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Yet, while the stock market gains are great for the bulls, I still have an issue with the rate of the stock market rally. Simply stated, it’s just a bit too fast, too quick.

I also wonder why the stock market is ignoring the continued fragile state of the global economy in spite of a deep recession in the eurozone and stalling in China.

The reality is that we need to be concerned about how the global economy is faring. The idea of focusing too much on only America doesn’t make sense due to the increased correlation between the global economies. Slowing in Asia and Europe will impact U.S. companies. (Read “Why America Will Struggle if the Eurozone Languishes.”)

Looking at China, while the Chinese economy continues to expand at rates we can only dream of, the country is stalling, as reflected in its demand for commodities.

Copper is a key commodity used in wiring, pipes, electronics, and other areas. When the economy expands, so does the demand for copper.

China imported less copper in February with imports declining to a 20-month low, according to the country’s General Administration of Customs (Source: “China Copper Imports Slump to 20-Month Low on Holidays,” Bloomberg, March 7, 2013, last accessed May 6, 2013.) China is the world’s top importer of copper, so the decline in the import number is important. (Source: “International Trade Centre,” NationMaster.com, last accessed May 6, 2013.)

The lower demand from China is a telltale sign that there could be more slowing on the horizon. If this is the case, then you have to wonder about the current level of the stock market.

Take a look at the chart below comparing the movement of spot copper on the Chicago Mercantile Exchange (CME), as shown by the red candlesticks, against the S&P 500, reflected by the green line.

    Chart courtesy of www.StockCharts.com

You will notice the direct correlation in the first part of the chart up to around March, when copper prices begin to trend lower on global growth concerns, while the S&P 500 continues to ratchet higher, based on my technical analysis.

Looking at this comparative move, I’m somewhat baffled by the stock market. The reason for the decline in copper prices is the rise in copper stockpiles due to the global slowing.

So why is the S&P 500 continuing to move higher?

It’s true, the U.S. economy is improving across the board, but you have to also consider or discount in what’s happening with ... Read More

See the full story here →

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Inventories at LME (London Metals Exchange) warehouses have risen in excess of 190% since October alone. Inventories are now at levels not seen since 2003 at more than 590,000 tons.

LME inventories are closely watched by traders and economists alike as a key indicator of global economic strength and activity. Normally, such rising levels of copper in warehouses would be a flashing red light warning about economic weakness ahead globally.

According to the Commodity Futures Trading Commission (CFTC), traders have jumped on this inventory number and have accumulated the highest level of net short positions on copper in over six months.

To continue reading, please click here...

Inventories at LME (London Metals Exchange) warehouses have risen in excess of 190% since October alone. Inventories are now at levels not seen since 2003 at more than 590,000 tons.

LME inventories are closely watched by traders and economists alike as a key indicator of global economic strength and activity. Normally, such rising levels of copper in warehouses would be a flashing red light warning about economic weakness ahead globally.

According to the Commodity Futures Trading Commission (CFTC), traders have jumped on this inventory number and have accumulated the highest level of net short positions on copper in over six months.

To continue reading, please click here...

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Brian Hicks, portfolio manager of the Global Resources Fund, is very familiar with the mine, having visited it often. He also has personal ties as both of his grandfathers were once employed by the mine. When Brian saw the photo of the landslide posted on the web, he said the substantial destruction of the collapsed wall and falling rock was apparent, yet the tremendous scale and magnitude of the mine cannot be captured in pixels.

To continue reading, please click here...

Brian Hicks, portfolio manager of the Global Resources Fund, is very familiar with the mine, having visited it often. He also has personal ties as both of his grandfathers were once employed by the mine. When Brian saw the photo of the landslide posted on the web, he said the substantial destruction of the collapsed wall and falling rock was apparent, yet the tremendous scale and magnitude of the mine cannot be captured in pixels.

To continue reading, please click here...

Unfortunately, as we finish the first quarter of 2013, economic indicators are suggesting U.S. consumer spending is under severe pressure.

Retail sales in the U.S. economy just took a wrong turn and dropped 0.4% in March from February’s sales. Consumer spending at electronics and appliance stores, health and personal care stores, and general merchandise stores posted a negative growth compared to the same period in 2012. (Source: U.S. Census Bureau, April 12, 2013.)

Similarly, a key indicator of future consumer spending, the Thomson Reuters/University of Michigan’s preliminary consumer sentiment index declined to the lowest point in nine months in April. The preliminary consumer sentiment index registered at 72.3 in April, down from 78.6 in March. (Source: Reuters, April 12, 2013.) Remember: consumers turning pessimistic means a pullback in consumer spending.

At the other end of the equation, we see businesses in the U.S. economy increasing their inventories. According to the U.S. Census Bureau, manufacturing and trade inventories in February of this year edged up almost five percent from a year ago. (Source: U.S. Census Bureau, April 12, 2013.)

Businesses often build up inventories in anticipation of demand, but looking at consumer sentiment and retail sales, I highly doubt that’s the case. It’s actually the opposite; business inventories are increasing because of a lack of demand.

Think of what happens to the GDP if consumer spending declines further from here.

In the draft version of the International Monetary Fund’s (IMF) World Economic Outlook, the IMF states that it expects the GDP of the U.S. economy to grow 1.7% this year. This forecast is 15% lower than the IMF’s previous growth estimate of two percent GDP. (Source: Dow Jones Newswires, April 11, 2013.)

In the last quarter of 2012, the U.S. economy witnessed dismal growth and actually tinkered with contraction. Nothing has changed since then. Looking forward, economic conditions have worsened as consumer spending is in trouble.

All of this “bad data” will eventually trickle into the stock market. Corporate earnings of S&P 500 companies for the first quarter of 2013 are expected to show negative growth for the second time in the last three quarters. I am very skeptical of any real growth in the U.S. economy this year.

Michael’s Personal Notes:

The threat of an economic slowdown in the global economy is increasing each day, but thanks to ... Read More

Copper stockpiles in the London Mercantile Exchange warehouses have reached a 10-year high. Since the beginning of this year, copper inventories have surged 84%. (Source: Wall Street Journal, April 11, 2013.)

According to the World Steel Association, steel demand in Japan is expected to decline (for the second year in a row) by 2.2% in 2013 and a further 0.6% in 2014. Similarly, the use of steel in the U.S. is expected to slow this year compared to 2012. (Source: World Steel Association, April 11, 2013.)

Other base metals, often referred to as “industrial metals,” are witnessing their demise as well. Consider the chart below of the Dow Jones-UBS Industrial Metals Index.

Chart courtesy of www.StockCharts.com

This index, comprising different base metal prices, has been declining since February and has shed more than 11% of its price. Base metals are used in many different industries, and if their demand slows and prices decline, then that’s not a great sign for the global economy.

Dear reader, it’s not a hidden fact: major economic hubs in the global economy are slowing down. In the U.S., we have high unemployment. Once-strong nations like Germany and France are being suppressed by an economic slowdown in the eurozone. Japan is in an outright recession. China’s economy is slowing, too.

After the economic slowdown of 2009, central banks in the global economy were able to inject significant amounts of money into their countries. Looking forward, what I do see happening is more central banks in the global economy resorting to even more paper money printing in the hopes to weather the economic slowdown.

Unfortunately, the economic problem at hand is slowing demand in the global economy; money printing will not change that problem.

Yes, gold bullion prices are under severe pressure now, but if central banks in the global economy turn to more money printing, then there will be an abundance of fiat currency in the system, and it will be the precious metals that will provide safety and stability.

A Note on Gold Prices:

Gold bullion prices fell sharply on Friday and again this morning. The media blamed the slowing Chinese economy and indications that the Federal Reserve would pull back on its $85.0-billion-a month quantitative easing program earlier than expected.

My opinion is that gold prices are correcting sharply after a multiyear bull market in the metal. Unlike the media, I don’t see gold entering a bear market. In fact, I see the current action in the ... Read More

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With signs of a sustained economic renewal in the United States, don’t be surprised to see the demand for silver ratchet higher. The uncertainty is the timing of the move.

Yet with silver currently doing very little, sitting below $30.00, it may be time to begin looking at the white metal as a possible upcoming trade back above $30.00.

Silver has been declining, caught in a sideways trading channel since September 2011, based on my technical analysis. Over the past year, the metal has made a new high only nine times, but in that same timeframe, it managed to make 15 new lows. Shortening the time to six months shows an even worse scenario, with 19 new lows and only two new highs.

As you can see in the chart below, spot silver has absolutely no support at this time; but this will be tested, as it heads toward a key support line, as indicated by the lower horizontal blue line in the chart.

As it has appeared numerous times in the past few years, silver looks set for a bounce back up past $30.00 to the $35.00 level, as it did in 2011 and 2012. Should this happen, it could mean a bounce of 25% or more. Of course, playing silver futures could multiply the gains.

For the white metal to advance higher, we need to see a strong move back to the 50-day MA of $29.68, the 200-day MA of $30.73, the 13-week high of $32.45, and then to the target 52-week high of $35.48. The relative strength is extremely weak and will need to gain strength.

Chart courtesy of www.StockCharts.com

For traders, an upward move could see silver prices take another run at $40.00, along with the $50.00 level reached in April 2011, as indicated by the blue oval on the chart above.

The reality is that the trading in silver is often rapid, so you need to be on top of the chart.

The bottom line is: just like copper, which moves in relation to the economy and gross domestic product (GDP) growth, the movement and direction of silver are dependent on the global economy.... Read More

But now many investors are bailing on the red metal. Prices have slipped about 9% this year, and inventories are soaring.

Copper prices hit an eight-month low today (Wednesday) as slowing economic growth has led speculators to take more short positions on the metal.

Copper inventories also appear to signal low demand. Stockpiles of the red metal in the London Metals Exchange are at the highest level since October 2003.

But what appear to be bearish signals for investing in copper are not the case. Here's what investors need to understand...

To continue reading, please click here...

But now many investors are bailing on the red metal. Prices have slipped about 9% this year, and inventories are soaring.

Copper prices hit an eight-month low today (Wednesday) as slowing economic growth has led speculators to take more short positions on the metal.

Copper inventories also appear to signal low demand. Stockpiles of the red metal in the London Metals Exchange are at the highest level since October 2003.

But what appear to be bearish signals for investing in copper are not the case. Here's what investors need to understand...

To continue reading, please click here...

The London Mercantile Exchange (LME) has reported that in the first quarter of this year, copper inventories hiked up 78% to 569,775 tons. Copper inventories are a key indicator of industrial production and manufacturing, because the metal is used to make many different goods. Copper inventories increasing to record highs suggest there isn’t a lot of production happening in the global economy.

Likewise, one of the key indicators I often quote in these pages, the Baltic Dry Index (BDI), has also been lagging. This key indicator shows the demand in the global economy. If it rises, it means global demand is increasing; if it declines, then the opposite is true. Take a look at the chart below:

 Chart courtesy of www.StockCharts.com

Unfortunately, the five-year chart above clearly shows that the demand in the global economy hasn’t really picked up since the financial crisis. In fact, this key indicator is still in decline despite all the paper money printing by central banks around the world.

To top this off, emerging markets in the global economy, which were the main force driving economic growth after the financial crisis, are now in a rut and are looking for growth.

China, for example, has witnessed an economic slowdown that is causing havoc in the country. In 2013, the Chinese economy is expected to grow at the slowest pace seen in many years.

Likewise, nations like South Korea are struggling. The country lowered its growth targets for 2013 by more than 20%, from three percent to 2.3%, due to poor local demand and slowing exports to the global economy. (Source: Financial Times, March 28, 2013.)

A significant portion of our gross domestic product (GDP) comprises exports to the global economy. In 2012, exports from the U.S. to the global economy were $2.18 trillion. (Source: Federal Reserve Bank of St. Louis, March 28, 2013.) An economic slowdown in the global economy will impact U.S. exports and the country’s GDP.

In the fourth quarter of 2012, U.S. economic growth was dismal, as the suffering in the global economy increased and the demand for U.S. exports declined. Seeing our GDP growth turn negative will not take much, given how fragile the global economy has become. The optimism created by a rising domestic stock market masks economic reality.... Read More