A Series of Unfortunate Events…

That’s what I thought. Except lately, it’s as if we have entire flocks of black swans, paddling up to the edge of the lake and walking out into the front yard. And then these critters cause big trouble.

Japan Black Swan

Let’s take a look at the Japan black swan, with its associated nuclear blackbird. The Japan earthquake-tsunami-nuclear disaster has wrecked large swaths of the Japanese economy, with ripples out to the rest of the world. Japan faces immense human suffering — they’re still picking out bodies nearly a month after the earthquake and tsunami. God bless them… it’s heartbreaking.

Japan also faces a long, cold future. Expect to see chronic power shortages, industrial disruption, logistical challenges, endless cleanup work and bills that boggle the mind. It’s a heck of a lot more than the news-grabbing article about how Ford Motor Co. can’t get “tuxedo black” paint pigment for its car assembly factories.

There are many globally important production and logistical channels that pass through central Japan. We have yet to understand the full impact on world commerce. Stand by for shortages of everything from name-brand automobiles to electronics to optical instruments to you-name-it. I think we’ll all be surprised as this plays out.

Of course, the Japan disaster ripped into the world’s nuclear power renaissance. Most nuclear stocks are knocked down, although I expect things to get better over time. The question is how long will it take?

At ground zero, the site of the wrecked nuke plants, the Japanese have huge bills to pay. It’ll be hundreds of billions of dollars over many decades. It’s pretty much pure “cost,” too, for the Japanese. That is, it’s not investment in the sense of the Japanese ever getting the money back. The expenses and efforts will go toward keeping the nuclear mess under control, and sort of cleaning it up.

Through it all, stay sanguine. Keep in mind that large capital projects, from mines to power plants, have a life cycle measured in decades. Policymakers, regulators, business executives, bankers and investors need to beware of making 10-year, 20-year or 30-year decisions based on the headlines of a week, a month or even six months.

Japan or no, the rest of the world’s reactors still need fuel. You shouldn’t discount a uranium play as a long-term investment.

[Editor's Note: There are a number of resource funds right now holding uranium assets, but Middlefield Uranium Focused Metals Class (MUTF_CA: MID210) may be worth a closer look.]

Until we meet again,
Byron King
Penny Sleuth

May 11, 2011

This Industry Is Still Gearing Up for Growth was originally featured in the Penny Sleuth.

According to the Chevron executive, “My greatest challenge is to manage a large array of aging assets.”

In the Permian Basin, Chevron is producing oil from fields discovered many decades ago, often using pipe and equipment that was installed decades ago. Oh, it would be nice to rebuild everything with new steel and equipment, and all the latest automation. But you can only justify so much new investment wells that produce 6.5 barrels per day before it’s cheaper to plug them…

This New Technology IS Working

At the same time, the modern U.S. oil business is not just all about managing legacy assets. For all the oil that’s ever been pulled out of the Permian Basin, MOST of the original oil is still down there, in the source rocks and in reservoir rocks that won’t give it up very easily.

So Chevron is using the Permian Basin as a modern laboratory for new oil recovery techniques. There’s still a lot of oil down there, but now it takes more imagination, capital and technology to extract it.

With some old reservoirs, Chevron is pumping CO2 to “flood” the reservoir, mix with the oil in place, and then move that oil out of pores in ways that traditional water-floods won’t reach. In fact, Chevron is working on ways of making the oil less viscous via CO2, and then “sweeping” the reservoir with water floods. The idea is to increase recovery from the reservoir, to get every drop that will possibly flow.

Chevron is also drilling new wells into formations that were not, traditionally, oil producers. Up until now, the rocks had something “wrong” with them — such that they didn’t give up the oil.

Indeed, some new types of oil bearing rocks have the permeability (“impermeability” is a better word) of granite. But the kinds of hydro-fracturing that we see in shale formations is also beginning to yield a lot of “new” oil from tight formations.

Chevron had eight, powerful pumper trucks all lined up. These pumpers were just roaring away, pushing barrels of fracturing fluid (mostly water, with chemical additives and propping-sand) down the hole.

The idea is for the fluids to work their way into the rock formation, and literally crack open a series of fractures as far away from the well as the energy will carry. Then when the water comes back out, the sand that’s been mixed will stay in the fractures and hold them open. This makes it easier for oil to move out of the rock formation and into the well.

According to the University of Texas Bureau of Economic Geology, there may still be 60 billion and more barrels of oil left in the Permian Basin — half the oil reserves of Iraq, by way of illustration. The trick is to develop technology to get it out.

It’s the new tech – with companies like Chevron out in front — that will keep the Permian Basin supplying oil for another 100 years — and offering new investment opportunities in the process. This is one technology you will want to keep your eye on.

Until we meet again,
Byron King
Penny Sleuth

March 9, 2011

A “Flood” of Profit to Come from This Oil Technology was originally featured in the Penny Sleuth.

Higher lows since the beginning of June have formed a strong uptrend line across those bottoms for Hogs.

The upside 76 price resistance has been tested and retested repeatedly for the last six weeks without success… so far.

This from CNN Money:

“Where’s the bacon? Hog supplies have been squeezed for the last couple years, as high costs of feed, low demand during the recession and the H1N1 (swine flu) virus scare led farmers to cut back on production.

“On top of the already limited supply, the USDA forecasts pork production to drop another 3% this year.

“Even though they’re making money now, we’re not seeing much interest from producers in expanding their herds because they’re still trying to recover from those losses from the last two years,” said Tim Maiers, spokesman for the Illinois Pork Producers Association.

“The recent hot weather has also been a factor, causing pigs to eat less and farmers to take longer to fatten them up, said Steve Meyer, president of Paragon Economics, a livestock and meat marketing consulting firm.”

“In the past four weeks alone, 7% fewer hogs have been brought to market from a year ago, making it likely that this year’s pork production will decline even more than the USDA expects, he said.

“But despite tight supplies and higher prices, demand for bacon is stronger than ever, Maiers said.

“It’s become quite a trendy meat,” he said.  “While they may be scaling back on other things, consumers are wanting lots and lots of bacon in whatever it is they’re eating or cooking.”

The immediate upside target on a Hog breakout is 80. For investors seeking to get the maximum gain potential, options are the way to go – but for now, the timing of the rally is going to dictate which option expiration to shoot foor.

[Editor’s Note: These days, options aren’t the only way to play commodities. Thanks to new investment tools like ETFs and ETNs, retail investors can make bets on commodity movements just as easily as buying or selling a stock. For a lean hog play, there are a couple of options open to investors right now:

The iPath DJ-UBS Livestock ETN (NYSE: COW) is an exchange-traded note that mirrors the performance of both cattle and hogs, with around 36% of its daily gains coming from hogs. Likewise, the PowerShares DB Agriculture Fund (NYSE: DBA) directly holds a 7.56% stake in lean hog futures.

Though these two funds aren’t as direct as a hog option play, they’re two viable trades for investors who want to get a foot in the door.]

It all comes back to commodities,
Alan Knuckman
Penny Sleuth

September 16, 2010

[Independence Note: Unlike scores of other penny stock resources, we’re 100% independent from the companies we talk about in the Sleuth – that means that we never accept compensation in exchange for profiling a company, and our editors never own a position in any stocks they talk about.]

The Pig Investment That Won’t Get You Slaughtered was originally featured in the Penny Sleuth.

The jobs of providing economic forecasts/commentary versus trading advice are two completely different roles. One is to predict what the market will do and the other is to profit from how things develop.

At Resource Trader Alert, my premium commodities trading advisory, the focus is on executing high reward versus risk investment strategies to make money. A solid trading plan is developed for each option position with potential entry and exit points determined prior to getting into the market. This money management discipline is designed to eliminate or at least diminish the emotional components of the constant noise in the marketplace.

Opinions: Everyone Has ‘Em – But They Do Not Make Money

You cannot let what you think the market should do impact a well thought out trading plan. At RTA we trade technically what we see in the charts – and sometimes that goes against what we think should happen. The trading methodology of Identify, Execute, and Manage to Maximize outweighs the larger macro viewpoint for the future.

For example, back in mid 2009 we were one of the first to mention the Bond Bubble and profit handsomely from the decline in Treasury prices. The combination of 2008’s safety position unwinding and increased debt sales put the pressure on prices for our trade. The following sharp decline in Bonds from 121 to 112 in June gave us nice profits of $2,200 to add to the RTA track record.

For a trader there is little consolation in being right without the financial payoff.

What Does the Market Tell Us About Interest Rates?

Interest Rates are set to rise currently — there is very little doubt about that with the current Fed target between zero and .25. Short term rates are determined by government monetary policy and remain near historical lows — prices actually went negative because of panic buying in the 2008 collapse – which leaves rates nowhere to go but up. The question is not if rates will go back up, but rather over what time frame they will go back up.

All of this movement and the timing is important to commodity investors because without rising interest rates the dollar continues to fall – and a falling dollar is bullish for our overall commodity portfolio.

To estimate the timing of interest rate moves I always turn to Eurodollar (not to be confused with Euro Currency) futures. Short-term trading instrument prices move in the opposite direction of the interest rates for Eurodollars.

For example the current price of the March Eurodollar of .9973 reflects a rate of .27%. Subtract the price from par at 100 to get that current interest rate. So the market is telling us that rates should remain close to the Fed’s target range for the next few months.

Here’s a look at the last 15 years in the Eurodollar:

Looking past this chart and into the futures market, the deferred months of June (.9955) and September (.9923) for the Eurodollar show a moderate increase in rates has been priced in. These indicate a rate of .45% by June and .77% by September.

But the recent upward Eurodollar price action of nearly 25 points since last Friday’s Unemployment Report has decreased the likelihood of Fed Action any time soon.

Back to Bullish on the Long End of the Curve

Eurodollars, Bonds and notes are not driven by Fed targets but rather supply and demand. With the current fragile state of the economy and no sign of a job recovery it’s nearly impossible to raise rates anytime soon. Keeping mortgages appealing is also necessary for the distressed housing segment.

Ten-year note rates had recently jumped to multi month highs and now sit against the significant 4% yield barrier. This is a solid resistance that should not be violated without the green growth of economic recovery. Not just yet anyways, these are future concerns that will be later trading opportunities.

All of this combined makes our recent Bond trade look very attractive.

Plus, another added bonus is the hedge potential we have from another stock downturn or political/ economic crisis that would create flight to quality and boost bond prices. The outside markets of oil and metals are giving signals that the dollar is under pressure with renewed rallies. It is very difficult for the dollar to fall in an increasing interest rate environment and vice versa.

While the selling of Treasuries may very well be the “Trade of the Decade” all of our information adds up to a buy in the very short term, relatively speaking, with minimal financial risk. Look at this trade as a 100-yard dash for the next couple of months within the larger marathon run of rising interest rates.

It all comes back to commodities,
Alan Knuckman

January 18, 2010

The Facts About Forecasts was originally featured in the Penny Sleuth.

Regular investors can actually take a cut of every single bill payment you and your neighbors make. Today, we’ll show you how…and give you three small-cap plays you need to get into right now…

When embattled in a game of Monopoly, the three sets of properties we typically shoot for are Boardwalk and Park Place, the railroads and the utilities. Why would Parker Bros. make such a fuss over these three assets?

Well, luxury real estate like the dark blues is typically lucrative. In today’s world, however, that probably isn’t your best bet.

How bout the railroads? Owning transportation and shipping systems is always a profitable venture. But with competition from cheap air cargo and trucking, railroads just don’t have the appeal they once did.

That leaves the utility companies. If you can own the transfer of water or electricity, chances are you’ll make a pretty penny. That’s why we’re big proponents of utilities.

These companies can pay such high dividends because they make so much money off the growing demand for natural gas, electricity and even water.

Buy why is now the best time to load up on utilities? Because they are as recession proof as it gets.

Time to Take a Trip on the Electric Avenue

Josh Peters of Morningstar writes, “Even during recessions, people have to heat their homes, take showers and keep that TV set aglow.” Even if television doesn’t sound like a necessity, try telling that to the majority of Americans. While ad revenue has crashed in the last 12–18 months, TV viewership is as steady as before…if not better.

While we think natural gas is the investment you need to make right now, electricity is the easiest and most lucrative. You see, the average American will actually use more electricity during recessions…a lot more time spent in their living rooms watching TV and surfing the Web.

Sure, industry has slumped a considerable amount. But electricity companies have seen only a nominal drop in revenue, most of which is already factored in. Meanwhile, they are paying larger and larger dividends.

When looking for an electric utility, the No. 1 characteristic to seek out is cash flow. The more cash running through a company, the better. You also have to consider whether the company is taking steps to curb spending. Today’s we have three small-cap utilities that have done expert jobs of both.

Buy These Three to Shore Up Your Income Portfolio

First up is UIL Holdings Corp (NYSE: UIL). UIL is an electric utility in New Haven, Connecticut. The company has a solid customer base of nearly 325,000. Only 5.6% of its revenue comes from industrial businesses, which helped the company escape the last market collapse relatively unscathed.

But the best part about UIL is its dividend. The company has paid out its income to shareholders dating back to 1977. Over that period, its dividend grew considerably. Now you can get a solid, consistent 6.3% dividend yield, without worrying about where the stock goes. You can’t get that with a savings account.

Next is NorthWestern Corp (NYSE: NWE). With both electricity and natural gas operations, the company has over 650,000 customers in South Dakota, Montana and Nebraska. NorthWestern has little-to-no competition in its operating region, which makes it a true semi-monopoly.

While it’s only been paying dividends for a little over a year, the company has already raised its payments to 34 cents per quarter. That works out to a solid 5.4% yield. Now is the time to lock in this growing income.

Finally, we found Empire District Electric Co (NYSE: EDE). Empire generates, transmits, and distributes electricity in Kansas, Oklahoma, Arkansas, and its home state of Missouri. While the company’s stock is a bit more volatile than others, it does offer another upside most don’t.

Empire also has water operations in various places in Missouri. This could become a lucrative business, as the cost of water continues to skyrocket.

Empire’s 7% dividend yield is enough to give it a serious look. High yielders like this don’t come along too often. We suggest you jump on it.

All three of these should be consistent income generators for years to come. If you are worried about a second market drop, or you just want to get your share of your neighbor’s energy bills, these are your best bets.

After all, where else can you get safe income in this market?

Sincerely,
Jim Nelson

October 27, 2009

Get Paid When Your Neighbor Turns on His Kitchen Light was originally featured in the Penny Sleuth.

Oil peaked at $147 per barrel in July 2008 — right before the house of cards came crashing down on the global economy. Once banks started to fail and credit dried up, other businesses slowed production and laid off workers. This created a massive trickle effect on the overall economy.

Big corporations and individual consumers alike were using less energy. That meant the prices of every energy-related commodity plummeted.

This spring, things started to turn around… The unemployment rate quit falling at such a rapid rate. Inventories were too low in many industries, creating a ramp up in production again. Energy prices climbed…

Since the start of this year, the price of crude oil has nearly doubled. In just the last six months, heating oil jumped as much as 90%. These two commodities are still cheap as far as we can tell. But they aren’t the real story…

Two other commodities are still low, but won’t be for long…

Coal and Natural Gas Are Commodity Buddies

Back in June, Greg Guenthner told you about coal’s recent history. Coal, being the most widely used fossil fuel in the U.S., took an extra-hard hit during the past several months. It’s down nearly 70% and hasn’t recovered in the slightest.

Demand will flood back into the system. In fact, that’s already happening. We have no doubt that the coal play we let our Penny Stock Fortunes readers in on is the best way to take advantage of the coming coal boom. But there’s another energy commodity about to shoot even higher, even faster…

Natural gas prices have utterly collapsed. After trading above $13 in June 2008, natural gas fell the whole way down to $2.70 today. Its decline happened as gradually as can be. Most of the financial world has been trying to time the bottom for months. But it keeps falling.

We don’t know if this is the bottom, but it can’t be far from it. It doesn’t matter to us even if it’s not. You see, we found the best natural gas seasonal laborer in the world, and we can just wait it out… no matter how long it takes.

Before we get into any specific natural gas play, we need to know how big natural gas’s recovery will be…

Why We’ll See Natural Gas 209% Higher By Year-End

Natural gas and coal go hand in hand. They are oftentimes found together in the same place. Natural gas hides beneath and between coal beds. It’s not uncommon for a coal company to come in and mine the same site an oil and natural gas driller just left.

When one of these two is no longer in demand, it usually spells trouble for the other. That’s one of the main reasons natural gas has taken such a hit. But just as they fall together, they rise together.

We already laid out the reason coal will see a price spike in coming months and years. Natural gas is just as lucrative, if not more…

Natural gas demand is continuing to increase around the world at an unprecedented pace. Many nations are starting to choose NG over traditional coal and oil in power plants. It burns about 29% cleaner than petroleum and 44% cleaner than coal.

And because of its recent price collapse, it’s now the cheapest choice for customers. Why pay more for coal or oil when you can get natural gas for $2.50 per thousand cubic feet?

The supply side of the coin is even more compelling…

The U.S. imports around 17% of its natural gas — almost all of which comes from Canada. Unfortunately, Canada’s natural gas reserves are drying up. Daily Canadian natural gas production peaked in 2001. We’re already back down to 1995 production levels, and falling.

Natural gas production here in the U.S. has also fallen off a cliff. Most drillers can’t drill for a profit at these prices. So they aren’t. We have almost no production right now. We’ll eventually burn through stored natural gas reserves. When they go too low, it will spur a panic.

This panic will be enormous. Natural gas is simply too cheap. It hasn’t been this cheap for decades. The average oil-to-natural gas price ratio is about 9.3. Now it’s at about 29.

It wouldn’t take much for prices to shoot upward from here. To reach the 20-year average natural gas-to-oil ratio, NG prices would have to climb 209%.

That doesn’t take into account the future boom in demand. It won’t take long for it to correct itself…certainly before the end of this year.

This panic is inevitable, and there are a number of penny stock plays that could take advantage of it… Union Drilling (NASDAQ: UDRL) and Pioneer Drilling (AMEX: PDC) are two that could be worth looking at right now.

Sincerely,
Jim Nelson

September 23, 2009

Natural Gas’ Triple Could Give Us a 416% Gain By Year-End was originally featured in the Penny Sleuth.

In the last year, my Resource Trader Alert readers have already had the chance to book 143%, 148%, even 200% gains thanks to the commodities market. And in the current economic climate, as commodity prices start to heat up once again, the profit potential is amazing.

Here are the resource plays that I see rocketing right now…

Gold and Silver are leading the markets higher with the decline in the U.S. Dollar.  The greenback is at its lowest levels in since September 2008.  Gold is solidly above $1000 an ounce and looks positioned to easily make new all time highs on a course to $1200, from my projections.

Silver has made an impressive rally as well – one that I see continuing into the upper teens.

Recently I’ve been concerned about the lack of recent strength in Crude compared to new highs in stocks and metals.  Last week, that disconnect was repaired with a 5% move in prices putting oil solidly above $70 a barrel again. And it looks like oil hasn’t stopped its ascent either…

More Fuel for Higher Market Prices

The Organization of the Petroleum Exporting Countries (OPEC) did a good job of pushing oil prices up this summer. While OPEC managed to boost oil prices in the last six months, at current levels black gold is still a far cry from where it was a year ago – and where it could be again soon. This from Bloomberg:

“OPEC’s success in more than doubling oil prices since a five-year low in December will probably persuade ministers to maintain production quotas after this week’s meeting.

“Reducing shipments beyond record cutbacks last year would endanger the global economic recovery, the Organization of Petroleum Exporting Countries’ president said last week. Oil rose to $75 a barrel on Aug. 25, the price Saudi Arabian King Abdullah says is fair for consumers and producers.”

A major flaw in the governments’ unfair obsession with speculators is the failure to acknowledge the role of OPEC in energy prices.  They are a cartel!  Traders can buy and sell but only OPEC colludes to determine price levels.  Until hybrid cars, solar and geothermal technology, and algae fuel replace black gold we can fight the battle for financial gains.

We’ll continue to do just that.

It ALL comes back to commodities,
Alan Knuckman

September 14, 2009

What You Need to Know About the Future of Silver, Gold and Oil was originally featured in the Penny Sleuth.

It seems like utilities are the only industry that haven’t had a great year in 2009. That’s a shocking fact for many investors who counted on stable recessionary profits from utilities stocks.

In the past, utilities have been touted for their recession resistance. Brokers even went so far as to call them “widow-and-orphan stocks” because as USA Today’s John Waggoner puts it, “A stockbroker could sell utilities stocks to old Widow Brown (or Orphan Annie) without worrying that the townspeople would someday chase him down Main Street with dogs and torches.”

The torches would certainly have come out in 2008 when the sector shed 27% of its value – and again this year, when utility stocks lost another 30% as the S&P 500 rebounded by 15%.

Indeed, while the average publicly traded stock has increased in valuation by 40% since March, utilities have only seen a 24% reprieve from the depths of the market’s lows.

Believe it or not, that’s exactly why one subset of the utilities industry is such an attractive investment right now.

Why an Industry Mired in Doubt Could Pave Your Path to Profits

Don’t get me wrong; there are plenty of reasons to continue to stay away from the utilities sector as a whole. Utilities stocks are slow growing, they deal with all of the drawbacks of extensive government regulation, and with interest rates again on the rise, the cost of capital is liable to increase dramatically for the second-largest corporate borrower behind the financial sector.

But each of those arguments against investing in utilities is a double-edged sword that falls short when it comes to international utility stocks.

That’s because international utilities that operate in emerging markets are actually growing at a breakneck pace as countries like China and India develop their infrastructure and deliver things like electricity and clean water to their citizens. Overseas, where in many cases utilities have more say in the regulatory process, these companies act like government-sponsored monopolies.

And with dovish economists nervous to overcompensate on the interest front, it’s unlikely that any interest rate increases that we see in the next several quarters will materially hurt utilities stocks – especially those in high-growth areas.

So while domestic utilities continue to be mired with doubt and concern, investing in international utility stocks seems like a pretty exciting recession play right now.

Another of the utilities sector’s biggest draws is dividend income. Historically, utilities are one of the top-paying sectors when it comes to dividends – yet another reason why they’re so well-liked during recessions. When capital gains dry up during a bear market, dividends can often mean the difference between keeping your head above water and sinking with the ship. Even as utilities staged their disappointing tumble last year, consistent dividend income has lived up to expectations.

International Utility Profits Through ETFs

Naturally, one of the best ways to get exposure to international utilities is through exchange-traded funds (ETFs).

At present the ETF offering for utilities is staggering – from broad based utilities index funds like the Utilities SPDR ETF (NYSE: XLU), which is based on the S&P 500’s utility components to the PowerShares Progressive Energy ETF (NYSE: PUW), which invests in utilities that engage in environmentally friendly practices. But for international exposure, there are only two funds that stand out right now…

First is the iShares S&P Global Utilities ETF (NYSE: JXI). This fund, which is based on the utility components of the S&P 1200 Global index offers investors a good spectrum of international utility stocks as well as the stability of a few domestic plays thrown in. The fund’s top five holdings are all diversified overseas utility providers that operate in emerging and high growth markets, including E.ON AG, GDF Suez, and Enel SpA.

A relatively low expense ratio (0.48%), coupled with a 4.81% dividend yield make JXI a very attractive fund right now.

The other fund worth looking at is the WisdomTree International Utilities Fund (NYSE: DBU), which has thinner volume than JXI and a somewhat higher expense ratio (0.58%), but offers slightly more exposure to small-cap utility plays. Both funds share a very similar investment philosophy and hold many of the same stocks.

A 20% Upside in the Technicals

Taking a look at JXI’s chart above, even at first glance it’s pretty clear that this ETF is already in a sustained uptrend, one of the most important things that we look for in any trade. In early July, the stock’s 50-day moving average (the light blue line) crossed over its 200-day moving average (the dark blue line). Moving averages, which chart the average price of a stock over a given number of days, give us a glimpse at how a stock is trending relative to its past. Seeing a shorter-duration moving average cross over a longer-duration average is a bullish signal that suggests the real uptrend is only just beginning in the stock.

What’s also significant to us is the trading channel that JXI finds itself in right now. The fund has been bouncing in the same channel since March, and is currently toward the bottom of the channel, primed for a bounce back to the top. If this stock follows the pattern that its been exhibiting for the last six months, there could easily be a 20% upside on a JXI play.

As you might expect from such a closely related fund, DBU’s chart is nearly identical to JXI’s… That means that these two ETFs can be traded interchangeably.

From a fundamental perspective, it’s clear that international utilities are being undervalued by investors right now. And from a technical perspective, these two ETFs look primed to take off in the short term with a potential 20% upside for investors willing to take the plunge.

Cheers,
Jonas Elmerraji

September 11, 2009

These Utility ETFs Are Set to Soar was originally featured in the Penny Sleuth.

From where I’m standing, the market looks very overbought right now. That means that after the last three consecutive weeks of rallies that we’ve just experienced, the market is currently at risk of topping off and heading back down. But technical analysis is more than just speculation, so it’s time we look at a chart…

While we usually use the Dow, OTC Composite and S&P 500 charts to get a glimpse at what’s going on with the market at large, today we’ll be looking at the Wilshire 5000 and the S&P 500 for a view from the top.

It doesn’t take a rocket scientist to see that major indexes have come a long way, and are now sporting major bearish technical indicators. But you sure wouldn’t know it by watching TV.

Traditional Wall Street “buy and holders” would do themselves well by taking note of this…

When the markets see bad times on the horizon (forward thinking) they run the markets higher. Why would they do that you ask? So the big, smart money that is never on CNBC can get out. Said another way: You have to sell peanuts when the circus is in town — and one look at the last 10 days suggests that the market is the high wire act currently on stage.

Looking at the daily charts of the indexes, as well as a number of Investor’s Business Daily leaders, all we see are peaks and stocks in overbought territory.

While we aren’t seeing anything but a peak on the daily charts, we sure are seeing topping/bearish structure in the shorter-term frequencies — not just on the indexes but also in leading stocks.

So, what’s the bottom line right now?

In the short term as well as the long term all the ingredients are there for a pullback to initial breakouts (green lines).

The real test will be what happens after a pullback to initial breakout levels. Will we see a bounce? That bounce is what you really want to watch for, as more often than not the markets have a way of testing and returning to the scene of the crime.

If we are going to top in the next week or two, then a pullback of the recent breakouts are in order with another move up to put in a top.

Sincerely,
David Grandey
AllAboutTrends.net

July 27, 2009

Be Ready When the Market Tops was originally featured in the Penny Sleuth.

ExxonMobil is the Big Oil player that’s causing all the fuss. The company has thrown $600 million into a research partnership to study the potential of algae oil. Now, ExxonMobil will team up with human genome researcher Craig Venter in an attempt to make algae oil a more viable fuel source.

“There has been so much hype and hope about the potential for algae that this announcement should act as a reality check for everyone,” Venter told the Financial Times.

Up until this point, the algae oil industry was rarely mentioned in mainstream media sources. Yet it remains one of our most viable alternatives to conventional fossil fuels.

The argument is simple: Algae are the fastest growing plants in the world. And algae consume more carbon dioxide than any other plants. As they grow, algae produce lipids, or vegetable oil.

The math is greatly skewed in favor of algae. One acre of corn can yield about 28 gallons of oil in one year. In more tropical regions, an acre of palms can yield about 6,700 gallons of oil per year. An acre of algae can yield anywhere between 20,000-100,000 gallons of oil per year.

This tremendous potential exists because of a lightening-fast growth cycle. An algae plant can completely reproduce up to six times per day. And we all know it takes corn all summer to mature.

Of course, ExxonMobil’s new partnership does not mean we will be filling our tanks with pond scum biodiesel just yet. Developers will still need to tackle genetic engineering and oil extraction issues…

But ExxonMobil’s leap into the algae oil market effectively legitimizes the industry. But as you probably have already guessed, the budding algae oil industry offers very few public companies in which you can invest. However, there are a few compelling names you’ve probably never heard of…

Here are two algae penny plays you might want to watch:

PetroSun Inc. (PINK SHEETS: PSUD): Last month, this diversified energy company signed an agreement with a town in Arizona to develop a algae-to-biofuels wastewater pilot program…

Green Star Products Inc. (PINK SHEETS: GSPI): Green Star is involved in the business of environmentally friendly lubricants and fuel additives, as well as algae fuels and other biodiesels. Recently, the company has also announced plans to build electric vehicles.

Several private startups and partnerships are worth watching, too…

We’ve mentioned Sapphire Energy before. It’s scored more than $100 million in private financing — including a chunk from Cascade Investment, a holding company owned by Bill Gates.

Then there’s Algenol Biofuels. This company has partnered with Dow Chemical on a project that would use algae as a vehicle to harvest CO2 for ethanol.

“The ethanol would be sold as fuel,” reported The New York Times, “But Dow’s long-term interest is in using it as an ingredient for plastics, replacing natural gas. The process also produces oxygen, which could be used to burn coal in a power plant cleanly, said Paul Woods, chief executive of Algenol, which is based in Bonita Springs, Fla. The exhaust from such a plant would be mostly carbon dioxide, which could be reused to make more algae.”

The company’s target price is $1 a gallon — incredibly cheap compared with corn-based ethanols. A breakthrough like this one could put the U.S. on the road to energy independence at breakneck speeds. We’ll keep you posted…

Best,
Greg Guenthner

July 23, 2009

A $600 Million Boost to Your Clean Energy Portfolio was originally featured in the Penny Sleuth.