Copper Top Battery (FCX)

Copper Top Battery (FCX)

It’s a difficult thing – reality.


Tough to identify.  And tough to digest.


In some fields, it makes little difference; one can ignore reality for years, decades, even centuries in some cases, before the truth finally makes its appearance.  Then the jig is up.  Take the former Soviet Union, for example, or the contemporary, foolhardy Venezuelan effort to copy it.

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All the while, though, before the eventual reckoning arrives, myriads of souls are set adrift, lost in the invention of men – in the lie.  And while some may make great names for themselves from it, and though fortunes may be won or lost along the way, many, too, will lose everything.


Our World of Deceit


We see it today across a variety of venues, in the food that we eat, the alcohol and cigarettes and drugs that we consume, the morbid – even sordid – images that we watch at theaters and on our home computers, and no less in the ideals that we hold dear.  We see it in those that we choose as models to emulate and in all the energy we invest in things vain and fleeting.  And if we’re honest, we recognize that in far too many respects the lie has, indeed, caught us.


There’s no shortage of deception and no end to it changing, mutating its form into newer, more palatable fibbery daily, growing like pathogenic bacteria, feeding off our innocence, our timidity, our vanity, festering equally well in the world of politics, finance, and indeed, across the full spectrum of human action.

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But there are people and places less apt to fall for the lie.  There are some quarters where folks lead a more timeless existence and are far less likely to succumb to the dictates of the latest fashion.


For our part, we know that the stock market is one of two venues where lies will not stand (the second being the battlefield).  In the markets, you’re either long or short, and the market is either moving up or down.  You’re either profiting or losing, and no amount of self-delusion can change that fact.


The market is the ultimate civilian test of our ability to perceive reality.  It’s the arena where every minute one’s ability to see truth and act accordingly is objectively judged by the amount of money in one’s wallet.  It’s a domain in which delusion equals bankruptcy.


Not like sports, where the referee’s whistle, or boundary lines or drunken fans running onto the field can suspend the action and offer players a moment to regroup, think a little and return to the action refreshed.


The markets never stop.  They’re open 24 hours a day all year round, and if your position is open, it’s open to the possibility of either exorbitant gains or catastrophic losses – and everything everything depends on your perceptions – and your ability to act on them correctly.

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Those who survive the financial wars, no less than those competing with broadswords and battleaxes, are those who possess a starkly accurate read of reality, who judge their positions coldly, and either enter the fray or cut and run.


For them, what is, and what they want to be, are never be confused.


Trading the Truth


We’re going to set up a ‘reality’ trade for you in just a moment, but first, we have some interesting news to report as we go to file.


Long-time commodities trader Dennis Gartman had the following to offer in a letter that reached us just moments ago:


“… perhaps the world is finally awakening to the fact that World War III has begun in earnest … We are convinced now that even the Obama Administration can no longer avoid the facts of the age; that Islam and the West are at enmity one with the other and in this light equity investment is wholly ill-advised.”


Now, we can’t be sure that equity investment is ‘wholly ill-advised’ at this point, but we do tip our hats to a man who got half of the equation right, and whose readiness to make a matter-of-fact pronouncement on the issue is no doubt one of the reasons for his longevity in a business that’s as merciless as war.

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You got it, Queenie!


The trade we’re after this week is a short term affair that hinges on a number of factors.


The first is the price of copper, which, as you’ll see below, is sucking wind after having broken below former support.


Have a look –

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Copper has been declining for the last three months and with it, of course, all the major copper miners.


The question today is whether former support at roughly $2.05 (red line) will now act as resistance, effectively putting a lid on any further gains for the metal – and the stocks.


And while we can’t be certain, we do see an excellent opportunity emerging with one major copper miner, Freeport-McMoRan Copper and Gold (NYSE:FCX), whose shares have declined meaningfully over the last several days, and which should continue to do so in the weeks ahead.


Have a look at the chart –

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The stock’s support at $10 has been tested repeatedly in the last month, with buyers emerging on at least five occasions to buoy the shares (in red).  At this point, though, it’s do or die, as several moving averages are now pressing down from above (in blue), and both RSI and MACD have descended below their respective waterlines, the threshold level for many technicians looking for a sell signal (in black).


Our hunch is that there’s a far greater chance here for a dump than a jump, so we’re going all in, short term, with the purchase of an in-the-money PUT option.  No hedge.  No nothing.


We go in-the-money because we’ll still have something in hand should the stock reverse higher and move toward resistance at $11.00.



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With kind regards,


Hugh L. O’Haynew

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