TSX Venture Exchange and Gold
Investors were concerned about the so-called “PDAC Curse” last week and indeed the CDNX stumbled out of the gate Monday and Tuesday, falling 5% from the March 2 close of 1679 to an intra-day low of 1596 Tuesday. However, the Index showed its resilience by recouping most of those losses and closing at 1650 Friday for a weekly loss of only 29 points or 1.7%. Volumes were relatively low but in part that was due to PDAC with so many investors less focused on trading as they made the rounds at PDAC. This market does need a substantial increase in retail interest and buying to push through resistance around 1700. Based on the charts and our gut instincts, we do believe that will occur as the month progresses.
The CDNX continues to look very healthy from a technical perspective. Rising 50 and 100-day moving averages are supporting the Index, as we saw early last week, and what we also find encouraging is how the CDNX has performed on a relative basis vs. other markets through the first two months of the year.
It’s always a bullish sign when the CDNX is out-performing Gold, the TSX and other markets. The Venture is up 11% so far in 2012 – more than double the gains posted by the Dow (5.4%) and the TSX (4.6%). The Nasdaq is leading the way, up a whopping 14.7% for the year (that’s also a very encouraging sign).
Below is a 2.5-year weekly CDNX chart from John that shows how the RSI(14) has plenty of room to move higher to support a strong surge in this market. The catalyst could be a major discovery and/or a powerful run by Gold and commodities in general. Technical “breakouts” (i.e. a move through the 1700 area) will add additional fuel.
Gold
Gold tested important support levels between $1,660 and $1,680 last week and finished the week on a very positive note with a sharp intra-day turnaround Friday to close at $1,713 (a small weekly gain). John’s 3-month daily chart below shows a market that is regaining momentum and will likely find higher ground this coming week.
Silver lost 41 cents for the week to close at $34.32. Copper fell 2 pennies to $3.86. Crude Oil climbed 70 cents to $107.40 while the U.S. Dollar Index gained half a point to 79.96.
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.
“It’s always a bullish sign when the CDNX is out-performing Gold, the TSX and other markets”
Depends on your time frame yet again. As per your chart, the CDNX started 2011 in the 2200-2300 range meaning it is down substantially compared to other indexes and gold as well. My belief is that it is a very difficult market to comprehend due to many macro factors and I think that is reflective in the CDNX market. Spec/gambling money is either playing it safe or chasing earnings.
Comment by seamus — March 11, 2012 @ 11:34 am
The CDNX broke down in March/April of last year, before all the other markets……..that trend has changed with the CDNX leading the way out of the 2011 lows and with a very strong 1st quarter 2012 performance vs. the major markets. Unquestionably the CDNX is headed a lot higher, and what you’ll see later in the year is hugely significant with a reversal to the upside in the 1000-day SMA….
Comment by Jon - BMR — March 11, 2012 @ 11:43 am
I worry about the short positions- they’ve gone from 100,000 to 722,000 during the last rally from mid-Feb. to the end of Feb.- not a good sign- If the news is real good and they cover we’re in the money but if not, they will get us down to 20 cents at least
Comment by Richard — March 11, 2012 @ 2:08 pm
Richard, you’re misunderstanding the “short” position. It’s actually a very positive sign. What’s happening is that you’re starting to see some Rainbow warrants getting exercised. These individuals wouldn’t be exercising warrants at 25 cents if they thought for a minute this stock wasn’t ultimately going a lot higher. They face no risk on the “short” side because they can cover with paper. So they’re not betting on the stock going down. Some are just playing for a few pennies with the stock trading above 25 cents. This also provides needed liquidity in the market. No need to worry. RBW is “in play” and that’s always a positive thing.
Comment by Jon - BMR — March 11, 2012 @ 2:23 pm
There is also a factor that the market maker (house looking after the stock) ccould sell short in order to keep a stable market by to an extent, controlling the price. After all, this is new to the market, they have proven up nothing yeet and they all want an orderly market without it getting to far ahead of itsef. lets say that the coming technical report is very favourable to rbw. What comes next? Not much until drilling results in 2 to 3 months? We know that they have been doing an ariel survey, perhaps aquiring more favorable claims etc. but thats maybe about it. The truth machine will tell the tale. just my 2 cents worth. richard 1
Comment by richard l — March 11, 2012 @ 4:52 pm