of oil is going to fall and the price of natural gas is going to rise.
The big problem with the natural gas markets isn't that there's too much gas. You really can't have too much energy. People will always consume it, if it's cheap enough. The real problem with the natural gas markets is there's no global distribution.
While the global economy has grown over the last decade (creating new demand for energy)… and natural gas supplies have soared… our ability to transportnatural gas hasn't grown enough to equalize the global markets. That's why gas is so cheap in the U.S., but so expensive in Asia and Europe.
We have some parts of the world with far too much gas… and some parts of the world with far too little gas. Given the economics, I believe the best and surest way to profit is likely to be from owning the liquefied natural gas (LNG) tankers that will distribute natural gas to markets around the world. There's going to be a huge boom in these ships, which are expensive to build and operate.
So instead of focusing on the gas production companies… I think investors should focus on the distribution end – the LNG shipping companies. Fortunes will be made as entrepreneurs and investors build the ships and pipelines necessary to take advantage of the higher price of LNG across the world's markets.
It's not going to happen overnight… but years down the road, there will eventually be a large, global distribution system for natural gas. Prices around the world will converge. And those holding the best distributions assets will make a fortune.
Good investing,
Porter Stsnberr y
THIS GREAT ENERGY BARGAIN KEEPS GETTING CHEAPER…
The "oil-to-gas" ratio continues to soar to extraordinary highs…
Regular DailyWealthreaders know how new drilling technologies have allowed us to access huge new supplies of domestic natural gas. This supply surge has pushed gas to bargain-basement levels.
Like its energy cousin oil, natural gas has many uses. It's used as a building block to make chemicals, fertilizers, and plastics. It's also used to fire power plants and heat homes and factories. And it's becoming widely used as a motor fuel .
Over the past year, we've shown you how falling natural gas prices have produced a series of new highs in the oil-to-gas ratio. This ratio compares the cost of oil versus natural gas.
Years ago, this ratio drifted between six and 10. Sometimes, the ratio would even spike to 14, which indicated really cheap natural gas. In January, the ratio spiked to 35… then it spiked to 47 in March… and just this week, the ratio struck another all-time high of 52.
We state again: U.S. natural gas is the greatest energy bargain on the planet… and it's becoming one of America's greatest economic strengths.
Cumulative AD suggests we will back to the highs and a bit higher
Posted by steve101 on 17th of Apr 2012 at 02:14 pm
S&P 500 Cumulative A/D Line
The chart below shows the cumulative advance-decline (A/D) line for the S&P 500 over the last twelve months. The cumulative A/D line is simply a running total of the daily number of net advancers (number of stocks up in a day minus number of stocks down) in the S&P 500. At the end of March, the cumulative A/D line hit new bull market highs but then pulled back after the calendar turned to April. In the last few days, though, the cumulative A/D line has rebounded after falling slightly below its low from early March. If today's rally holds, the cumulative A/D line will have made a short term higher high, setting the stage for a run to prior bull market highs.
The charts below show the cumulative A/D line for all ten S&P 500 sectors, and just like the overall market, they have all pulled back from their bull market highs with varying degrees of magnitude. One glaring standout, however, is the Energy sector. While the nine other sectors are within close range of their bull market highs, the energy sector has been decimated. It is now the only sector with a negative cumulative A/D line over the last twelve months.
Fundamental research on a variety of natural gas related companies including Ultra
Thoughts on UPL?
Posted by steve101 on 17th of Apr 2012 at 12:06 pm
5-Star Stocks Poised to Pop: Ultra Petroleum
By Brian D. Pacampara | More Articles
March 23, 2012 | Comments (0)
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, natural gas-focused explorer Ultra Petroleum( NYSE: UPL ) has earned a coveted five-star ranking.
With that in mind, let's take a closer look at Ultra's business and see what CAPS investors are saying about the stock right now.
Ultra facts
Chairman/CEO Michael Watford (since 1999)
CFO Marshal Smith (since 2005)
Cabot Oil & Gas
EOG Resources
XTO Energy
Sources: S&P Capital IQ; Motley Fool CAPS.
On CAPS, 97% of the 1,476 members who have rated Ultra believe the stock will outperform the S&P 500 going forward.
A few weeks ago, one of those bulls, fellow Fool Buck Hartzell ( TMFBuck), tapped Ultra as a particularly timely opportunity:
Capping a new opportunity
The conga line of green tech failures is growing longer, but I don't expect Capstone Turbineto join them. Particularly since it's betting on oil and gas companies to become an important component of its growth plans.
Oil and gas drillers use its microturbines to power their rigs in remote areas, and its 1,000-kilowatt unit microturbines are well-suited for utility substations and larger commercial and industrial facilities. It recently sold its first such unit to an unnamed oil and gas producer, and just sold two more orders totaling approximately 10 megawatts in the Eagle Ford shale play. The turbines generate low-emission electricity onsite to power the plants' pumps and infrastructure systems instead of flaring the waste gas produced as a byproduct of the drilling process.
The natural gas industry is giving off conflicting signals these days. Many drillers, like Ultra Petroleum ( NYSE: UPL ) and Qwiksilver Resources ( NYSE: KWK ) , are cutting back on production, but vertical rig counts have started inching up again (horizontal rigs, which moved up last week, fell again) and inventories remain at record levels.
Capstone points to wins in the Eagle Ford and Marcellus regions, as well as those made in remote oilfields in Russia and Africa, as proof the energy sector will be its biggest growth driver. With 94% of those rating Capstone on CAPS expecting it to outperform the market averages, it seems they're looking for oil and gas companies to power its future, too.
Joe interviews Paul to find out what stock he'd like to own. Paul's pick is Range Resources, a low-cost natural gas producer with a commanding position in the Marcellus shale, along with other liquids-rich plays. While investors would probably do OK over the long term even at today's price, Paul prefers to wait for a pullback to buy this great company. The long term future is bright.Natural Gas Fundamental Research
Thoughts on UPL?
Posted by steve101 on 17th of Apr 2012 at 11:58 am
Range 1Q Volume Surges - Analyst Blog
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Range Resources Corporation 's ( RRC ) first quarter 2012 production volume experienced a 20% improvement from the year-earlier period, mainly on the back of sustained accomplishment from the company's drilling program .
The company's first quarter production averaged 655.5 million cubic feet equivalent per day (MMcfe/d), comprising 78% natural gas, 16% natural gas liquids (NGLs) and 6% oil. Oil production expanded 36%, NGL rose 20% and natural-gas production increased 19% on a year-over-year basis. Range's high liquid-rich spending level was responsible for the relative increase in oil and natural-gas liquids production.
In April last year, Range sold all of its 52,000 acre Barnett Shale properties for $900 million in order to focus on its Marcellus Shale assets. Excluding the impact of the sale, production would have risen 50%.
For the first quarter, Range's total price realization, on a preliminary basis (including the effects of hedges and derivative settlements) averaged $5.19 per Mcfe, down 14% year over year. The overall price comprised NGL at $46.20 per barrel, crude oil at $83.54 a barrel and natural gas at $4.01 per Mcf.
In February, Pennsylvania imposed stringent regulations and charges for natural gas drilling after drillers were blamed for the contamination of local water supplies. The new law entails a flat annual impact fee on shale gas producers. Hence, in the first quarter of 2012, Range Resources expects company-wide production taxes of $13.6 million in total. Additionally, the company will also witness a one-time expense of about $24 million in the upcoming quarter, based on the required payment for wells drilled last year and in the previous years.
Range Resources displays a diversified high-quality asset base across the low-risk/long-reserve Appalachian assets and large-volume/rapid-payout Gulf Coast properties. Given a dominant presence in the Marcellus Shale play, we believe that the large acreage holdings will support several years of oil and gas drilling in the fast-growing fields. The company remains well on track to reach its 2012 production growth target of 30% to 35%.
The company is seeking to ramp up the output of NGLs (such as ethane, propane and butane) and oil, which are better price takers than natural gas. In a low natural gas price environment, Range Resources' record production, declining unit costs and the sale of non-core properties will be beneficial over time.
However, considering the company's exposure to volatile natural gas fundamentals, interest rate risks and the uncertain macro backdrop, we maintain our long-term Neutral recommendation. Headquartered in Fort Worth, Texas, Range Resources competes with EQT Corporation ( EQT ), SM Energy Company ( SM ) and Ultra Petroleum Corp. ( UPL )
Read more: http://community.nasdaq.com/News/2012-04/range-1q-volume-surges-analyst-blog.aspx?storyid=134315#ixzz1sJW3LJHa