TSX Venture Exchange and Gold
It was another solid week for the Venture Exchange which added 32 more points to close at 1690. For the year, the CDNX is now up 14% but there’s a lot more upside to come.
First, we suggest to each of our readers that you do yourself a favor and take a few minutes to check out Frank Holmes’ weekly Investor Alert article (posted last night) at www.usfunds.com. Holmes puts a lot of things into perspective regarding the current situation and why commodities are expected to do so well this year. The global liquidity boom that began in earnest in December has much to do with what’s unfolding in the markets.
In the near future, likely next week, we expect the CDNX to work its way through a resistance band which will then inject some high octane fuel into this bull market. The signature pattern of a CDNX bull market is frequent injections of fresh fuel in the form of technical triggers/breakouts, exploration success, and rising commodity prices with periodic pullbacks to supporting moving averages. That’s the environment we’re in right now and it should continue through the balance of the year.
When this market gets a little ahead of itself, it pulls back a few percentage points and smart money buys on weakness. For now, the 10 and 20-day moving averages are providing excellent support as we’ve seen over the last two months. That trend should continue in March. The 100-day moving average (SMA) recently reversed to the upside – a very bullish development. Interestingly, the 500-day SMA – which flattened out for a period of time – is now rising again and that’s also hugely bullish. This SMA is currently sitting at about 1800, a level we expect this market to test and perhaps surpass next month. At some point in the spring, a 10% correction is likely and will be necessary in order to unwind overbought conditions and set the stage for a major advance over the summer/early fall.
Overall market volume still needs to increase but we believe that will occur in the near future on a “reverse capitulation”. A lot of investors are still sitting on the sidelines, scared to test the waters. That’s a good sign.
Below is John’s updated CDNX chart.
Gold
Support for Gold held in the low 1700’s, as expected, and the yellow metal then took off to the upside this week ($50 an ounce) to close at $1,774. It’s now right in the middle of a resistance band, so the next week or two are going to be really interesting. Given the bullishness of the CDNX, a very reliable leading indicator, the odds seem very good that Gold will manage to bust through the $1,800 level sometime next month.
Silver, which is looking exceptionally bullish, gained $1.82 an ounce last week to close at $35.41. Copper jumped 13 cents to $3.85. Crude Oil climbed a whopping $6.53 a barrel to $109.77 while the U.S. Dollar Index fell a full point to 78.40.
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. It’s hard to imagine Gold not performing well in this environment. The Middle East is being turned on its head and that could ultimately have major positive consequences for Gold.
BMR, Where if any does the huge short position in both gold and silver play into your bull market, these guys are not going to let gold and silver take off to the upside without a fight. Your thoughts?
thanks
The total Commercial net short position now sits at 39,188 contracts, or 195.9 million ounces. Based on my back-of-the-envelope calculation… and once you remove all the market-neutral spread trades… JPMorgan (all by themselves) is short a bit more than 25% of the entire Comex silver market. The Commercial traders have sold 25,000 silver contracts short (125 million paper ounces) since the late-December lows. One can only imagine what three-digit silver price we would have if JPMorgan et al. hadn’t been there.
But as bad as the COT was in silver, it was just plain ugly in gold, as the Commercial net short position rose an eye-watering 19,894 contracts… a hair under 2 million ounces. The Commercial net short position has now blown out to 22.9 million ounces. These are not extreme numbers (extreme is over 30 million ounces), but the danger flags are now flying.
Comment by Greg — February 25, 2012 @ 1:38 pm
More of the above:
As of the close of trading yesterday, I note that silver has already fallen back to its 200-day moving average…and the HUI closed below that average yesterday. Gold is still about $100 above its 200-day moving average.
The only question that should be asked now is whether the engineered price decline will come sooner rather than later. “Da Boyz” could peel $100 off the gold price and five bucks off the silver price very easily, considering how loaded up they are on the short side at the moment. However, the possibility still exists that JPMorgan and their merry band of co-conspirators on the Comex may get overrun. If it does happen, it will be for the first time. But at the moment, there’s no sign of that.
All we can do is wait until the Sunday night open in New York… watch the overnight trading action… and hope for the best.
Comment by Greg — February 25, 2012 @ 1:44 pm
I think you may have answered your own question, Greg…shorts could be in for a nasty surprise…having said that, the COT structure is just one of many indicators to look at, and I do examine it occasionally, but don’t get “caught up” in it as it can throw you off the big picture and it can also change dramatically very quickly…the #1 leading indicator (of many indicators) to pay attention to is the CDNX and the technical health of that market…what the CDNX is telling us is that the primary trend for Gold and Silver and commodity prices in general is very bullish…the long-term charts for Gold and Silver are also very bullish – in fact, I’ve just looked at John’s latest Silver chart (which we’ll be posting by tomorrow), a 2.5-year weekly chart, and it’s HUGELY bullish……you’d have to be insane to against this market right now…..shorting Silver last year when it ran to $50 made a lot of sense, but not now…
Comment by Jon - BMR — February 25, 2012 @ 1:58 pm
Moosey- Remember to sell in May & go away.
Bert – I think that line came about because May rhymes with away. I think it was 2010,
when May, June were the best months of the year for me. The market’s don’t close down
during those months, so it’s up to the investor to be in the right sector(s). I may not
be interested in holding SNOW shares in May.
Greg – Hopefully, this time i am taking profits if given the chance.
Bert – Your above noted sentence, gives me a chance to relate what i do & what i did even
as recent as Friday.. I have 40,000 shares of RBW, more than i expected to buy. Anyway, while
everyone seemed to be cheering RBW, i sold 5,000 at 0.28, 1/8th of my position for a profit of
$400.00. If i sold them all, it would have given me a profit of $3,200.00, a tidy sum for a
lowly fella, way down here somewhere. To continue with my plan, if the price continues up,
i will consider selling another 5,000, for additional profit & will do this all the way up,
& raising my profit considerably.. Anyway, before i rid myself of all my shares, i expect
it to become overbought & while the guys like Andrew are posting, that he will not only be
buying a car for himself, but also one for his brother, Charles…. Where was i ? oh yes,
eventually i expect RBW to becomes overbought & i will be looking for it to pull back & if
it does, i will consider replacing all or some of my previous position. Not always do the
best of plans work out, but it is a plan just the same. If it doesn’t move back, i will
continue to sell in increments & who knows what my profit will eventually be, more than
$3200.00 for sure..
Disclaimer – My plan may not be suitable for others.
Comment by Bert — February 25, 2012 @ 3:32 pm
Thanks Jon
Comment by Greg — February 25, 2012 @ 8:13 pm
Hey Bert, though I agree with taking profits when u can, RBW seems to have a bit of a mind of its ownn….very controlled. All it takes is a week of consolidatign between 28-26c and we will out out of overbought territory. I would be scared to sell any shares unless I had inside info, look at 2 yr chart for HDA and see the run they went on. A couple pullbacks indeed but Id rather stick around for the whole ride…
db
Comment by db — February 26, 2012 @ 7:25 am
db – I would be scared to sell any shares
Bert – The above 8 words tell me a lot about you, my friend. If i may, i will relate
a story that may fit you to a t. A grade 11 student had to write an essay, the topic
was,,, if you were in a strange locality, with no friends & no money, what would you do ?
His response took one line only & is as follows:— I WOULDN’T KNOW WHAT TO DO.
Disclaimer — Bert is a joker
Comment by Bert — February 26, 2012 @ 8:03 am
Bert- Just like you “have a plan” so do I… and its doesnt include selling shares for 28c when I know I will be able to get 60+ cents for them in a couple months. I might even follow “your plan” after RBW is in the 60s but to start piecing it out in the 20s is a lil early IMO. Though RBW is overbought there is still room to go up next week after the MMReport comes out it will lift the SP into the 50s, and youll be thinking….”why did I sell ANY shars at 28c?!”. While everyone else is following your plan after next weeks run, youll be kicking yourself at the lost profits…
Desclaimer- This is just my opinon. Good luck to BOTH of us and our “plans”
db
Comment by db — February 26, 2012 @ 8:23 am
db – While everyone else is following your plan after next weeks run, youll be kicking yourself at the lost profits…
Bert – You got that one wrong, i actually whine more over my losses, than any one
stock i have made a profit in. There is nothing guaranteed in life, except that is,
DEATH. If you are now thinking that i should have mentioned taxes, you are wrong
again, because some actually get away with paying taxes, including the richest of
the rich. Anyway, my previous post was not meant to influence anyone, in fact, i
would be alarmed, if anyone out there followed my suggestions, who wants to follow
a fool ? The difference with you not selling now & getting 0.60 in a couple of months
is, the 0.60 is not guaranteed, but my sale at 0.28 is & any future sales will be. Our
profits may be the same at the end, but i can sort of relax as we move along.. When
i sold ATC at the end for the big jackpot, i didn’t mention how much i made as i
moved along buying & selling, buying & selling, but there are times i sell & don’t
get to buy it back. By the way i only pay $9.95 for commission, because my buying
& selling makes me an active trader. I did mention recently that i am investing
now, instead of trading, although i will trade as we move along, hopefully i
can stay with RBW for the longer term. 3 of my stocks that are much longer term
are, CEV, SGC & HRC… What i have written is to carry on a friendly internet
conversation with you & to pass some time. I am far from perfect with this game,
but for a lowly guy, i feel i have done fairly well. When you can sit on your
ass & grab cash from someone, in another part of the country\world, it gives
me a sense of accomplishment. Thanks for reading. R !
Bert
Comment by Bert — February 26, 2012 @ 9:16 am
I too send these as a way to pass time and poke fun so please dont take anything to personally. I also have $9.95 commision but have long term holds such as you….RBW is one of them. Its interesting what other people’s ideologies are. As you mention CEV as one of your longterms, it is one of my trading stocks and have done quite well on it from 32c up to the current SP. As we cant win them all (ZNR/CJC for me to name a couple) I wish every retail investor success against the MarketMakers…db
Comment by db — February 26, 2012 @ 9:44 am
db
I have also traded in & out of CEV, SGC & HRC, but there comes a time when one has to
consider where those companies stand & the possibility that they are being assessed by
major(s), so i slow down & become an investor for a period of time..
As for RBW, they haven’t even drilled yet & i am having fun, while they create a
story & who knows, the company may end like this—
RBW, all puckered up like a great big frog,
I sneaked up close & poked it with a wire,
It just went zzzzzzzzzzzzzz, like an old flat tire.
Comment by Bert — February 26, 2012 @ 11:36 am