BullMarketRun.ca

Gold is rebounding today after its sharpest drop in 3 months yesterday…as of 9:25 am Pacific, the yellow metal is up $9 an ounce to $1,344…Silver has jumped 47 cents to $23.84…the U.S. Dollar is getting pounded again with the Dollar Index off by more than a full cent at 77.15… if you look at the bull market in Gold over the last decade, the biggest single-day moves have consistently been to the downside…yesterday was another healthy shakeout and savvy investors will keep focused on the big picture which is an extremely bullish one for precious metals and commodities in general…Gold is underpinned by a number of factors including the “power shift” to emerging markets and strong investment demand as players diversify from fiat currencies…while much was made of China’s rate hike yesterday (the country raised its benchmark lending and deposit rates by a quarter point after inflation accelerated to the fastest pace in 22 months), the fact is that a very modest increase in Chinese rates is not going to put an appreciable damper on growth in that country…there also continues to be a negative real interest rate in China (inflation is significantly higher than interest rates) which means there is no “opportunity cost” there for Gold…the action in the CDNX yesterday was very bullish given Gold’s sharp sell-off…the CDNX, our leading indicator, shed less than the TSX Gold Index and bounced off its 10-day moving average just like it did in late August and in late September…this morning the CDNX has hit a new 52-week high…as of 9:25 am Pacific, the Venture is ahead a whopping 41 points to 1856…the “China” factor is keeping interest high in a number of rare element plays, just one example being Rare Element Resources (RES, TSX-V) which has more than doubled since late September and is now nearly $14 per share…Gold Bullion Development (GBB, TSX-V) is up a penny at 57 cents with the closing of the company’s $8 million financing expected very soon…Richfield Ventures (RVC, TSX-V) released more positive drill results from Blackwater this morning including 171 metres grading 1.04 g/t Au in BW-81…results from the 6 holes were pretty much in line with market expectations as evidenced by the fact the stock is unchanged at $2.75…the company will continue to drill aggressively throughout the rest of the fall and winter as it attempts to define a multi-million ounce deposit…Seafield Resources (SFF, TSX-V) is showing signs of life this morning…it’s currently up 2 pennies to 24 cents on volume of over 900,000 shares…BMR is attempting to arrange an interview with Seafield President and CEO Tony Roodenburg for an update on the company…

Gold took a hit today, falling as much as $40 an ounce primarily on a knee-jerk reaction to the first rate hike in China in 3 years.  A violent move such as that does not scare us in the least.  In fact if you look at the bull market in Gold over the last decade, the biggest single-day moves have consistently been to the downside.  Today was another healthy shakeout and savvy investors will keep focused on the big picture and embrace any further weakness which is expected to be limited.

Tonight, BMR’s Technical Analyst takes a fresh look at the TSX Gold Index which fell in sympathy with the yellow metal today and closed at 389, just below its 50-day SMA and only 11 points above its 100-day SMA.  Strange thing is, the TSX Gold Index is now back to where it was 5 weeks ago (Sept. 14) when Gold was trading about $70 lower around $1265, and nearly 4 months ago when the yellow metal was at $1,250.  This clearly demonstrates we’re far from a top or a “bubble” in Gold mining stocks.  In fact, the party has hardly begun.

Could there be a little more weakness ahead?  Absolutely, as John points out below, but the downside from here with the TSX Gold Index is limited (the action in the CDNX also confirms that):

John: Tonight we look at the S&P TSX Global Gold Index in Part 3 of our 4-part series on indexes and the Gold Sector. The TSX Gold Index is a modified market capitalization index of 19 precious metals mining companies with a minimum market capitalization of $240 million (U.S.).  No individual component has a weight in the index greater than or equal to 25%.

Looking at the weekly chart of the TSX Gold Index, we see that it rose from a low of 300 in February of this year to a high of 390 in June before it retraced for 5 weeks to the 345 level.  It has risen again to a new all-time high of 410 during October.   Today we saw it take a hit with the drop in Gold, and the TSX Gold Index closed down 13 points to 389 – its first close below 400 in 10 sessions.

Today’s close is right on a support level as shown by a short horizontal green line which is at the pivot level of the previous high in June. I have also drawn a strong support level (lower green line) at 380, just above the rising 100-day SMA.   The index closed near its session low today, so there is still some downward pressure.

A mauve circle highlights 4 “spinning top” candles. A spinning top candle has a small body and usually has both upper and lower shadows and denotes indecision. When the shadows are very long they indicate confusion between the bulls and the bears. The 4 spinning tops show there has been a lot of indecision in this index over the past 4 weeks and this came to a head today when the bears overcame the bulls and took the index to the downside.

The long term weekly SMA(50) provides very strong support at 356 as it did in July.  The weekly volume has been declining for the past 4 weeks, also indicating the possibility of a correction.

Looking at the the indicators:

The RSI has plunged out of the slightly overbought area down to the 51% level. I have drawn a previous support level at 40% (thin orange line) and it could continue down to this support, but I do not expect this support to be broken.

The Slow Stochastics is still overbought with both the %K and %D lines above 80%.

The ADX trend indicator has the +DI (green line) above the -DI (red line) in bullish orientation, but the bullish +DI peaked in the 3rd week of August (vertical blue line) and has declined from there even though the index has still climbed.  In retrospect this was a warning there could be weakness ahead. The ADX (black line) trend strength indicator is at 23 and has flattened, indicating there could be trend weakness during this correction.

The primary trend for the TSX Gold Index is still very bullish.

Outlook: I expect we’ll see some additional weakness in the immediate future but support should hold at the 380 level.  I will be surprised if it falls further before continuing its climb past 400.

The first rate increase in 3 years in China was a market-moving event today as the oversold U.S. Dollar bounced higher, sending Gold down sharply…U.S. Treasury Secretary Timothy Geithner spoke bullishly on the U.S. Dollar yesterday before the Commonwealth Club of California…G-20 finance ministers and central bank governors will be meeting in South Korea this coming weekend and no doubt the “currency wars” will be the hot topic of conversation…John’s technical analysis of the U.S. Dollar last night was timely to say the least as he stated a short-term reversal was at hand but any rally would not take the Dollar Index any higher than 79 before the greenback goes into retreat again…as of 8:55 am Pacific, the Dollar Index is up over 3/4 of a cent at 77.92 while Gold is off $27 an ounce to $1,343…the yellow metal dropped as low as $1,331… at this point no serious chart damage has occured in Gold and the fact the CDNX is holding up reasonably well, all things considered, is encouraging as that is our leading indicator…the CDNX touched its 10-day moving average (SMA) at 1806, a drop of 32 points, but has since recovered some of those losses and is now at 1818 for a 20-point loss on the day…the CDNX bounced off its 10-day moving average in late August and again in late September, so we’ll see if the trend continues…we believe it will…Gold Bullion Development (GBB, TSX-V) is off 2 cents at 56 cents (its 100-day SMA) as investors continue to wait for the closing of the company’s financing which should be in a matter of days…patience is a virtue in life and in the market, and having patience with GBB right now is important given the immense blue sky potential that exists with the LONG Bars Zone…we’re certainly excited with what the rest of the year may bring at Granada…we’re keeping a close eye on Richfield Ventures (RVC, TSX-V) which could announce additional drill results as early as today from its Blackwater Project in central British Columbia…there has been a remarkable degree of consistency in results from Blackwater over the past year with long intersections of mineable grade, so we are optimistic the newest batch of assays will be positive…Richfield is currently down 17 cents at $2.65 but on low volume of only 50,000 shares…a company around Blackwater we’re now watching again is Greencastle Resources (VGN, TSX-V) which was part of the BMR Portfolio earlier this year…we deleted it in August as we weren’t sure when Greencastle would start to get more aggressive in the exploration area…last week, however, the company announced it had acquired an option on 13,000 hectares (28 claims) in the Nechako Plateau on trend with Blackwater…work is starting immediately on that property which constitutes Greencastle’s first activity in the Gold sector in 3 years…that is an important development and may signal that Greencastle is also about to do something with its promising Nevada Gold properties…Greencastle’s chart is looking encouraging and yesterday’s close of 16 cents gives the company a market cap of only $7.2 million…the company has $6 million in cash and regular monthly oil royalties of approximately $125,000…at 16 cents VGN is a “no brainer” for patient investors who are looking for a low risk play with cash flow that offers considerable upside potential…as always, perform your own due diligence…

The United States is a nation that has lost its way.  The country has turned its back on its founding principles and is now saddled with enormous debt and levels of government intrusion into the economy and the lives of its citizens that not long ago would never have been imaginable.  The upcoming Congressional elections are likely going to be a total disaster for the Democrats with the Republicans regaining control of the House and perhaps even the Senate, but this doesn’t mean America’s problems will be fixed anytime soon.  Washington is broken.  Putting it back together will not be easy and it certainly won’t happen under the United States’ version of Pierre Trudeau in the White House.

The state of the U.S. Dollar reflects the mess the United States is in and has been a significant contributing factor in Gold’s recent surge.  Given the awful fundamentals at play, the overall outlook for the U.S. Dollar is negative which supports our contention that Gold and commodities in general are headed significantly higher in the months ahead.

Tonight we take a fresh look at the U.S. Dollar Index for the immediate future from a technical perspective.  BMR’s Technical Analyst, who correctly predicted support recently for the Dollar Index at the 76 level, outlines below how he sees the Index not being able to advance beyond 79 on any rally with a new yearly low on the horizon of just under 75:

John: Tonight we look at the U.S. Dollar Index in Part 2 in our 4-part series of Indexes and the Gold Sector. The Dollar Index is a method of determining a relative value for the U.S. Dollar in terms of a weighted basket of other currencies – the Euro, Canadian Dollar, Japanese Yen, Swedish Krona, British Pound and the Swiss Franc.

Looking at the weekly chart of the Dollar Index, we see that from a high of 89 in the 2nd week of June, 2010, it fell for 9 consecutive weeks to a value of 80.  It then rebounded in just 1 week to 83.  Then for the following 4 weeks it traded between 82 and 83.5.

On the above chart there are Fibonacci levels (blue) shown for this 9-week downtrend and note that the retracement was to the 61.8% level. Then an “Evening Star” candle pattern formed, signaling that the retracement was over and for 7 consecutive weeks the Index continued to drop until it reached support last week at the 76 level.

Last week formed a “Southern Doji” candle. The position of this doji at the end of a decline and at support indicates the strong probability of a reversal. However, I fully expect the retracement to go up no higher than the Fibonacci 61.8% (green) level, shown at 78.95.

There appears to be a strong support band between 74.5 and 76.  The target level from the blue Fibonacci levels is shown as 74.74 which coincides with the support band.

Looking at the indicators:

The RSI is oversold at 20% and is flat – ready for a retracement.

The Slow Stochastics has formed a “W” formation with the %K (black line) at 8%, above the %D (red line) at 5% and pointing up – ready for a retracement.

The ADX trend indicator has the -DI (red line) above the +DI (green line) but has reversed and is now pointing down, thus getting weaker. I expect the ADX (black line) – the trend strength indicator – to flatten in the near future now that the -DI has peaked and reversed.

Outlook: Over the next few weeks I expect the Dollar Index to climb no higher than the Fibonacci 61.8% level (green), then reverse and continue down to the Fibonacci (blue) target of 74.74.

Welcome to our site, or at least a sneak preview of it!  The final version may look much different than this as we continue to develop a very unique investment and money-management resource site.  An important component of this site is original research on small and undiscovered junior resource companies, mostly in the gold exploration space, that offer very real and significant upside potential. We are extremely selective in the companies we feature and put forward to investors – we prefer quality over quantity.

We use a combination of fundamental and technical factors in determining the value and potential of a stock.  In terms of fundamentals we look for a company with a superb project supported by strong management.  Management must possess integrity, solid ethics and a determination to succeed and build shareholder value.

At BullMarketRun (BMR) we approach the handling of money from a biblical perspective and this is an important topic we will be sharing with our readers (and listeners) as the site continues to develop.

Disclaimer:

BullMarketRun.com is completely independent from any companies it covers.  BMR accepts no compensation of any kind from any groups, individuals or corporations for coverage of any company mentioned on this site.  We accept no advertising either.  Our stock coverage is for informational purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. No investment opinion or other advice is being rendered on any stock or company.  We strongly recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research before making any investment decisions.  The stocks we cover, by definition, are highly speculative and potentially very volatile.  Investors are cautioned that they may lose all or a portion of their investment if they make a purchase or short sale in these speculative stocks.  We are not Registered Securities Advisors. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.  It should be assumed that BMR personnel, writers and their associates may hold or dispose of or trade in positions in any securities mentioned herein at any time.  Owner/Publisher of BullMarketRun.com is Terry Dyer of Langley, British Columbia.

The underlying strength of the Gold market is on display again today…the yellow metal dropped as low as $1,352 overnight but has since rebounded above Friday’s close of $1,369…there is very significant dip-buying interest from the physical and investment sectors…as of 8:30 am Pacific, Gold is up $1 an ounce to $1,370…Silver fell below $24 but has also rebounded and is now up on the day as well…South Korea appears to be the latest country about to add to its Gold reserves…the head of the South Korean central bank, Kim Choong-Soo, says the country is considering accumulating more Gold to diversify its portfolio which is heavily weighted in U.S. dollars…the U.S. Dollar Index, which hit a 10-month low last week of 76.14, rallied for the second straight day today but faces very stiff technical resistance at the October 12 high of 77.93…the Index got as high as 77.65 this morning but bears have pounded it back down to 77.08…another test of the 76 level is likely and it’s quite possible the Index could crash through that level…Fed Chairman Ben Bernanke seems quite content with a lower U.S. Dollar as a “tool” for stimulating the American economy…he’s about to engage in a new round of mass money printing, otherwise known as “quantitative easing”, which is fraught with all sorts of risks…trashing paper currency is an insiduous tactic that governments the world over have repeatedly used to gain a trade advantage and when skyrocketing deficits and debt have threatened the collapse of their economies…the CDNX is powering higher today…the Index is currently at 1833, up 10 points for the day and just 3 points shy of last week’s new 52-week high…as John outlined in his article yesterday, the CDNX appears headed for a band of resistance between 1900 and 2000…the 200-week moving average sits at 1959…it’s always good to see takeovers which provide fresh fuel for the market…Antares Minerals Inc. (ANM, TSX-V) is up over $2 per share at $6.56 on First Quantam’s (FM, TSX) $460 million cash and share takeover announced this morning…Gold Bullion Development (GBB, TSX-V) is off a penny at 57 cents…we’re hoping GBB will announce the closing of its recently announced private placement this week…we’re keeping a close eye on Richfield Ventures (RVC, TSX-V) which is expected to release more drill results from Blackwater as early as tomorrow…RVC’s chart is looking very bullish and the stock has also largely unwound its overbought condition from September when it shot up to a high of $3.05…Richfield is currently up 4 cents at $2.84…GoldQuest Mining (GQC, TSX-V) has traded down to its rising 20-day moving average of 23 cents this morning…we view the pullback we’ve seen in GQC since last Wednesday as merely a correction within a powerful new long-term uptrend…Sidon International Resources (SD, TSX-V) is up half a penny to 10.5 cents…Canaco Resources (CAN, TSX-V) has been halted this morning, pending news, so that is worth watching closely…

The BMR Portfolio

Gold Bullion Development (GBB, TSX-V)

Gold Bullion is likely on the verge of closing its $8 million private placement…our best guess is that this will occur during the upcoming week…the stock finished ahead 1 penny last week at 58 cents and has held at or above its rising 100-day moving average over the past month…technically, one could make a strong case that GBB is getting very close to starting a new uptrend…volume has tapered off considerably over the past couple of weeks, typical of the late stages of a consolidation, and the 20-day moving average (SMA) appears ready now to reverse to the upside…more drill results from the LONG Bars Zone can’t be far off…it makes sense that we should expect a very steady flow of results through November and December….

GoldQuest Mining (GQC, TSX-V)

GoldQuest doubled in value over 11 trading sessions from late September into early October…some profit taking set in last week when the stock declined from a 52-week high of 32.5 cents to as low as 24.5 cents where there is very solid support…this helped to significantly unwind an overbought condition…GQC closed Friday at 25.5 cents, a loss of 5.5 cents for the week, and it’s strongly underpinned by a rising 20-day moving average at 23 cents…we are extremely bullish on the near term and longer term prospects for GoldQuest which has a highly prospective portfolio of exploration projects (Gold, silver, and base metals) in the Dominican Republic, and a substantial zinc-lead-silver deposit in Spain that was acquired for potential production in a partnership with Lundin Mining (LUN, TSX)…we expect more news soon from GoldQuest which is expected to be very active in the DR over the coming months while advancing the Toral deposit in Spain with a 43-101 compliant resource estimate…

Excel Gold Mining (EGM, TSX-V)

Volume picked up in Excel last week with the stock trading in a tight range between 16 and 17.5 cents…it closed Friday at 16 cents for a loss of 1 penny on the week…Excel announced last Wednesday that it has arranged a non-brokered private placement of 3.75 million flow through shares at 20 cents per share to raise gross proceeds of up to $750,000…the company will use the funds for an upcoming drill program at its Montauban Mining Camp Project, 120 kilometres west of Quebec City…Excel also stated it expects to receive a report from its geological consultants very soon on historical data pertaining to the former Montauban Mine…this will be the most extensive compilation of data ever assembled concerning Montauban, a former producer of Gold, silver, zinc, lead and copper…the Company will also be presented with a 3-D Gemcom geological model of the Montauban mineralized structures which will aid immensely in preparation for the upcoming drill program…

Richfield Ventures (RVC, TSX-V)

The upcoming week will be an interesting one for Richfield…it’s very unusual that a company would actually give a specific date (October 19) for release of assay results on specific holes, but that’s exactly what Richfield did in a news release last Tuesday…volume was the highest in 11 sessions on Friday as the stock closed the week up a nickel at $2.80…technically, Richfield’s chart looks extremely interesting and we wouldn’t be surprised to see another major breakout this coming week through the September all-time high of $3.05…Richfield is consistently delivering stellar results (long intersections of mineable grade) from its Blackwater Project in central British Columbia…Richfield’s market cap of $100 million is still well below what a potential takeover price would be if the company is able to prove up several million ounces as seems very possible…there are also silver and copper values at Blackwater…

Sidon International (SD, TSX-V)

Sidon reached a 52-week high of 18 cents in early August and has not participated in the powerful CDNX run since then…in fact it has traveled in the opposite direction, dropping almost in half…the stock got a little ahead of itself a couple of months ago, and this also underscores the importance of holding a basket of exploration companies as timing on individual moves can often be unpredictable…”opportunity cost” is always something to be aware of…having said that, our outlook on Sidon hasn’t changed and by all accounts the company is making progress on the ground at its Morogoro East Property in Tanzania…Sidon recently raised $1.7 million to clean up its weak balance sheet…technically, the stock is trading in an area of strong support with rising long-term moving averages (100-day and 200-day)…volume has tapered off considerably which is normal during a consolidation…Sidon closed at 10 cents Friday, a loss of 1.5 cents for the week…

Seafield Resources (SFF, TSX-V)

Seafield continues to encounter resistance in the mid-20’s…the stock traded as high as 25 cents last Tuesday and Wednesday on strong volume but just couldn’t break past that barrier…it declined over the final 3 days of the week to close at 21.5 cents, a half cent gain for the week…our major concern with Seafield at the moment is the slow pace of exploration at its very promising Quinchia properties…we say this with tongue in cheek, but at their current rate of drilling the bull market in Gold (which we expect to continue for quite some time) might be over by the time Seafield gets around to finishing 1st phase drill programs at all 3 of its major properties at Quinchia…the stock’s 200-day moving average is now flattening out and in danger of soon reversing to the downside…things need to turn around  quickly in a positive fashion for Seafield as both the risk level and the “opportunity cost” are now increasing with this stock…

Colombian Mines (CMJ, TSX-V)

Colombian closed the week at 81 cents, down 4 pennies on improved volume as 650,000 shares traded on the CDNX over 4 sessions…last Wednesday the company reported assay results for 7 more holes at its Yarumalito Property with the best result being a 151 metre section in porphyry from YAR-24 grading 0.64 g/t Au…YAR-14 returned 95.5 metres of 0.70 g/t Au…Yarumalito continues to show promise but these are still early days and much more drilling is required…CMJ is one of the best positioned companies in Colombia with a history in that country and a large package of properties…technically, the stock continues to fluctuate between its 50 and 100-day moving averages at 76 cents and its 200-day SMA of 94 cents…a move through the mid-90’s would confirm the start of a new uptrend…

North Arrow Minerals (NAR, TSX-V)

North Arrow was quiet again this past week as it traded only 275,255 shares, closing at 16.5 cents for a gain of one penny for the week…we’ve been very patient with this company which has essentially drifted aimlessly since we introduced it to BMR readers last April…the biggest disappointment for us has been North Arrow’s inability to carry out a drill program this summer/early fall at its Lac de Gras diamond property in the Northwest Territories…the company finally received a drill permit last month but then said it was too late in the year to drill at Lac de Gras and has rescheduled drilling there until next spring…the company has some other properties in its portfolio and President and CEO Gren Thomas has also been searching for new opportunities…there is great potential with North Arrow and at this point we’re hoping Thomas can pull a rabbit out of the hat in the very near future and take advantage of a strong market…

CDNX and Gold

It was another strong week for the CDNX which never even hesitated pushing through 1800.  The Index closed Friday at 1823 for a 38-point weekly gain, its 9th consecutive weekly advance.  The CDNX is up a whopping 36% from its early July low of 1343.

Friday’s action in the CDNX was particularly interesting.  Gold took a hit Friday, dropping as much as $25 intraday.  The CDNX fell from a high of 1828 to a low of 1809 and then rallied to close the day up half a point to 1823.  This shows the incredible buying support that’s coming in on any pullbacks in the CDNX and also demonstrates that $1400+ Gold is probably just around the corner.

As John’s chart earlier today shows, the CDNX continues to be in a super-charged state and is showing no signs of letting up.  The trend, as they say, is your friend.  So it makes sense to continue to embrace the trend.  Our “Big Picture” view is that we’re in the midst of an historic move in Gold and junior gold and mining stocks in general which ultimately should take the CDNX to much higher levels than it’s at now.  Over the near term we expect the CDNX is going to test a band of resistance between 1900 and 2000.  The 200-week CDNX moving average (SMA) is currently at 1959 and continues to decline.  This is where there is going to be some resistance and likely a reaction.  After a pause and a minor correction to unwind overbought conditions, the CDNX should have fresh legs for another potential huge move that could take it well beyond 2000 during the 1st quarter of next year.

The best strategy in this type of environment (and at anytime really) is to own a basket of high quality juniors rather than putting all of your speculative money into just 1 or 2 plays.  When the CDNX jumps over 30%, as it has over 3 months, some stocks will beat the market by a factor of 10 to 1.  Some tremendous gains are possible if you’re in the right play at the right time and this requires diversification.  Some investors unfortunately have largely missed out on this move since early July as they’ve made the mistake of putting all of their money into just 1 or 2 stocks which haven’t yet participated in the run.

Another thing to be careful about is trading too much and losing your position in a particular stock.  If you believe as we do that the CDNX could double in value (from 1343 to 2700) in 7 months like the Nasdaq did (from 2500 to 5000) between the summer of 1999 and early 2000, then it’s best to stay long on the stocks that have the best prospects (rather than frequently trading them) and let your profits run unless you are an exceptionally skilled trader.  The more you trade, the more mistakes you’re going to make.

Gold hit another new all-time high this past week of $1,388 before closing Friday at $1,369 for a $22 weekly gain.  Over the past 5 weeks Gold has been remarkably consistent and has climbed $122 ($22, $28, $22, $27 and $23 weekly increases, respectively).  Traders/investors will be buying into any weakness in Gold and selling into any strength (a technical bounce up) in the U.S. Dollar.  Fed Chairman Ben Bernanke is not coming to the defence of the beleagued greenback – in fact, his strategy has been to drive it lower to “help” the U.S. economy and increase inflationary pressures.  Trashing paper currency is an insiduous tactic that governments the world over have repeatedly used to gain a trade advantage and when skyrocketing deficits and debt have threatened the collapse of their economies.