ANR, BTU - the greatly unloved coal miners

Whilst the main US equity market continues to break new historic highs, the coal miners remain the most unloved sector in market land. The week concluded with a major snap lower, with Alpha Natural Resources (ANR) and Peabody Energy (BTU), falling by a very severe -12.5% and -5.3% respectively.


ANR, daily

BTU, daily

Summary

The above charts are interesting, but from a bigger perspective, the real horror is more clear...

ANR, monthly

BTU, monthly

*please note, the upside targets are most certainly 'on hold', with broader downside now expected across the spring/summer.
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How are ANR and BTU actually doing?

First, see key stats..

ANR @ yahoo finance
BTU @ yahoo finance

ANR is still losing money - and that is in a supposedly 'recovering US/world economy'. BTU is doing less bad, but still with net margins of -7%. All things considered, the lack of profitability is a real concern. How badly might the miners fare if the economy actually slipped into recession, whether 2015, 16.. or whenever?

Commodity prices remain relatively low - despite the huge QE from many central banks, and again it should be noted, if the economy turns lower...lower output prices are going to add even more problems to the miners.

Indeed, Copper prices are now vulnerable to slipping under the key $3 threshold. If Dr Copper has a problem, then it could be a key signal of looming trouble this spring/summer.

Copper, monthly

Long term outlook

I am very bullish for just about all mining/resource stocks in the very long term. However, the immediate  trend is clearly very weak, and if the main market does see a multi-month decline this spring/summer (back to the sp'1600/1500s), then the miners are going to see further significant downside.

For me, one of the more curious questions is whether any of the big miners are going to either merge/buy out each other in the next year or two?

Many seem to think coal is a commodity/fuel that is no longer necessary, I'd most certainly disagree with that sentiment. At some point, the surviving miners are going to recover, but that is probably a very considerable time away.

Regardless, I will be closely watching the miners - Coal, Gold/Silver, Copper, across the spring and summer. 

GDX - miners clawing higher

Whilst the main equity market is still broadly climbing, the miners are similarly also climbing - no doubt helped by rising Gold/Silver prices. The ETF of GDX settled with somewhat significant gains, +1.3% @ $26.84. Near term outlook is bullish, with upside to the big $30 threshold.


GDX, daily

Summary

*Today was the highest daily close since Sept'19
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Little else to add. Clearly, near term trend is bullish, and with Gold/Silver prices also on the rise, the miners have done very well since the low in the December.

Indeed, GDX is now over 30% higher in just under 3 trading months.

The problem remains, if the metals don't keep pushing higher, and...if the main equity market rolls over in the spring/summer, then the miners are going to be in real trouble.

I'm still inclined to an eventual floor in Gold..somewhere in the $1050/950 zone. If that is the case, then GDX will eventually break new lows.

DRYS - back in the $4s

Whilst the main market remains broadly bullish, the transport stocks are battling to join the party. Dry Ships (DRYS) saw significant gains today as it broke back into the $4s, settling +6.7% @ $4.14. Near term outlook is bullish.


DRYS, daily

DRYS, weekly

Summary

It has been a messy opening few months this year for DRYS. Yet..with the sp'500 in the 1870s, and the Trans in the 7500s, DRYS is finally starting to pick up some momentum again.

With the break into the 4s, the late Dec' high of $5.00 is now the obvious target.

*my broad outlook is for a key turn around the time of the next FOMC of March'19.

Best guess, DRYS does at least get close to testing the big $5 threshold, but if the main market rolls over again, we could be looking at a double top..with DRYS slipping back to the 3s..even 2s by late summer - if sp'1500s.
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I remain a fan of the company, but only on a longer term basis, and DRYS is without question a pretty speculative stock to meddle in.

TVIX - widow maker still making widows

With the US and world equity indexes rebounding strongly, the VIX is back on the slide. The 2x lev (bullish) VIX instrument of TVIX fell a considerable -12.1%, settling @ $7.17. Near term outlook is for further downside, and the usual 'decay' problem sure won't help.


TVIX, daily

Summary

*first, an update on the daily VIX

As I noted yesterday, the daily closing candle for the VIX did not bode well for the equity bears. Today's gap lower was certainly not exactly a surprise. A black-fail candle - as I like to call them, are not to be dismissed lightly
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As for the TVIX, rest of the week doesn't look good.

My broader market outlook remains a target equity cycle high around the time of the next FOMC (March'19). If that is the case, the TVIX will merely decay for another 10 trading days or so.
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As ever...such lev' instruments are for short term holds only. Rarely do multi-month holds work out..even when the trend is going the 'right' way.

UGAZ - weakness despite geo-political concerns

Probably the most notable weakness of the day was in Nat' Gas prices. Despite some very valid concerns about the Russia/Ukraine situation, Nat Gas prices swung from minor opening gains, to close -2.3%. The 3x ETN of UGAZ closed -7.3% @ $25.19


UGAZ, daily

Summary

*first, an update on Nat Gas' weekly

So..Gold, Silver, and Oil all benefited from concerns about the increasingly unstable situation in the Ukraine..yet Nat' gas actually declined. I'm pretty bemused at this, maybe it will turn higher tomorrow..or later this week, but really..its kinda odd.

Of course..spring is coming though, and we're another day closer to a seasonal peak..before 6-9 months of downward price pressure.
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As for UGAZ, the statistical decay will likely be a real nightmare across the coming late spring/summer. As ever...such 3x leveraged instruments will generally slip lower on a month to month basis..even if the trend is somewhat in their favour.