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February 4, 2014

BMR Morning Market Musings…

Gold has traded between $1,252 and $1,262 so far today…as of 7:45 am Pacific, bullion is down $7 an ounce at $1,250…Silver has added 8 cents to $19.42…Copper is up a penny at $3.22…Crude Oil is up over $1 a barrel to $97.63 while the U.S. Dollar Index has climbed slightly higher to 81.16…

Barclays stated, “The strength of the Gold price floor will be tested this week, given the absence of the Chinese market,” due to the Lunar New Year holiday period…bullion moved higher yesterday thanks to weak U.S. economic data, continued emerging market concerns and turmoil in the broad equity markets, but its gains were probably muted due to the fact that Chinese buyers are mostly on the sidelines this week…

Large speculators’ net-long Gold positions are now at the highest since November 5 according to the latest COT report ending January 28…Edel Tully, strategist at UBS, said that since the bulk of the net-long gains continue to be on short covering, rather than new buying, this “in a way helps explain Gold’s failure to break higher in spite of several attempts.”

The key for Gold, as John’s charts have shown, is to break above the $1,275 level which represents very significant resistance…

“Mattress Mack” Has A Really Bad Day

If you saw the value of stock portfolio dip yesterday thanks to the S&P 500’s worst February start since 1933, at least your net worth didn’t take as much of a beating as “Mattress Mack’s”…the Houston furniture store owner is out an estimated $7 million due to the Seattle Seahawks’ Super Bowl victory Sunday after losing a bet with customers who made hefty purchases at his stores…Jim McIngvale, known as “Mattress Mack,” ran a 10-day promotion at his two Gallery Furniture stores promising customers their money back if the Seahawks beat the Denver Broncos…to win, customers needed to have purchased $6,000 worth of furniture and had it delivered before kickoff on Sunday night…about 1,000 people participated, buying an average of $7,000 worth of furniture…at least he got some Super-Bowl sized free publicity…

Today’s Markets

Asia

Japan’s Nikkei tumbled 4% overnight, losing 610 points to finish at 14,008, as a reaction to what occurred on Wall Street yesterday plus the yen jumped to two-month highs against both the U.S. dollar and the euro…the Nikkei is down 12% since hitting a six-year peak of 16320 on December 30, placing this market firmly in correction territory…China’s Shanghai Composite remained closed…

Europe

European markets have been volatile today and are mixed in late trading overseas…

North America

U.S. markets are moderately in the green as of 7:45 am Pacific, trying to get back up on their feet after yesterday’s drubbing which extended the Dow’s losses to 1086 points (6.6%) over the last 10 trading sessions…

Since 1971, when January was negative, the S&P 500 extended its losses into February 72% of the time, falling on average 2.4%…that ratio stands at 65% for the Dow and 57% for the Nasdaq…the S&P 500 settled at 1742 yesterday, 35 points above its 200-day moving average (SMA), its lowest close in more than three months…in fact, it was the worst start to February for the Nasdaq on record, and the worst for the S&P since 1933 and 1982 for the Dow…

Yesterday’s weaker than expected manufacturing report contributed to growing concerns about the economy before Friday’s monthly jobs report…overall factory activity hit an eight-month low in January as new order growth plunged by the most in 33 years…Obamacare continues to weigh heavily on business confidence…of course emerging countries are a focus of attention right now, and a bullish catalyst has been removed from the market in Ben Bernanke…new Fed chair Janet Yellen faces a difficult task in the weeks and months ahead in terms of “messaging” and sending the right signals to the market…

From CNBC this morning…a historically high number of people will be locked out of the workforce by 2021, according to a report by the Congressional Budget Office released today…President Obama’s signature healthcare law will contribute to this phenomenon, CBO said, citing new estimates that the Affordable Care Act will cause a larger than-expected reduction in working hours – eliminating the equivalent of about 2.3 million workers in 2021 versus a previous estimate of an 800,000 decline – a great example of how Obama’s “social engineering” is killing jobs and hampering the ability of the American economy to fire on all cylinders…this is also a President who of course has mocked the job-growth potential of the Keystone XL Pipeline Project…does the President really understand how jobs are created?…he is America’s version of Pierre Trudeau, the hero of Canadian liberals and socialists, who inflicted long-term damage to the Canadian economy…

Updated Dow Chart

Yesterday, the Dow fell below its 200-day moving average (SMA) for the first time since December 28, 2012…over the last several years, great buying opportunities have always emerged each and every time the Dow has touched or fallen below (briefly) its 200-day, but that’s not a catchy headline for the mainstream media which has a tendency to dwell on the negative…the 300-day at 15000 also provides great support…below is an 18-month weekly chart from John…a critical band of support for the Dow, we would say, is between 14850 and the 300-day at 15000…what’s the big deal about a 10% correction?…interestingly, historically, February ranks as the second-worst performing month of the year for the Dow and the S&P 500, and the fourth-weakest month for the Nasdaq…

Volatility Index Chart

The “VIX” rose above 20 yesterday for the first time in four months…it’s important to note that the “Fear Index” is approaching a resistance zone (indicated in the chart below) and a near-term extreme based on the RSI(2) indicator…this is solid evidence that now is not the time to push the “panic button” – the worst time to be a seller is when the “Fear Index” is near a peak…

In Toronto, the TSX is relatively unchanged as of 7:45 am Pacific…the Venture, which has a very strong band of support between the 920’s and the 940’s, is up 3 points at 944…

TSX Updated Chart

Strong chart support for the TSX should exist at 13400…the TSX is also underpinned by rising 200 and 300-day moving averages between just below 13000 and 12800, respectively…

Canadian Dollar Chart Update

The Canadian dollar, like many other currencies, has taken a pounding recently, but appears to have landed on support…below is an interesting 20-year monthly “big picture” chart from John…RSI(14) is now at a level not seen since late 2008/early 2009 during and shortly after the Crash


Tower Resources Ltd. (TWR, TSX-V)

We suggest readers perform their due diligence on Tower Resources Ltd. (TWR, TSX-V) which came out with significant news January 23 and Jan. 27 regarding its Rabbit North property near Kamloops which now covers 16,400 hectares in the immediate vicinity of New Gold Inc.’s (NGD, TSX) producing New Afton mine…check out TWR’s news release regarding this Copper-Gold porphyry play, and we’ll be continuing our due diligence in the days ahead…

New Afton is approximately 14.5 kilometres east of the main Rabbit North target…Rabbit North is also 28 kilometres east-northeast of the producing Highland Valley mine operated of course by Teck Resources Ltd. (TCK, TSX)

TWR 2.5-Year Weekly Chart


LX Ventures Inc. (LXV, TSX-V)

Some of our readers have been following this tech story in recent months, so below is an updated chart from John on LX Ventures Inc. (LXV, TSX-V)…rising long-term moving averages suggest an overall uptrend is still intact with LXV, but note the down trendline that has formed from the late November high of 96 cents…yesterday may have marked the start of a turnaround as shown in this 6-month daily chart…


Note: John, Jon and Terry do not hold share positions in TWR or LXV.

13 Comments

  1. Hi Jeremy
    Further to my comments about SMA crossovers….here is an example.

    http://stockcharts.com/h-sc/ui?s=MSFT&p=D&st=2011-01-01&en=2011-12-31&id=p27822081215&a=334890188&listNum=1

    Comment by John BMR — February 4, 2014 @ 8:08 am

  2. 2.BMR
    Are you going to have any comments on GMZ? you mentioned you would on Monday?

    Thanks

    Comment by Bosse — February 4, 2014 @ 9:50 am

  3. We’re getting to GMZ as quickly as we can.

    Comment by Jon - BMR — February 4, 2014 @ 10:03 am

  4. V.GGI
    125.00%

    V.HBK -10.00%

    T.SAM 13.51%

    V.IO -16.67%

    V.TGK 0.00%

    V.GTA -6.25%

    V.KWG -10.00%

    V.RBW -25.00%

    V.FMS 67.65%

    V.PGX 39.13%

    V.GBB -12.50%

    V.GMZ -25.00%

    bmr members stock picks

    120.32 134.59 14.27 11

    Comment by gil — February 4, 2014 @ 10:52 am

  5. SYMBOL……..COST…………..TODAYS CHANGE………..NET CHANGE
    GGI…………………………………………….MICKEKY MAC
    HBK…………………………………………….GREG J
    SAM…………………………………………….JUSTIN
    IO……………………………………………..TONY T
    TGK…………………………………………….KDCDOGGY
    gta………………gil
    kwg………………Barry
    rbw………………Alexandre
    fms…….Paul
    pgx…….Richard
    gbb…………Marc
    gmz………..Bosse

    Comment by gil — February 4, 2014 @ 11:06 am

  6. thx John… i guess if it was a technical crystal ball everyone would be rich eh!!!:) and it did come back to test but broke thru… funny how that happenes

    Comment by Jeremy — February 4, 2014 @ 1:22 pm

  7. Here’s some food for thought. I would like to debate “why its a good time to sell the current gold rally”.

    1. Hedge funds have increased their exposure most since November. In most cases when hedge fund increase exposure to commodity it typically defines a local top.

    2. Seasonality factors. Gold strongest months are around Q3/Q4.

    3. Volatility is increasing and big sell offs in the markets are forcing people into the USD which could be strength for the USD and weakness for gold. As well, taperitis is also providing limited strength to the dollar.

    4. Sell in May and go away will most likely be the strategy for this year considering the overbought markets and volatility/uncertainty in the emerging markets.

    I can’t think not to sell into this rally and sit tight until July/Aug to buy back in. I only forsee further downside pressure in gold which will probably drive gold back down one more time to 1180ish or further before making its vicious bullmarket. I like to buy with Jim Rogers and right now he’s not a buyer of gold and also agrees with this premise.

    I know that BMR is going to come back with technical analysis, but that hasn’t served many people well in the past few years in the gold market, so I’m always leary of relying on it to determine the bottom in markets. TA should be used as a secondary indicator tool, but not a primary indicator to officially call the all clear because its an art more than a science. I prefer investing with the big boys like Jim Rogers because at the end of the day volume is what drives markets and I don’t see significant volume in the markets at this moment.

    I guess only time will tell, but I would prefer to watch and see rather than gamble my money away. Right now, the hedge is to take some money off the table with this local top and wait until Q3 for things to explode to the upside in gold.

    Comment by Andrew M — February 4, 2014 @ 4:50 pm

  8. I don’t think the U.S. markets are ready for a bear yet, rather more than likely we’ll get a correction, then more new highs. The new highs will be met with less participation by stocks though. Bear markets usually take a while to start. Gold and commodities on the other hand are bottoming, we’re in that early wall of worry phase where everyone is bearish but they’re not making any money either. Mining stocks are acting like gold has put in a bottom. The U.S. dollar won’t be the asset that spikes either during the next bear, the only reason it did that in 2008 was because it was the funding currency for all the leveraged speculation and that trade was unwound during the crash. This time I expect everyone to pile into gold because the reaction to the bear will be massive money printing by central bankers, which will actually cause the dollar to fall.

    Comment by Justin — February 4, 2014 @ 6:05 pm

  9. AIX joins the DBV/GGI area plays with news today!

    Comment by STEVEN1 — February 5, 2014 @ 7:08 am

  10. Steven, AIX are obviously keeping their cards close to their chest at this point – would be interesting to know exactly where they have positioned themselves…”next” to claims held by Doubleview but DBV had a couple of large claim blocks prior to the last few days and there are rumors they have picked up additional ground as well…staking activity and negotiations with individual claim holders in the Sheslay Valley are reported to be intense…

    Comment by Jon - BMR — February 5, 2014 @ 7:21 am

  11. thanks….looks like the ‘best’ area to be involved in!

    Comment by STEVEN1 — February 5, 2014 @ 7:29 am

  12. Jon – I was just going to ask you did you know where AIX.v was there is an unnamed block between DBV and RG in north east corner

    keep us advised thanks

    Comment by ChartTrader — February 5, 2014 @ 7:37 am

  13. Will do…PGX is starting to kick into gear, not surprisingly…

    Comment by Jon - BMR — February 5, 2014 @ 7:42 am

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