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Canadian markets are closed today as Canadians celebrate Thanksgiving, and we extend our best wishes to all of our Canadian readers and hope that they enjoy this special day and give thanks for all the blessings we receive individually and as a country.

It’s also Columbus Day in the United States.  Most markets are open (bond market is closed) but volumes are relatively light.  No economic reports are coming out today.

Postings resume tomorrow morning.

TSX Venture Exchange and Gold & Silver

The Venture Exchange has recently been consolidating just underneath a resistance band between 1350 and 1365, and a time of decision is fast approaching as we’re now seeing a squeeze between this band and the SMA(20) as shown in John’s chart below.  RSI has formed a bullish “W” while volume and buying pressure remain steady.  An increase in volume will be required to carry the Index through the resistance.  For the week, the Venture gained 10 points to close at 1345.  The 10, 20, 50, 100 and 1000-day moving averages are all pointing north while the 200, 300 and 500-day SMA’s continue to decline.  It’s reasonable to expect that the Venture will soon overcome immediate resistance and challenge the 200-day around the 1400 level.

Gold

Gold climbed within just a couple of dollars of the $1,800 level Thursday before retreating Friday on a better, though confusing, U.S. jobs report.  President Obama got an apparent gift in the final jobs report before the elections as the unemployment rate magically fell below 8% for the first time since 2009.  Non-farm payrolls increased by only 114,000 in September but the government household survey showed the biggest monthly jobs gain in many years.  In our view the most likely reason for the drop in the unemployment rate is due almost entirely to individuals leaving the labor force as opposed to any significant job creation, and that is clearly an indictment against the fiscal policies of the Obama administration.  For those reasons the U.S. dollar is in the tank, caught up in a vicious downtrend that has no end in sight.  This is bullish for Gold and commodities in general.

Gold gained $10 for the week, closing at $1,781.  Silver was essentially unchanged, finishing at $34.51.  Copper was up a penny at $3.75 while Crude Oil fell $2.31 a barrel to $89.88.  The U.S. Dollar Index slipped more than half a point to 79.33.

Below is John’s updated Gold chart.  Generally, the set-up is bullish going into next week.  Expect an increase soon in volatility based on the Bollinger Band Width.

John will update the short and long-term Silver charts Tuesday morning.

Gold held in exchange traded funds reached a new record high last week and sales of Gold and Silver coins by the U.S. Mint were very robust in September.  According to Bloomberg, people purchased the most American Eagles from the U.S. Mint in eight months. Almost 70,000 ounces were sold last month – the most since January.

Indian Gold Demand Up

The rupee’s recent strength has helped to increase Indian Gold demand with flows climbing to a five-month high, according to UBS. What’s helped bring shoppers back to the market is the fact that the exchange rate is back to where the rupee was in April.  This improvement in the currency comes just in time as the wedding season is in full bloom. Every year, about 10,000 weddings are held in India from late September through January, in between the monsoons and the summer heat. Gold has historically been closely linked with the celebration of weddings, as the bride wears the precious metal and gifts of Gold coins are given to the newlyweds.  In addition, Diwali will be celebrated in November. The Festival of Lights is India’s biggest and most important holiday of the year and is celebrated by almost 1 billion Hindus around the world. Traditionally, on the first day of Diwali, it is considered auspicious to clean the home and shop for Gold.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, is having a huge impact on Gold.

The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates and negative real interest rates that won’t end anytime soon (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), money supply growth, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on.  QE3 has arrived, and massive central bank intervention is now taking place to prevent a breakup of the euro zone and to kick-start the global economy.  It’s hard to imagine Gold not performing well in this environment.

Gold has been bouncing around today, thanks in part to a rather strange U.S. jobs report…as of 7:55 am Pacific, bullion is down $5 an ounce at $1,786…it traded as high as $1,796 overnight and as low as $1,772 following release of the jobs report…Silver is 11 cents lower at $34.86…Copper is up a penny at $3.78…Crude Oil is off $1.43 to $90.28 while the U.S. Dollar Index has fallen nearly one-fifth of a point to 79.21…

U.S. Unemployment Rate Falls To Lowest level Since 2009

The U.S. unemployment rate fell dramatically from 8.1 to 7.8%, rather magically some cynics would say just a month before the elections, in a jobs report that may blunt any momentum Mitt Romney gained from a strong presidential debate Wednesday night…some of the details of the report were contradictory, but overall, it pointed to a stronger U.S. labor market…non-farm payrolls – based on a survey of businesses and normally the most reliable part of the monthly jobs figures – rose by a mediocre 114,000 (the August number, however, was revised upward by 40,000 to 181,000)…the September report was broadly in line with expectations and points to a still sluggish economy…this is based on hard data – the number of checks employers deliver…but the separate government survey of households found a surge in total employment of 873,000, the highest one-month jump in 29 years…the total of unemployed people tumbled by 456,000…the household survey is used to calculate the unemployment rate and caused it to plunge…the sampling error on the business establishment survey is plus or minus 100,000 jobs…the sampling error on the household survey is plus or minus 280,000 jobs…the labor force participation rate, which reflects those working as well as looking for work, edged higher to 63.6% but remained around 30-year lows…

ECB Planning Heavy Bond Buying For Up To Two Months

The European Central Bank envisions buying large volumes of sovereign bonds for a period of one to two months once its “OMT” program is launched, but would then suspend purchases during an assessment period, senior central bank sources told Reuters…until now, the details of how the ECB plans to conduct the bond-buying program, unveiled last month by President Mario Draghi, have been murky…economists have questioned what the bank’s exit strategy might be, or in other words how it would put a stop to “Outright Monetary Transactions” once it had begun to buy the sovereign debt of struggling euro zone countries…the answer appears to be that the ECB would suspend its purchases on a regular basis for a period that could last up to a month or more…during that time, inspectors from the EU or “troika” — the ECB, European Commission and International Monetary Fund – would assess whether a country is meeting the conditions of its aid program…

Many U.S. Retail Investors Still On Sidelines

The stock market is reaching toward new highs on the fourth anniversary of the financial crisis, but many people refuse to be lured back…even as stock indexes have doubled in value since the market low in March, 2009, investors have yanked a net $138 billion from mutual funds and exchange-traded funds that invest in U.S. stocks, according to the Investment Company Institute, a mutual-fund trade group…investors over the same period put $1 trillion into bond funds, a traditionally lower yielding but safer investment…it marks the first time since 1981 that investors have pulled money from U.S.-stock funds for more than a year at a time…

Someone’s Getting Fired – Trading Error Causes 15% “Crash” On India’s National Stock Exchange

Trading was halted for a brief period on India’s National Stock Exchange today after erroneous orders worth 6.50 billion rupees ($125.7 million) by a broker sent its main index crashing….the 50-stock Nifty index dropped as much as 15.5% to 4,880.20 in early trading as shares of companies such as State Bank of India and Axis Bank fell sharply…when the market reopened after the 15-minute halt, the index recouped most of its loss, and it was down 0.6% at 5,752.15 points in late afternoon trading…the problem occurred after brokerage firm Emkay Global Financial Services Ltd. placed 59 wrong orders on behalf of an institutional client, the exchange said…the abnormal trades triggered the circuit filter – a trading band that, if breached, causes an automatic halt in trading – leading to the closure of the cash market, the exchange said in a statement…it said all stock positions from the wrong trades have been settled smoothly and that Emkay has been “disabled” from trading…

Today’s Markets

Asian markets were higher overnight (China’s Shanghai Index resumes trading Monday after this week’s holiday) while European and North American shares are also strong today…as of 7:55 am Pacific, the the Dow is up 78 points while the Venture Exchange is 3 points higher at 1344…the Venture will certainly gain fresh momentum as soon as it plows through the resistance band between 1350 and 1365 (however soon that is)…

U.S. Dollar Index – Horribly Bearish

There’s really no end in sight to the downtrend in the greenback, and that’s hugely bullish for both Gold and Silver…of course there will be “relief” rallies in the dollar but as we indicated before, a lot of astute traders will be building short positions on any of those rallies…as John’s 6-month daily chart shows, the Dollar Index has repeatedly been encountering resistance at the EMA-20 (inversely, that’s where the Venture is finding support) and that trend is expected to continue for the foreseeable future…

Hana Mining (HMG, TSX-V)

Hana Mining (HMG, TSX-V), which we’ve highlighted here before, was among the most active stocks on the Venture yesterday as it jumped 4.5 cents to 46 cents on 3.8 million shares (most recent news was drill results near the end of September)…Hana is working on its promising Ghanzi Copper-Silver Project in Botswana…below is an updated chart for HMG (1-year weekly) that shows a double bottom and a bullish ascending triangle…one of many stocks that has a much better-looking chart these days…

Mineral Mountain Resources (MMV, TSX-V) Update

Mineral Mountain (MMV, TSX-V) has been a very strong performer ever since we started tracking it in the mid-20’s over the summer…we suggest readers take a good look at this one as MMV has assembled a very attractive land package consisting of former producers along the Homestake Gold belt in South Dakota…MMV closed at 38 cents yesterday and is up another half a penny in early trading today…there is strong short-term resistance at 45 cents, as indicated in John’s chart below, so keep that in mind…the rising 20-day moving average (SMA), currently at 30 cents, provides strong support…over the short-term at least, MMV is likely to trade between the low 30’s and the 45-cent resistance area…

Note:  John, Jon and Terry do not hold positions in HMG or MMV.

Gold is firm this morning, fueled by a stronger euro and rising tensions between Turkey and Syria…as of 7:55 am Pacific, the yellow metal is up $12 an ounce at $1,791…Silver is 27 cents higher at $34.91…Copper is is up 3 pennies at $3.78…Crude Oil is $1.37 higher at $89.51 while the U.S. Dollar Index has fallen one-third of a point to 79.49…

Today’s Markets

Equity markets are solid across the board today…the Venture Exchange, still looking to push through a resistance band between 1350 and 1365, is up 10 points at 1345 as of 7:55 am Pacific…Decade Resources (DEC, TSX-V) and Mountain Boy Resources (MTB, TSX-V) are among the volume leaders after reporting drill results this morning from their Red Cliff Gold-Copper Project in northwestern British Columbia…one of the holes returned 7.83 g/t Au over 35 metres (from 174 to 209 metres)…GoldQuest Mining (GQC, TSX-V)  is up another 7 cents at $1.46…the recent sell-off that took GQC down very close to its 100-day moving average (SMA) was a tremendous buying opportunity…

Draghi:  ECB Bond Buying Program Has Already Helped Ease Euro Zone Tensions

European Central Bank (ECB) President Mario Draghi said the bank’s recently announced bond buying program had eased market tensions, even though it has not yet commenced…speaking at a news conference this morning, after the ECB announced that interest rates would remain on hold, Draghi also reiterated that the euro was “irreversible”…Draghi added that Spain had made “significant progress” but that challenges remained for the country…he said the ECB had mechanisms in place should Spain request aid, but that he would also seek involvement from the International Monetary Fund…he emphasized it was up to Spain to decide whether to solicit aid…the ECB kept its main interest rate at 0.75% due to inflation concerns…

Middle East Tensions Escalate, Supporting Gold

Turkey’s parliament approved a measure proposed by Prime Minister Recep Tayyip Erdogan, giving the government broad powers to send soldiers into “foreign countries” after Turkish armed forces and Syria traded fire yesterday and again today…the measure is valid for one year and allows Erdogan to deploy troops into Syria without consulting with the national assembly in Ankara…the measure was opposed by the main opposition Republican People’s Party, which dubbed it a “war bill”…

U.S. Unemployment Claims Show Mild Improvement In Labor Market

The number of Americans filing new claims for unemployment benefits rose less than expected last week, according to government data this morning that points to some mild improvement in the labor market…initial claims for state unemployment benefits climbed 4,000 to a seasonally adjusted 367,000, the Labor Department said…the prior week’s figure was revised up to show 4,000 more applications than previously reported…economists polled by Reuters had forecast claims rising to 370,0000 last week…the four-week moving average for new claims, a better measure of labor market trends, was unchanged at 375,000 – the first time since December last year that the four-week average was unchanged…

Romney Energizes Campaign With Strong Debate

Cutting to the heart of their differences, President Barack Obama and Republican Mitt Romney laid out contrasting visions for the federal government in their first debate in Denver last night, sparring over tax-cut proposals, regulations and deficit-reduction plans…Romney, who clearly exceeded low expectations, effectively portrayed Obama as a champion of big government and spending who would raise taxes on job-creating small businesses, calling his approach “trickle-down government”…in an instant poll conducted by CNN, two-thirds of respondents said they believed Romney won the debate, with a quarter saying Obama had won…even Obama’s left-wing media friends conceded the President took a bit of a thumping…of course Obama was without his most valuable friend, Mr. Teleprompter, and seemed almost disinterested and disengaged at times…while Romney certainly advanced his cause last night, which will likely produce a further tightening of the polls, he still has a brand problem to deal with, and no doubt the Obama team will come out swinging harder than ever now to try and push back any momentum the Republican challenger should be able to build from last night…Romney also has to try to find a way to cut into Obama’s strong support among female and Hispanic voters…moderator Jim Leher’s woeful performance last night gave support to Romney’s common sense plan to eliminate all taxpayer funding for PBS which he pledged to do last night…if only Canada would do the same with the CBC which sucks a billion dollars out of taxpayers every year…

Huldra Silver (HDA, TSX-V)

As we’ve been stating since early this year, an emerging Silver producer with a high-grade deposit in British Columbia (Treasure Mountain, the nearest active mine to Vancouver) and led by a strong management team is Huldra Silver (HDA, TSX-V)…at the moment the company is in the final stages of closing a $6.75 million financing as announced September 17…mine development is completed and mining operations are underway with Huldra permitted for 60,000 tonnes a year…following this financing, which will give it approximately 50 million shares outstanding, the company will have a modest market cap in the range of $70-75 million…much of the investment community in our view is still unaware of this opportunity as Huldra just hasn’t been aggressive, up to this point at least, in rolling out its story to the retail market…we believe that is about to change, especially with the recent announcement that the company has retained Renmark Financial Communications to “reinforce Huldra’s to profile in the financial community and enhance the visibility of our project portfolio,” according to President and CEO Ryan Sharp…we’ll have much more on Huldra in the coming weeks, and this success story is also an illustration of the tremendous geological potential of British Columbia which bodes well for other strong exploration plays we’re following in that province including Rainbow Resources (RBW, TSX-V), RJK Explorations (RJX.A, TSX-V) and Parlane Resources (PPP, TSX-V)…

Below is a 2.5-year weekly Huldra Silver chart from John that shows the stock is well-positioned to bust out from a bullish symmetrical triangle at some point during this fourth quarter…

FDG Mining Inc. (FDG, TSX-V)

Nicaragua is a highly favorable mining jurisdiction, and a company “flying under the radar” that we believe is very worthy of our readers’ due diligence is FDG Mining Inc. (FDG, TSX-V)…FDG is looking to put its Topacio Property into production next year while also continuing to test the blue sky potential of this multiple vein system…the company released an updated resource estimate earlier this week – 2,702,984 inferred tonnes grading 3.97 g/t Au containing 344,664 ounces…the resource is all within 150 metres of surface, and at least 30% is amenable to open-cutextraction…technically, FDG is looking particularly interesting given a classic “cup with handle” formation on the chart as John shows below…

Richmont Mines (RIC, TSX) Chart Update

Notes:  John, Jon and Terry do not hold positions in HDA, FDG or RIC…

Due to travel today and tomorrow, Morning Musings will be posted at approximately 8:00 am Pacific…

Gold and Silver are both firmer this morning, thanks to a stronger euro and rising tensions in the Middle East, while stock index futures in New York as of 6:10 am Pacific are pointing to a mildly positive open on Wall Street…

Gold has traded in a narrow range between $1,771 and $1,781 so far today…as of 6:20 am Pacific, bullion is up $5 an ounce at $1,779…Silver is 18 cents higher at $34.80…Copper is off a penny at $3.75…Crude Oil has lost $1.49 to $90.40 while the U.S. Dollar Index is up marginally at 79.94…

McEwen – Great Time To Be Buying Gold Shares, “Enormous Diversion In Price Performance”

Industry legend Rob McEwen is critical of how many Gold producers have been managed in recent years, but nonetheless believes this is one of best times ever to be holding Gold shares…”There’s an enormous diversion in price performance that’s happened basically around 2011 so that shares are really cheap now relative to Gold,” McEwen told Mineweb.com…”Someone looking to get exposure to Gold, I think will see Gold shares as a cheaper way of getting their Gold exposure than buying a bar of Gold now, because of that difference”…

Today’s Markets

Asian markets were mixed overnight with sentiment dampened after data showed China’s official purchasing managers’ index for the services sector fell to 53.7 in September from 56.3 in August as growth in the country’s manufacturing industry stabilized at a slower pace, putting the world’s second-largest economy on course for a seventh straight quarter of slowdown…the Chinese are celebrating Golden Week, so the Shanghai Composite remains closed until next Monday…European shares are slightly higher this morning while stock index futures in New York as of 6:20 am Pacific are pointing toward a flat opening on Wall Street…the latest ADP numbers just came out…the private sector created 162,000 jobs in September, a bit better than expected, as the service sector continued to be the economy’s main employment driver…

Coming up this week, the FOMC minutes are released tomorrow while the Labor Department’s employment report comes out Friday…the market will be closely monitoring tonight’s presidential debate…in Europe, the European Central Bank and Bank of England hold meetings tomorrow…the Bank of Japan holds its monthly meeting tomorrow and Friday…

Euro Zone Economic Indicators Weaken Further

Dwindling new orders and faster layoffs marked a worsening decline for euro zone companies last month, according to business surveys that dent hopes the economy will return to growth before 2013…a good gauge of economic growth, Markit’s Euro Zone Composite PMI fell to 46.1 in September from 46.3 in August…while revised up slightly from a preliminary reading two weeks ago, the index has been stuck below the 50 mark that divides growth and contraction for all but one of the last 13 months…order books shrank last month at the fastest pace in more than three years, while firms cut staff at the fastest pace since January, 2010…

U.S. “Hooked On Crystal Meth” – Gross

Bill Gross, who manages the $273 billion Total Return bond fund for Pimco, has compared the U.S. government’s reliance on debt financing to a “crystal meth” addict, in the latest in a series of dire warnings from one of the most influential investors in the bond market…“The US, in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth”, said Gross in an interview with the Financial Times…Gross places the U.S. in a “Ring of Fire” that includes countries with precarious finances such as Greece, Spain and Japan…citing separate but similar reports from the International Monetary Fund , the Bank for International Settlements and the Congressional Budget Office, Gross said that to put American finances on a sustainable footing the U.S. must cut spending or increase taxes by 11% of gross domestic product over the next five to 10 years…to close the gap requires tax or spending changes of $1.6 trillion a year, he said…by comparison, tax cuts and spending programs set to expire at the end of the year, the so called “fiscal cliff”, total $200 billion…he said that failing to address the problem would ultimately lead to government printing of money and inflation…“Bonds would be burned to a crisp and stocks would certainly be singed; only Gold and hard assets would thrive within the Ring of Fire”…

Obama’s Lead Narrows, First Debate Tonight

President Barack Obama heads into tonight’s first presidential debate with a narrow lead over Mitt Romney in a new Wall Street Journal/NBC News nationwide poll that illustrates each candidate’s strengths and weaknesses entering the campaign’s final stretch…the survey shows the race tightening, with Obama now leading 49% to 46% among likely voters, down slightly from the five-point lead he enjoyed in mid-September immediately following the two parties’ conventions…Romney has also pulled even with Obama in the crucial swing state of Florida…the survey of likely voters had a margin of error of plus or minus 3.4 percentage points…Obama maintains commanding leads among Hispanics, young voters and women, with his share of the crucial Hispanic bloc appearing only to widen…a whopping 71% of likely Hispanic voters said they plan to vote for Obama…Romney, who has run a poor campaign so far, holds a strong margin of support among white voters and men…his challenge tonight is to articulate an inspiring vision for the country while also landing some hard punches that can knock Obama off balance and put the President on the defensive, where he should be given the state of the economy and the nation’s finances, for the first time in this campaign…

“So Let Me Get This Straight”

The best line of the 2012 Presidential campaign so far goes to Republican Dr. Barbara Bellar – a former nun, an Army major, a lawyer, and a college professor who’s running to be a state senator from Illinois…in a video that has gone viral, Bellar asks “What the blank could possibly go wrong” after delivering a one-sentence indictment of ObamaCare at a recent Women For Romney/Ryan event…

“So let me get this straight…this is a long sentence…we are going to be gifted with a healthcare plan that we are forced to purchase, and fined if we don’t, which reportedly covers ten million more people without adding a single new doctor, but provides for sixteen thousand new IRS agents, written by a committee whose chairman doesn’t understand it, passed by congress, that didn’t read it, but exempted themselves from it, and signed by a president who smokes, with funding administered by a treasury chief,who didn’t pay his taxes, for which we will be taxed for four years before any benefits take effect, by a government which has bankrupted Social Security and Medicare, all to be overseen by a surgeon general who is obese and financed by a country that is broke…

“So what the blank could possibly go wrong?”…

Venture Exchange

The Venture Exchange, in need of some fresh momentum, fell 7 points yesterday to 1322 as it continues to trade slightly below the resistance band between 1350 and 1365…the supporting 20-day moving average (SMA) is at 1313…

John has charts on four companies this morning (including a couple that our readers have requested) – CMC Metals (CMB, TSX-V), dividend-payer Mart Resources (MMT, TSX-V), Woulfe Mining Corp., (WOF, TSX-V) and Carpathian Gold Inc. (CPN, TSX)…

CMC Metals (CMB, TSX-V)

We’re continuing to perform due diligence on CMC Metals (CMB, TSX-V) which is a step closer to near-term production at its Radcliffe Gold Property in California with the Bureau of Land Management having completed an environmental assessment of this project and accepting the plan of operation…a 30-day public notice period is now in effect…the stock gained a penny-and-a-half yesterday to 15 cents on the news…this is an interesting situation to put on one’s radar screen, though it likely won’t be ready to make a major move until November or December…technically, CMB is looking healthier than it has for quite some time and is close to breaking through a downtrend line that has been in place for over a year…below is a 2.5-year weekly chart from John…

Mart Resources (MMT, TSX-V)

A Venture stock that pays you a dividend is a rare breed indeed…Mart Resources (MMT, TSX-V) has been trading in an upsloping channel for the past year, and below is an updated look at the chart from John that shows this pattern should continue…

Carpathian Gold Inc. (CPN, TSX-V)

Woulfe Mining (WOF, TSX-V)

Notes: John, Jon and Terry do not hold positions in CMB, MMT, CPN or WOF.

Gold has traded between $1,772 and $1,785 so far today, after touching a 7-month high yesterday…as of 6:05 am Pacific, the yellow metal is up $1 an ounce at $1,776…Silver is 6 cents higher at $34.71…Copper is up 2 pennies at $3.77…Crude Oil is up 22 cents at $92.70 while the U.S. Dollar Index is down over one-tenth of a point at 79.70…

Australia Cuts Rates, Bernanke Defends “QE Infinity”

Australia’s central bank cut rates today amid fears that the resources boom that has driven the economy was running out of steam more rapidly than expected, while consumers and other industries were failing to step into the breach…the Reserve Bank of Australia reduced interest rates by one-quarter of 1%, citing the slowdown in China and Europe’s recession in its decision to reduce rates to 3.25%…

Elsewhere on the central bank front, Ben Bernanke delivered a broad defense of the Fed’s controversial bond-buying stimulus plan yesterday but said nothing new…he insisted the Fed’s actions are necessary to support a flagging economic recovery…he pushed back against accusations that QE3 is laying the groundwork for inflation in the future or enabling the government to run large budget deficits…he said that while the country’s unusually weak economic performance had forced the Fed to resort to less conventional tools after bringing interest rates all the way down to effectively zero, the Fed’s goals of price stability and maximum sustainable employment have not changed…“These goals mean, basically, that we would like to see as many Americans as possible who want jobs to have jobs, and that we aim to keep the rate of increase in consumer prices low and stable,” Bernanke told the Economic Club of Indiana…

U.S. Manufacturing Bucks Global Trend In September

U.S. manufacturers bucked the global trend last month, expanding even as peers in Asia and Europe continued to suffer the effects of the slowing world economy…the American manufacturing sector expanded in September after three consecutive months of contraction, offering some support to the world’s largest economy as new orders and employment picked up…the recovery was not shared by manufacturers in other large economies, where activity continued to contract, albeit at a slower pace…the JP Morgan global manufacturing purchasing managers’ index, a compilation of manufacturing surveys in countries across the world, was 48.9 in September, slightly higher than August’s three-year low of 48.1, but still below the 50 level that distinguishes contraction from expansion…

Today’s Markets

Asian markets were mixed overnight (China’s Shanghai Index is closed for the week due to a holiday) after a surprising expansion in U.S. factory activity, reported yesterday, helped investors override concerns about weak overall global growth…European shares are higher this morning

European markets traded higher on Tuesday, led by Spanish stocks on increasing hopes that Spain will seek a full bailout, a move which would ease investors’ concerns over the euro zone debt crisis…a report by Reuters said that Spain was ready to request a bailout as early as next weekend, but Germany remained hesitant and said the country should hold off…stock index futures in New York as of 6:05 am Pacific are pointing toward a mildly positive open on Wall Street…

The Venture Exchange started strong yesterday but struggled to the finish line, posting just a 4-point gain to close at 1339 after climbing as high as 1349 early in the day – just below the resistance band which begins at 1350…

Euro vs. U.S. Dollar – Bullish For Gold & Stocks

Below is a revealing 2.5-year weekly euro chart from John that further illustrates the overall weakness in the U.S. dollar, and the greenback’s negative trend, which is bullish for Gold and the Venture Exchange…the euro, which no one wanted to hold up until a couple of months ago, is clearly on a new bullish track and has also broken out relative to the U.S. dollar…there is strong support for the euro around 128…it’s up slightly this morning to 1.2927…

Scorpio Mining (SPM, TSX) Chart Update

Scorpio Mining (SPM, TSX) has performed well since John’s latest chart, and has more than doubled since bottoming out around 50 cents over the summer…the stock climbed another 8 cents to close at $1.21 yesterday – its highest level since the end of March which reflects the strong turnaround in the junior miners…as John’s chart explains, $1.15 could become the new support for SPM – we’ll see what happens today…

Solvista Gold (SVV, TSX-V) and Carlisle Goldfields (CGJ, TSX)

Solvista Gold (SVV, TSX-V) and Carlisle Goldfields (CGJ, TSX) were both garnering attention at last week’s Cambridge Resource Show in Toronto, and are certainly worthy of our readers’ due diligence…Solvista has been getting strong results from its Caramanta Gold Project in Colombia which has the potential of hosting a series of Gold-Copper porphyry discoveries along a 3-kilometre
strike length…SVV, which is gradually unwinding a recent overbought condition, has fallen in 6 out of the last 7 sessions after hitting an all-time high of $1.29 a couple of weeks ago…this is definitely an interesting situation to look at, especially on any additional weakness which is possible based on John’s weekly chart below…

Solvista Gold (SVV, TSX-V)

Carlisle Goldfields (CGJ, TSX)

Bruce Reid’s Carlisle Goldfields (CGJ, TSX) continues to build on its resource base at its Lynn Lake camp in northern Manitoba, and should benefit as it adds more ounces in the months ahead against a backdrop of what will likely be even higher Gold prices…below is an 18-month weekly chart from John that shows CGJ is currently consolidating after a recent jump to 24.5 cents, and looks even better on any minor pullback from current levels (it closed yesterday at 20.5 cents)…there is strong support at 18 cents, slightly below the rising 200-day moving average (SMA) and just above the rising 50 and 100-day SMA’s…

Note: John, Jon and Terry do not hold positions in SPM, SVV or CGJ.

Gold has traded in a range between $1,764 and $1,774 overnight…as of 5:20 am Pacific, the yellow metal is unchanged at $1,771…Silver is off 6 cents at $34.43…Copper is down 2 pennies at $3.72…Crude Oil is 36 cents weaker at $91.83 while the U.S. Dollar Index briefly climbed above 80 but is now down slightly at 79.83…

John has updated Silver charts (short and long-term) below this morning’s important Venture Exchange update…

Euro Zone Manufacturing Data – Some Improvement But Weakness Continues

Euro zone manufacturing put in its worst performance in the three months to September since the depths of the Great Recession, with factories hit by falling demand despite cutting prices, a business survey showed on Monday – pointing to a new recession in the euro zone which comes as no surprise…factories helped lift the 17-nation bloc out of its last recession but the survey suggests a downturn that began in smaller periphery countries has taken root in core members Germany and France…”Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September,” said Chris Williamson, chief economist at data collator Markit…”The sector will act as a severe drag on economic growth…it therefore seems inevitable that the region will have fallen back into a new recession in the third quarter”, he concluded…Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 46.1 in September from 45.1 in August and above the preliminary reading of 46.0…but that was its 14th month below the 50 mark that divides growth from contraction…separate data released today showed euro zone unemployment at 11.4% in August, unchanged from July…

Global Trade Stalling – Central Banks, Governments To Step Up Stimulus Efforts?

The Wall Street Journal reported over the weekend that global trade is stalling, dimming prospects that exports will buoy the U.S. economy in the coming months…trade rebounded after its collapse in the recession…now several indicators of export activity are flashing red as Europe’s recession, anemic U.S. growth and the slowing Chinese economy dampen exports world-wide…the World Trade Organization just projected the global volume of trade in goods would expand only 2.5% this year, down from 5% last year and nearly 14% growth in 2010…a Dutch government agency, the CPB Netherlands Bureau for Economic Policy Analysis, estimates it fell outright in June and July…”The problems of the advanced economies, particularly the euro zone, are being spread around the world,” said Andrew Kenningham, senior global economist at Capital Economics, a London-based consulting group…”Everybody is being dragged down”…

The trade shift could take a particularly big toll on the U.S. economy…exports had been, until recently, “a stunningly strong driver of growth,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets…exports have accounted for almost half of U.S. growth during this recovery, compared with an average of 12% of growth in economic cycles over the past four decades, he said…more U.S. companies may downgrade their global growth estimates in the coming weeks as they prepare to report earnings from the third quarter, which ended yesterday…FedEx Corp. and Caterpillar Inc. already have downgraded their global outlooks…

China Injects Record Amount Of Money Into Financial System

The People’s Bank of China (PBOC) injected a record amount of money into the financial system last week to alleviate short-term liquidity concerns…the PBOC issued Rmb365 billon of reverse repurchase agreements, the largest weekly amount in history…the cash inflow was effective immediately, causing the seven-day repurchase rate to fall 100 basis points from the three-month high of 4.75% reached earlier in the week, and the stock market responded accordingly with a big moves Thursday and Friday…the Chinese markets are closed this week week for a holiday and this is often when the government announces policy changes…however, after recently unveiling over $150 billion in infrastructure spending, experts say China is unlikely to unveil further stimulus measures until after the Communist party holds its congress on November 8, an event that is particularly significant this year because it will mark a once-in-a-decade leadership change…

Federal Reserve Has Embarked On “A Very Dangerous Strategy” – Feldstein

There is “Reflation Ahead”, “Asset Bubbles” – Gross

Martin Feldstein, former Chairman of the Council of Economic Advisers which consults with the American President, had critical words for the Federal Reserve in an opinion piece in the Financial Times Friday…Feldstein, an economics professor at Harvard University, said the Fed’s decision to buy mortgage-backed assets for an unlimited time means the central bank has now embarked on a “very dangerous strategy” that could lead to high inflation and destabilizing asset bubbles…Feldstein’s views are certainly shared by many others including Bill Gross, the founder and co-chief investment officer of Pimco, the holder of the world’s biggest bond funds…CNBC reports that Gross wrote via twitter last night, “There is reflation ahead…it will create asset bubbles but little growth”…

Today’s Markets

It appears the fourth quarter will get off to a good start on the equity front…trading was subdued in Asia overnight due to holidays in China, Hong Kong and South Korea…European markets are strong this morning…a slew of manufacturing data from across Europe provided a mixed picture but some numbers came in better than expected which has helped risk assets…in addition, Spain’s bank stress tests showed the country’s lenders needed just $77 billion of the $125 billion in aid promised by the EU to plug a capital shortfall…stock index futures in New York as of 5:20 am Pacific are pointing toward a positive open on Wall Street..the news from Spain has helped, and factory output data from the euro zone and China weren’t as bad as expected…investors will be watching for factory output data in the U.S. with PMI data due at 6:00 am Pacific and ISM Manufacturing due at 7:00 am…construction spending data will also be released at 7:00 am Pacific…

Venture Exchange- Why This Index Is Poised To Move Much Higher

The Venture Exchange posted its best quarterly advance (12%) since the 4th quarter of 2010, and that alone should be an indication that this market has turned the corner…many investors, however, are still looking at the Venture through their rear-view mirrors at the ugly 53% drop from 2465 in early 2011 to the June, 2012, low of 1154…because they’re staring at their rear-view mirrors, assuming that this “rally” will fizzle out just like some others since 2011, they can’t see the big picture of what’s unfolding and how this Index could become one of the world’s top performing markets in the coming months…it’s usually either feast or famine with the Venture, and we’re getting ready for the feast…

Technically, a hugely important event this month for the CDNX is the reversal to the upside in the 1,000-day moving average (SMA) which has been in decline since 2008…one must not under-estimate the importance of this because the 1,00-day SMA has been such a reliable indicator of the primary direction of this market for well over a decade…explosive moves – up or down – typically occur at reversal points…the evidence is overwhelming in our view that Q4 2012 and Q1 2013 have the potential to result in spectacular gains for the Venture…

As we mentioned a couple of weeks ago:

“Within six months of the launch of QE1, the Venture climbed 57%…within six months of Bernanke’s infamous Jackson Hole speech in late August, 2010, which clearly signaled QE2 was on the way, the Venture rallied 67%…this time, we have an open-ended QE program from the Fed as well as aggressive action from the ECB…with loose monetary policy in place on a global scale for an indefinite period, rising commodity prices and a weak U.S. Dollar, this is the best time since the summer of 2010 to be accumulating quality junior exploration stocks…be patient but bold when you have to be…there is an ‘overhang’ of paper in the market and some important CDNX resistance areas that will require volume and a bit of time to deal with, but once this ‘train’ gets moving it will be unstoppable until early next year at least.”

Besides the 1,000-day SMA reversal, let’s look at some other specifics that support a major upside move (one that perhaps becomes parabolic) in the Venture…

1. The Index has broken out relative to the U.S. dollar, ending a decline that started in the spring of 2011…there is a strong inverse relationship between the Venture and the greenback, and the current state of the U.S. dollar (technically and fundamentally) is very weak given QE3 (QE Infinity) and the growing probability of another four years of Barack Obama in the White House and a possible Democratic sweep (if there’s enough collateral damage from Romney’s inept campaign) in November’s elections…Ben Bernanke’s job is safe as Federal Reserve Chairman and the Americans won’t seriously deal with their debt issue until another major financial crisis forces them to…Christmas will come early as Obama will ride in on his horse after a lame-duck session of Congress and announce that he has saved the nation from The Fiscal Cliff (but the “rich” of course will have to pay more in tax);

2. Over the past couple of months the Venture has been outperforming the broader equity markets – this is another important change in trend and reflects a more “risk-on” environment as central banks across the globe pour liquidity into the system;

3. Commodities, in particular Gold and Silver, are going much higher for technical and fundamental reasons.

Now let’s look at two important charts…John’s first chart shows the performance of the Venture (and Gold) during each previous QE program (QE1 and QE2)…in each case, the Index got into overbought territory – we expect the same thing in QE3…at the moment, RSI(14) on this 4.5-year weekly chart is at 50 with a lot of room to move higher…note the recent increase in buying pressure…

John’s second chart compares the Venture with the U.S. Dollar Index…this is a five-year weekly chart that shows how the U.S. Dollar Index has broken down, and how the Venture has broken out relative to the Dollar Index…what’s also very important is that the Venture has not yet broken above its downtrend line in place since the spring of 2011…in fact, it’s currently right up against the downtrend line which is obviously resistance…for the reasons cited above, we do believe this resistance will be overcome in October – perhaps even this week…

Silver

Silver can continue to benefit from Gold’s positive momentum on investment interest but needs improvement in industrial activity, according to Suki Cooper, precious-metals analyst with Barclays Capital, in a Kitco article…Copper noted that Silver has been the strongest precious metal so far this year, rising 22%…Chinese imports have picked up in the last couple of months, but supply/demand fundamentals excluding investment have not tightened considerably, leaving Silver’s fate in the hands of investors…however, Cooper said, investment demand has been strong lately…“Silver ETP (exchange-traded-product) holdings have risen to their highest since May last year and inflows for the year-to-date across the open-ended products have reached 775 (metric) tons, almost the equal and opposite of flows last year (-793 tons), and inflows in September are set to be the strongest month since July, 2011, with inflows at 411 tons,” she stated…

“On the retail side, Silver coin sales have also gained momentum with the U.S. Mint reporting sales in September to be the strongest since January this year at just over 100 tons…although short-term positioning on Comex Silver has risen to its highest since April last year, it is still below the peak, and the source of the acceleration in demand last year from the investment community in China has also notably gained momentum at the end of August and into September…investor interest likely retains the scope to push Silver prices higher in the near-term, but given its short-term nature, industrial demand would need to follow suit,” Cooper concluded…

Silver Chart Updates – Short-Term & Long-Term

Silver’s short-term overbought condition has eased somewhat which opens up the possibility of another leg up in the immediate future…below is a 9-month daily chart…the EMA-20 is providing strong support…resistance is at $35.50…

Silver Short-Term Chart

Silver Long-Term Chart

What’s important to note on John’s 15-year monthly chart is the fact that we can expect RSI(2) to remain in an overbought state for an extended period of time, as was the case at various times historically including between 2009 and 2011…so this means we’re still likely in the early stages of a big move – Wave 5 – that will carry on perhaps well into 2013, albeit with some pullbacks along the way…John’s Wave 5 Fibonacci target (no timeline) is $78, more than double Silver’s current price…

Temex Resources Corp. (TME, TSX-V)

We suggest readers do their due diligence on Temex Resources Corp. (TME, TSX-V) which is looking strong from a technical standpoint and has several fundamental factors in its favor including growing resource numbers at its project in Timmins…the company is currently conducting a private placement (Stifel Nicolaus Canada Inc. is the lead agent) for gross proceeds of approximately $7 million at prices of 28 cents (hard dollars) and 32 cents (flow-through)…the PP is expected to wrap up by the end of next week…the stock closed Friday at 30 cents…below is a 2.5-year weekly chart from John that shows a nice reverse head-and-shoulders bottom…also, the 1,000-day SMA is at 25 cents and just starting to reverse to the upside…

Parlane Resource Corp. Chart Update (PPP, TSX-V)

As readers know, we’re very bullish on the Blackwater area in central British Columbia where Parlane Resource Corp. (PPP, TSX-V) is one of several attractive juniors…it has a project ready to drill, strategically located between New Gold’s (NGD, TSX) Blackwater and Capoose deposits…Parlane jumped 38% in September on increased volume…

Note: John and Jon both hold share positions in PPP.