(FCX) Archives

Trade Alert Service Blasts to New All Time High

The Trade Alert Service of the Mad Hedge Fund Trader posted a new all time high today, pushing its two-year return up to 66%. The Dow average booked a miniscule 12% gain during the same time period. The industry beating record was achieved on the back of a spectacular January, which so far had earned readers a mind blowing 10.92% profit.

Right after the January 2 opening, I shot out Trade Alerts urging readers to take maximum long positions in the S&P 500 (SPY) and the Russell 2000 small cap index (IWM). Later, I piled on longs in copper producer Freeport McMoRan (FCX) and American Insurance Group (AIG). I balanced these out with aggressive short positions in the Treasury bond market (TLT), and the Japanese yen (FXY), (YCS). Only my position in Apple (AAPL) has cost me money this year.

After grinding around just short of the previous top for four tedious and painful months, the breakout was certainly welcome news for many. Once I wracked up an unprecedented 25 consecutive profitable trades over the summer, things went wobbly. The Fed unleashed an early, surprise, pre election QE3. Then inventors stopped drinking the Apple (AAPL) Kool Aide en masse. The extent of the tax loss selling after the Obama win was also a bit of a shocker. Maybe I should take longer vacations.

Then the ?aha? moment came. I concluded at the end of November that the multiple political crises facing us were nothing more than hot air. This meant the risk markets were poised to launch multi month bull runs to new all time highs, and I positioned myself, and my followers, accordingly. In the end, that is exactly what we got.

Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service, daily newsletter, real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.

Strong Dollar Spells Death for Commodities

Newsletter

Panic is on deck, to use the baseball terminology that my foreign readers are often attempting to decipher. That is the only conclusion one can reach after getting gob smacked by the price action this morning. Copper got spanked for eight cents, oil burned $2, gold shed another $26, and silver puked 70 cents.

The tantrum like stock behavior in producing and equipment companies, like Freeport McMoRan (FCX) and Caterpillar (CAT) has been atrocious. How many of you out there know that JP Morgan (JPM) is the largest holder of futures contracts in the silver market and just got hit with a massive margin call? Why is all this happening on the 100 year anniversary of the sinking of the HMS Titanic?

Blame it all on Uncle Buck, whose recent steroid treatments has enabled him to unload the pounds, shed the fat, and adopt a new, more virile attitude towards life. Every other currency now looks like a 98 pound weakling. We now awake each morning to be greeted by the latest disastrous headline from Europe that accelerates the capital flight from the continental currency.

The Euro (FXE), (EUO), is deteriorating from bad to worse, with the foreign exchange community now clearly gunning for the next short term support at $1.26. Look at a ?10 note these days and it has recently printed upon it ?Abandon hope all ye who enter here.?

Traditional diversification currencies, like the Australian (FXA) and Canadian dollars (FXC) are now biting the hands that fed them, dragged down by their export commodities? pitiful performance. Hard as it is to imagine, the Ausie has been the world?s worst performing major currency this year, even underperforming the dreadful euro. Australian readers who followed my advice to pay for their summer vacations in advance at the $1.10 that prevailed at the beginning of the year are smiling. Those they didn?t are now looking for a discount caravan at a remote, dingo plagued campsite somewhere in the Outback.

The Japanese yen, the currency that everyone loves to hate, has perked up to a flight to safety bid while the rest of the world goes to hell in a hand basket. We are currently in between Bank of Japan quantitative easings there, so don?t expect this to last much longer. The tipping point into hyper debt driven, economic Armageddon there creeps ever forwards with each passing day on the calendar.

Take a look at the charts below for the US Dollar Index and it is obvious that things may soon get a whole lot worse. For starters, the dollar has only rallied back to the midpoint of a multiyear range. To get back up to the top of that range it needs to appreciate another 10%. To understand why this is a problem, look at the second chart that proves a tremendous inverse correlation between the dollar and commodities. A strong dollar always leads to falling demand for the hard stuff.

The third chart suggests that the other grotesquely overvalued asset class, US stocks, is also cruising for a bruising. Commodities led equities in this downturn by three months, as they usually do. If they break support here, then they will easily drag the (SPX) down to my medium term target of 1,275, off a heart thumping 10.3% from the recent top. If the economic data continues to worsen on a daily basis, as I have been chronicling on a daily basis for the last two months ad naseum and ad absurdum, then we have a clear shot at the fall, 2011 low at 1,060.

Oops, There Goes My Equity Portfolio

Why Dr. Copper is Looking Ill

Newsletter

Traders like to refer to the red metal as Dr. Copper because it is the only one that has a PhD in economics. This year it has been proving its credentials as a great predictor of future economic activity once again.

Copper has been leading the downside charge for all risk assets since it peaked on February 10. After looking at the latest trade data for the red metal, it is clear that it has a lot more bleeding to do. This does not bode well for risk assets anywhere.

The harsh truth is that copper stockpiles in China, which accounts for 40% of global consumption, are the highest in history. Estimates for the size of current stockpiles in country run as high as 3 million tonnes, with a stunning 918,000 tonnes coming in during the last six months. Consumption totaled only 1 million tonnes in Q1, 2012, and could fall to as low as 1.7 million tonnes over the remaining three quarters. The mismatch is huge, and makes the current price of $3.64 a pound look pretty expensive.

This imbalance is occurring in the face of a slowing Chinese economy. Only yesterday, the Chinese purchasing managers index for April came in at 49.1, well below the boom/bust level. Residential real estate, the largest consumer of copper in the Middle Kingdom, has clearly been in a bear market since last year.

The grim outlook is expected to make a serious dent into the profits of major producers, BHP Billiton (BHP), Freeport McMoRan (FCX), Rio Tinto (RIO), and Anglo American (AAUKY.PK), and Xstrata (XTA.L).

If the risk off scenario continues through the summer, then a $3.25 downside target is a chip shot. Remember that the 2009 low was positively subterranean $1.25 a pound. Bring in a real summer slowdown, and lower prices are within reach. Professionals will be selling the futures on any decent rally. Individuals can sell (CU) on market, are buy near money puts.

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