A Long Wait Pays Off

Here's a chart for subscribers to Red-Hot Canadian Small-Caps ...Patience pays off as Wavefront goes ballistic. You'll find the news in today's issue of Red-Hot Canadian Small-Caps.

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Monday Is Chart Day

Gold Increases in Asia as Negative Real Interest Rates in U.S. Spur Demand Gold rose in Asia after the biggest decline in 11 weeks as negative real interest rates in the U.S. increased demand for the metal as an alternative investment.

Bernanke Ease Makes Bulls Out of Dollar Bears Anticipating Surging Growth Ben S. Bernanke's decision to lower interest rates 1.25 percentage points last month will end the dollar's two-year slide, according to the world's biggest currency traders.

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Canadian Metal Mania in Money and Markets

My latest MoneyandMarkets column is up, with more details on my trip to Canada ...


Metal Mania in Canada! by Sean Brodrick Wednesday, January 30, 2008 7:30 AM
The Vancouver Resource Investment Conference I attended last week was a treasure-trove of undiscovered stocks. What's more, the pullback in the broad markets is turning these ... [More...]

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Stories and Charts for Monday

10 Stories You Should Read This Morning …

1) 1000% hedge fund wins subprime bet

The decision to use derivatives to short, or bet against, low-quality US home loans taken by a select group of hedge funds last year appears to have become the most profitable single trade of all time, making well over $20bn in total so far this year. John Paulson’s New York-based Paulson & Co, the biggest of the group with $28bn under management, is said by investors to have made $12bn profit from the trade already.

However, Mr Lahde, whose fund is one of the smallest specialists shorting subprime, has now begun to return money to investors, telling them in a letter: “The risk/return characteristics are far less attractive than in the past.”

In his letter, Mr Lahde said he expected the collapse in value of subprime mortgage-linked securities to be repeated for bonds backed by commercial property loans in a deep recession – which he also predicts.

“Our entire banking system is a complete disaster,” he wrote. “In my opinion, nearly every major bank would be insolvent if they marked their assets to market.” He also said he would be putting some of his own profits into gold and other precious metals.

2) Sovereign wealth funds on Monday indicated a hunger for Asian assets, with China’s state investment agency hiring Japanese market strategists and Dubai International Capital kicking off its Asian shopping trip with a small stake in Sony Corp.

Oil exporters, including Norway, Russia and the Middle East, held up to $3,800bn in foreign financial assets through sovereign wealth funds, central banks and wealthy individuals at the end of 2006, according to McKinsey Global Institute. Asian central banks, part of whose foreign exchange reserves have been split off into more actively managed vehicles, held a total of $3,100bn. That is more than double the total assets managed by hedge funds and roughly quadruple that held by global private equity. These numbers, measured at the end of last year, already look out of date. So far this year, Asian FX reserves are up 20 per cent to $3,700bn. As for petrodollars, MGI calculates that if oil prices remain above $70 a barrel, nearly $2bn of new petrodollars will enter global financial markets every day.

3) While the news for Detroit gets worse and worse, there are plenty of American car makers who are working on the next big thing. Here are some of the cars you may be driving 10 years from now

4) Holiday Sales in U.S. Climb on Discounts; Individual Shoppers Cut Spending Sales gained in the days after the U.S. Thanksgiving holiday as retailers lured more customers with discounts even as individual shoppers spent less on average.

5) Worst Month for Stocks Since 2002 Shows Smallest Companies May Be Cheapest The cheapest small-cap stocks in four years are luring equity investors battered by the biggest monthly losses since 2002.

6) BHP Billiton Bid for Rio Tinto Loses Confidence of Investors, Steelmakers BHP Billiton Ltd., the world's largest mining company, is losing the support of investors and steelmakers for its proposed $128 billion takeover of Rio Tinto Group.

Also … Australia's S&P/ASX 200 Index rose the most for more than two months, led by Rio Tinto Group on reports China Investment Corp. may counter BHP Billiton Ltd.'s takeover bid for the world's third biggest mining company.

7) Dollar Displaces Yen, Franc as Favorite for Carry Trades With Rand, Real Using the dollar to pay for purchases of currencies with higher yields is proving to be the most profitable trade in the foreign-exchange market.

8) Areva Wins Record $11.9 Billion in Nuclear Reactor Contracts From China Areva SA won an 8 billion euro ($11.9 billion) agreement from China to build nuclear reactors, a record for the French company, as the fastest-growing major economy diversifies energy supplies.

XX Sean’s note – Areva often sells reactors with the agreement that if you buy their reactor, they’ll supply you the fuel. Look for Areva to make more mining acquisitions.

9) Gold Gains for Third Consecutive Day on Weaker Dollar, Stronger Crude Oil Gold climbed for a third consecutive day in London as oil rose and the dollar declined against the euro, spurring demand for the metal as an alternative investment.

10) Soybeans Rise to 34-Year High in Chicago on Demand Outlook; Soy Oil Gains Soybeans in Chicago rose to the highest in 34 years on speculation a weaker dollar and rising oil prices may compound surging Chinese demand.

Here's a note, from currency analyst Boris Schlossberg: “Tuesday could prove to be a more exciting day for dollar traders, as the Conference Board’s consumer confidence survey for the month of November is expected to support more cynical retail sales predictions, as the index may drop for the fourth consecutive month to a two-year low of 91.0 in the face of record high gasoline prices and declines in the stock markets. If this is indeed the case, fed fund futures will likely continue to suggest that investors are ramping up speculation of a December rate cut by the Federal Reserve, leaving the US dollar open to further declines.”

On a holiday note: The cost of 5 golden rings, bought over the internet, is up 20% year over year.

Check out my new gold and energy blog at MoneyAndMarkets.com

Today's Chart

I was busy with issues today and I had to suddenly change tracks on my MoneyandMarkets.com column for Wednesday. Anyway, check out this chart of the small-cap Russell 2000 Index ...
I think we're in for a pullback. I added an ETF to Red-Hot Canadian Small-Caps today that aims to track 200% of the INVERSE of the Russell 2000 Index. We'll see how it does.

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Market Update

Natural Resource stocks are taking their lumps today as investors A) grab gains and B) take defensive positions with the Dow down over 200 points as I write this. Also, the rise of the Canadian Dollar against the US dollar must be worrying Canadian investors -- Canada sells 70% of its exports to the US, though I think that will change in a big way over the next few years (hello, China!).

Natural resources have had a great run lately, so it's not surprising there is profit-grabbing, as Red-Hot Canadian Small-Caps subs did a couple days ago. It's all part of the ebb and flow of the market.

Let's look at a daily chart of the S&P/TSX Composite ...You can see that the S&P/TSX Composite is dropping below its 20-day moving average (the red line) today. Many "black box" technical trading systems take that as a sell signal. The TSX has enjoyed a great run since its low in August, so it is due for some consolidation before the next leg up.

My target for a pullback would be the Bollinger Band -- right around 13922. It's not written in stone -- there is other support at 13663. And, of course, the TSX could rally this afternoon to close back above the 20-day moving average.

The Green line on the bottom is the longer-term uptrend. Will the TSX pull back that far? It's scary to think about, but just think of the opportunities.

I'm glad we took some gains. One of those didn't work out as planned, because the stock pulled back too quickly for you to get filled on the order. Hold it -- a pullback should lead to another rally.

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Riding the Gold Breakout

I've added gold stocks to all my portfolios recently. Let me sum up some of the reasons why in chart form ...
And this brings us to the gold stocks. I'll show you one -- the one we added to Red-Hot Canadian Small-Caps on Monday.

I'm fairly sure no one but my subscribers comes to this blog anyway. If you aren't a subscriber, remember, it's just as important to know when to get out as to know when to get in. And only my subscribers will hear my recommendation on when to get out.

I've recommended Aurizon previously in Red-Hot Canadian Small-Caps, and we took some nice gains. All things considered, this is another good entry point.

Check out my new gold and energy blog at MoneyAndMarkets.com

Canadian Breakout!

Red-Hot Canadian Small-Caps subscribers know I’m bullish on oil, and I wrote on that theme in my MoneyandMarkets column this week – a column that was originally titled “Peak Oil and The Nuclear Option” before my editors got a hold of it.

Anyway, I recently (March 28) added a Canadian oil stock to the Red-Hot Canadian Small Caps portfolio to ride what I expect will be surging oil prices this summer. And here’s the good news – the stock just broke out to the upside.

The open gains are still small, but my target on this is $24 – a 53% rise from recent levels.

Oh, and that oil sands stock that is in the Red-Hot Canadian Small Caps portfolio -- about the only oil sands company worth buying if you ask me -- hold on to that one, too. It's on the launch pad.

Check out my new gold and energy blog at MoneyAndMarkets.com

Playing the Pullback in Red-Hot Canadian Small-Caps

North American markets plunged yesterday morning only to recover by the end of the day. Now the futures look abysmal (again!) What the heck is going on?

Many people (including my friend and currency expert, Jack Crooks) say it's the unwinding of the yen/US dollar "carry trade." A carry trade occurs when a speculator borrows in one currency and trades in another. Few markets have been riper for carry traders than Japan, thanks to the two-decades of recession which in turn made the Bank of Japan (BOJ) institute near-zero borrowing costs in an effort to get people to borrow money and put it to work in the economy.

Many large investors have taken advantage of the free money to borrow hundreds of billions of yen at 0.25% and invest that money in US Treasuries paying 4.5%. But they also invest the money in US stocks, too. Hey, it's "practically free" money. Why not?

But note the quotes I put around practically free. Money is never truly free. It always comes at cost to someone.

Anyway, the carry trade tends to make investors rich in a bull market. So long as rates are cheap and the spread between the rates is large, this results in higher liquidity, increased demand for equities and higher stock prices worldwide.

Still, it's a delicate balance. The BOJ raised its prime rate to 0.5%. What's more, the BOJ is making noises that those rates may continue to rise. Investors doing the carry trade start to price in that risk. They scale back on their carry trade investments. This reverses the tide of global liquidity, and stock prices go down.

One good bet in this market is the Japanese yen. It surged against the US dollar this week. Another good though less-sure bet is that stocks will go lower before they go higher. The question becomes how low will they go?

Jack Crooks is pretty bearish. Mike Larson is standing on the tallest tower crying havoc and chaos. These are two very smart guys. Me, I'm worried, but not THAT worried. I take a more long-term view, and the long-term fundamentals driving the global commodity are still very strong and still in place.

Heck, it's more than just commodity fundamentals that are bullish. The earnings of S&P companies have soared in the past four years -- I think they've doubled -- and stock prices don't reflect that. In a way, some people could argue that stocks are undervalued.

Me, I think investor and consumer psychology counts for a lot. In the short-term, that seems to be bearish -- SOMEBODY is coming out every morning and putting stocks on sale. However, I think things could look very different in another week or two.

How low could things go? Let's look at a chart of the S&P/Toronto Stock Exchange Index and see where Canadian stocks stand ...

This is a daily chart of the S&P/TSX Composite. I've put a couple of things on here.
#1 shows where the 50-day moving average came in line with the short-term uptrend. That proved to be support on Thursday.
#2 shows where the long-term uptrend lines up (approximately) with a common 38% retracement.
#3 shows RSI, which measures momentum and has gone bearish on a daily chart, showing there is likely more work to be done on the downside.

Now, some common retracement levels are 25%, 38% and 50%. These are support levels that show where an index or equity could pull back in a trend and still maintain that trend. I'm measuring mine from 2005, because that's when money started to pour into commodities. In that case, a 25% retracement brings us to around12,390. 38% is 11,841 (close to the long-term uptrend), and 50% is at 11,350. That's right, the TSX could pull back from its peak above 13,400 all the way to 11,350 and still be in a bull market.

And this is shorter-term -- since 2005. The Canadian stock market really turned around in 2002. closing at around 5978. Doing retracement levels from THAT level, first support (25%) comes in at 11,550. I won't tell you how low the other levels are because it's too early to start drinking.

Do I think it will come to that? No. Despite this recent pullback in China, that economy is super-strong. Ditto for India. In fact, the global economy is humming along. And that will fuel the continue global appetite for metals, energy, you name it.

So how low do I think the major indices could go? Well, measuring from 2005 again, I checked the percentage pullbacks every time the TSX closed below its 10-day moving average. The AVERAGE pullback was 7.2%, and the deepest was 12.5%. This is just since 2005, mind you -- do you remember that 12.5% pullback? How easily we erase the bad news from our memories.

As of Thursday's close, the TSX is 3.8% off its highs. So it has a ways to go just to get to an AVERAGE pullback of 7.2%.

A pullback to 12,000 would be a 10.7% pullback. And a pullback to 11,841 (the 38% retracment, and close to the long-term uptrend) would be a 12% pullback. THESE are my targets for buying again.

To be sure, the bottom could come a lot sooner than that. As I said, the underlying fundamentals are GREAT. But I'm glad we sold two positions to raise cash in Red-Hot Canadian Small-Caps yesterday. That money will come in handy later when there are bargain-priced stocks just waiting to be picked up.

Check out my new gold and energy blog at MoneyAndMarkets.com

RCS Uranium Stock Goes Ballistic

You know what it is, boys ...

This is a nice move for a stock that Red-Hot Canadian Small-Caps subscribers added just two weeks ago.

By the way, the stock picks in my Small Uranium Wonders report, which came out in late January, are now showing double-digit open gains, on average. But there's still time to get onboard. In fact, one of these stocks is an ugly duckling that could turn into a beautiful swan very soon.

For more on Small Uranium Wonders, CLICK HERE.

Check out my new gold and energy blog at MoneyAndMarkets.com

2 charts for ya

I'm busy as a bee at the Orlando Money Show, but here are two charts for you...

First, an update of last week's weekly silver chart...

and here is gold on a daily chart...

Bullish? Heck, yeah! If you didn't get in on the most recent recommendations in Red-Hot Canadian Small-Caps before they blasted off, look for an update for you on Monday.

Check out my new gold and energy blog at MoneyAndMarkets.com

My Latest Money and Markets Column Is Up

It's about Canada, naturally. You might find it interesting. Here are some stats...

1. Vancouver is a hotbed of Canadian small-caps. That’s because the province of British Columbia is home to 60% of Canada's exploration companies. Mineral exploration in B.C. (as the locals call it) soared to $224 million in 2006. That’s up 20% from 2005 and more than 800% from 2001!
   
   
2. Three mines opened in British Columbia last year. And as many as five more could start production in B.C. this year.
   
   
3. Meanwhile, across Canada, it’s the same story. Mineral exploration expenditures tripled in just four years!

Read the rest by CLICKING HERE.

Check out my new gold and energy blog at MoneyAndMarkets.com

Uranium Stocks Blast Off

Yesterday, we saw a stock that was recently added to the Red-Hot Canadian Small-Caps portfolio jump 14% in one day...

That was pretty sweet. Then, overnight, the most recent addition to the Red-Hot Asian Tigers portfolio -- also a uranium stock -- jumped 14%!

The stock was recommended in the January 3 issue of Red-Hot Asian Tigers, but I told subs to buy it on a pullback, so it wasn’t filled at our price until January 15^th. No sooner did subs get in than this thing started ramping up! So, it racked up 28.5% gains in five days, and 14% in just one day! (Subscribers who bought the US tracking stock on the pink sheets won't see the gain until Monday, because pink sheets always report prices a day behind).

All in all, I think this is a great time for me to be going to Canada to the Vancouver Resource Investment Conference to talk to people from some mining stocks I'm really interested in. At least half of them are uranium stocks. I don't know if they're all winners -- I'll have a better idea after my trip -- but man, I am seeing some HUGE bargains just waiting for you to reach out and grab them.

I'll finish up my next uranium report while I'm up there. You can read about that by CLICKING HERE.

As for Red-Hot Canadian Small-Caps and Red-Hot Asian Tigers subscribers -- you already have uranium stocks in your portfolios (RHAT subs have FOUR of them). And you should have all the uranium stocks from my first report in October. So if you think you have enough, I don't blame you.

But if you want an even bigger piece of what could be the biggest bull market of our lifetimes, call 1-800-400-6916 for your special discount rate on the new report.

Check out my new gold and energy blog at MoneyAndMarkets.com

Charts for today

I am swamped today, so here are some charts to look at. Red-Hot Canadian Small-Caps and Red-Hot Asian Tigers subs take note -- I'm showing a stock for each service that you already hold...

First, let's look at crude. Not so bullish.

The bounce today isn't very convincing. On the other hand, look at the volume -- we're seeing big selling by funds, particularly hedge funds. You know they all run to one side of the boat at once. That unbalances any market, but it also helps us find bottoms (and tops).


Now for the next chart. It's interesting to see how the Australian market broke away from the S&P 500 in late December, but has come back to Earth hard. Today was a very bullish day in Australia. We'll see if we have follow-through.


RCS subs should know that Forsys Metals, my latest uranium pick, pulled back and got you filled on Friday, then took off like a rocket. Note the rising triangle -- bullish!
And here is one for RHAT subs. Check out the bullish action in Sino Gold! Your whole portfolio had a very bullish day.


But who knows what tomorrow will bring for either service. Stay tuned!

Check out my new gold and energy blog at MoneyAndMarkets.com

Enlist Now, and Win The Global War for Natural Resources

My latest MoneyandMarkets.com column is up, In it, I talk about the latest developments in the Global War for Natural Resources. I believe this struggle, not the battle with al Qaeda and fundamentalist Islam, will define the 21st century. I've banged the table about this before, but now I'm putting my money where my mouth is and launching a new trading service, with the goal of helping people put their money to work in this War for Natural Resources ... and potentially make a pile of money themselves.

Here are some ways the new service is different from Red-Hot Asian Tigers and Red-Hot Canadian Small-Caps:

1) The new service is US-listed stocks only.
2) It will recommend trades in mid- and large-cap stocks. The trades will also be shorter-term. In other words, these aren't the swing-for-the-fences small-cap trades that RCS and RHAT focus on.
3) The trading is primarily technical and short-term in nature. There won't be long explanations or in-depth analysis (at least in the issues -- we still do a lot of analysis behind the scenes).

There are more differences, and you can find out what they are by calling 1-800-430-3683. Subscribers to Red-Hot Asian Tigers and Red-Hot Canadian Small-Caps will get to test this new service FREE for three months. Just call 1-800-430-3683 and we'll hook you up.

The name of my new service: Red-Hot Resources. Yes, it's the same name as this blog. But we'll probably fold this blog into the new service down the road, as I can only do so many things at once.

You can find out more by CLICKING HERE . Or you can read my MoneyandMarkets column about it by CLICKING HERE.

Check out my new gold and energy blog at MoneyAndMarkets.com