The bears are about to be left in the dust yet again.
The 24% decline in the CDNX from the 2465 high March 7 to the 1862 low June 28 was exactly what this market needed – a major correction which typically occurs once a year with the Venture Exchange during a multi-year bull market cycle. That pattern actually goes right back to the days of the CDNX‘s predecessor, the old Vancouver Stock Exchange.
And if history repeats itself and if John’s technical analysis is an accurate guide, as it so often is, we’re now in the beginning stages of a powerful new CDNX wave that’s going to bring in a lot of money that’s sitting on the sidelines at the moment.
John’s three-year weekly CDNX chart below is irrefutable evidence in our view that the corrective period that began in March is indeed over and a fresh bull phase is now underway. John’s theoretical Fibonacci target (a potential Index level based on technical analysis) is 2853 though the timeline for the Index hitting that possible area is uncertain.
As we’ve pointed out in recent weeks, however, a 10-year historical review of the CDNX has shown that the Index has gained an average of nearly 30% by the end of December from the low recorded during each year in which there has been a major correction. So if we take 1866, the June 29 low, and add 30%, it’s reasonable to expect we’ll see the Index close 2011 right around 2400 based purely on historical patterns. This gives additional credence to John’s technical analysis.
Not everyone will agree with this bullish scenario but that’s what makes a market. Yes, from a fundamental standpoint, it’s understandable some people are gripped by fear when they look at all the problems confronting the world at this time. Money and Markets ended a column this morning stating, “Expect crises to ripple. Be defensive!”
But the CDNX has proven to be the most accurate leading indicator we’ve seen of the global economy and the markets in general. Unquestionably it remains in a long-term bull market and its chart is telling us that a new bull phase has started.
We also find it extremely encouraging that the American Association of Individual Investors (AAII) survey of investor sentiment, a popular contrarian indicator, showed 77% of individuals were bearish in June – one of the lowest readings since the beginning of this bull market in early 2009, according to J.P. Morgan.
Check out John’s chart below and decide for yourself if our bullish scenario makes sense. John made a similar great call on the CDNX at almost this exact same time last year.
Great work. Thanks Gents. I would also agree with your analysis. Since I’m a contrarian investor I’m heavily weighted in equities as of two weeks ago.
Any good option call plays that could improve returns in certain gold and silver stocks? CQX seems to have turned a corner. Can you provide some TA on that stock?
Do you have any good REE or Potash plays?
Comment by Andrew M — July 9, 2011 @ 7:25 am
I for one, agree with your readings, in particular, because it’s stock harvest time, when traders
replenish their portfolios, in anticipation of the mining stories, etc. No doubt, we are in
difficult times, but time seems to heal everything & traders now appear to be immuned to all
the difficulties out there, they have absorbed the shock of it all & are ready to move on &
play the game they are addicted to. We the lowly traders are still fair game for the big boys,
who not are not only connected to the hip with different companies, but now have the upper
hand with their expensive software, which most of us can’t afford, but hopefully we will prevail.
My writings may have told you that i am not fussy about the big boys, who mostly are heartless &
will not rest until they have emptied our pockets. This is part of the reason i am following BMR,
so far, i feel they are honorable folks . There’s no one perfect out there, whoops ! sorry about
that Lord, i got carried away & forgot you for a moment, anyway, i do feel BRM are trying their
best to help us succeed & make life just a little more comfortable & i thank them for that.
R !
Bert
Comment by Bert — July 9, 2011 @ 7:49 am
Hi Andrew, thank you. We mostly look at Gold/Silver plays of course, but in a general sense we are always on the lookout for potential opportunities in other sectors including potash and rare earth plays.
With regard to Cadillac, yes, it did pop up a little bit last week though the volume is still relatively low. From a fundamental standpoint, the company has little cash in the bank (less than $300,000) and has to show us they have a plan of attack that makes sense after what transpired in the first few months of the year. We do see excellent potential of course with CQX, which is why it is part of the BMR model portfolio, but the time to jreally get charged up again over this company is when there’s clarity with regard to their game plan – we don’t see that just yet – or of course if there’s a hit on the Cadillac/Lucky Break optioned ground – that hasn’t happened yet either. Patience will be the key with CQX.
Comment by Jon - BMR — July 9, 2011 @ 7:54 am
GBB real players are not there yet. Monday can continue going down to 44 cents … SFF is more active than GBB but I am sure that when GBB reaches the resistance points, there will be larger dumps… Everybody is waiting for the news and it may still take some time for results to come out by end of July or early August. SD is quiet but news will come out soon… I do not have the crystal ball to say it comes with good results but my six sense … it will be. I am holding a position in SD and return potential is much better than GBB in a short run:
GBB : 46 cents —- July 8 …. example invest $10,000 = 21,800 shares
SD : 4 cents —– July 8 …. example invest $10,000 = 250,000 shares
GBB : unknown —- August 12 …. (total value $ ) = +/- ?? %
SD : unknown —- August 12 …. (total value $ ) = +/- ?? %
I am not intended to make a projection but simply want to highlight the investment return of both stocks in one month’s time.
Comment by Theodore — July 9, 2011 @ 6:40 pm
Andrew, check out Encanto (EPO) for a Canadian potash stock.
Comment by Wayne — July 10, 2011 @ 5:19 am
I’m currently a owners of both EPO and PPI. I think AAA and FED provide an interest potash play in Ethiopia which has returned some nice results.
Rare earths I’m not sure about though. RA and GWG are the plays that I’m watching, but I think there are alot more out there. ORT.A is another that I think has huge potential, but I just can’t quantify it at this stage.
Comment by Andrew M — July 10, 2011 @ 8:05 am
Hi Bert !
Could you please explain further what advantages the software you mention will give the big boys. I am new in this very exciting market and all educating information is very much appreciated. Sorry for my spelling but english is not my native language.
Thanks in advance
Best regards
Tommy
Comment by Tommy — July 10, 2011 @ 12:58 pm
Theo,
your comparing apples to oranges,there isnt even a comparison and i wont debate you here, but really SD vs GBB?
com mon man, give your head a shake a few times?
I sure most everybody that reads this site will agree with me.
Well, just have to wait a bit and see once the RE comes out in Aug or Sept.
Til then good luck with your trades and your 6th sense.
Comment by alec — July 10, 2011 @ 9:56 pm
Thank you for your comments. It does not matter it is an orange or apple… we are investing the money in the stocks and expect return in fashion manner. What I am trying to say here… if you invest in SD or GBB now, the return by August …what will be your return. I am not predicting the price but my sixth sense tells me, the return of SD in a short run is much better than GBB. In fact, I like GBB better than SD as it has a better piece of land and less risky. I switch some of my investment to SD for this purpose. For sure, I will buy back GBB at a good time.
Comment by Theodore — July 11, 2011 @ 1:30 pm