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The Resource Sector & Equity Markets
 

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November 3, 2014

BMR Morning Market Musings…

Gold has traded between $1,165 and $1,175 so far today…as of 8:30 am Pacific, bullion is off $4 an ounce at $1,169…Silver is down 7 cents at $16.11…Copper is up 2 pennies to $3.08…Crude Oil is 46 cents lower at $80.08 while the U.S. Dollar Index is up one-fifth of a point at 87.28…this has the potential to be another bullish week for the greenback given the growing likelihood of a Republican sweep in tomorrow’s U.S. midterm elections, expected dovish comments from an ECB meeting and Friday’s U.S. non-farm payrolls report…monetary policy divergence between the U.S. and other central banks continues to be a key theme, as evidenced by Friday’s stimulus news out of Japan that drove the yen to a 7-year low and gave a sharp boost to global equity markets (pushing Gold lower)…

A couple of interesting new Gold charts this morning (see below)…U.S. Mint sales of Gold coins were strong in October…the Mint’s web site shows that sales of American Eagle Gold coins, which account for the bulk of the activity, were 67,500 ounces – the highest since January, according to Commerzbank, with buying interest picking up noticeably in recent days and with Gold investors “using the low price level as a good entry opportunity.”  Meanwhile, the Mint reports selling 5.79 million ounces of American Eagle Silver coins last month, the most so far in 2014 and the highest since January 2013

Barclays says physical buying continues to firm amid lower prices…Gold premiums in India have risen to $15 an ounce, with buying expected to pick up this week – exactly what the Gold market needs…the latest Hong Kong trade data show the highest Gold exports to China since March…further, Barclays reports that official-sector buying was “healthy” in October, with Russia upping its holdings by 37 metric tons…

If Gold prices settle modestly below $1,200, Allied Nevada Gold (ANV, TSX), Barrick Gold (ABX, TSX), Iamgold (IMG, TSX), Kinross Gold (K, TSX) and Newmont Gold (NEM, NYSE) are “particularly vulnerable” to credit rating downgrades according to Standard & Poor’s in the new RatingsDirect report entitled:  Will Falling Prices Tarnish North American Gold Producers’ Credit Quality?  “Specifically, we estimate that these companies would breach the adjusted debt-to-EBITDA ratio, funds from operations (FFO)-to-debt ratio, or liquidity thresholds previously highlighted in the downside scenarios in our most recent research reports on each issuer,” the S&P report stated…

Russia Oil & Gas Production Remains High

Figures showing that Russian Oil and gas production hasn’t been affected by Western sanctions underpins the oversupply in global Oil markets, keeping prices under pressure.  “The continued high level of Oil production in Russia is playing its part in the oversupply on the world-wide Oil market,” said Commerzbank which reported that according to the Russian Ministry of Energy, the country produced 10.6 million barrels a day of Crude Oil and condensates in October, only slightly down from September and only just short of the record post-Soviet Union era high…the oversupply continues to put pressure on OPEC which has so far confounded the market by refusing to rein in production (there are internal squabbles)…many had expected OPEC members to slash production to shore up prices…

Today’s Equity Markets

Asia

China’s Shanghai Composite rose to a 20-month peak overnight, advancing for a 5th straight session…the Shanghai climbed 10 points to close at 2431…mixed economic data out of China…HSBC’s final PMI for October rose to a 3-month high at 50.4, unchanged from a preliminary reading and higher than September’s figure…the report followed data over the weekend that showed China’s official PMI for October falling to a 5-month low at 50.8…other data today showed the country’s services sector growing at its slowest pace in 9 months in October, with the official services PMI falling to 53.8 from 54 in September…

No trading in Japan today due to a holiday there…

Europe

European markets finished modestly lower today after data revealed that euro zone manufacturing activity expanded slightly less than previously thought in October…

North America & Tomorrow’s Congressional Elections

The Dow is off 32 points as of 8:30 am Pacific while the S&P 500 is up slightly, hitting a new record high…the TSX is down 64 points while the Venture is flat at 770

The U.S. manufacturing sector slowed in October to its lowest rate of growth since July, while a gauge of new orders hit its lowest level since January, an industry report showed this morning…

Findings from the latest Wall Street Journal/NBC News poll show that the most important issues for Americans as they go to the polls tomorrow are job creation/economic growth (41%), ending gridlock/getting things done (36%) and the deficit/government spending.  “This is really the last chance for America to pass judgment on the Obama administration and its policies,” former GOP presidential nominee Mitt Romney stated on “Fox News Sunday”…Democratic candidates have been weighed down by the President’s unpopularity – his approval rating is around 40%, a far cry from the days of “Yes We Can”

It’s important to keep in mind that in two southern Senate matchups – Louisiana and Georgia – polls show the races are too tight to call, creating a possibility (though this is still considered unlikely) for run-off elections that could delay for weeks knowing who will control Congress’ upper chamber…

A clear outcome tomorrow could set the market up for additional upside into the end of the year…historically, midterm elections correspond with market strength…the S&P 500 has rallied an average of 16% in the 6 months that follow midterms going back to 1950, according to Nuveen Asset Management…meanwhile, Barclays noted that since 1928, the S&P 500 has posted a median return of 7% in the 90 days after a midterm, with returns positive 86% of the time…

Dow-Gold Comparative Chart

This is an interesting chart that goes back to 1980 and shows the relationship between the Dow and the price of Gold…generally, though there have been some exceptions (in particular, 19851988 and 20092010), bullion tends to move in the opposite direction of the Dow, and the strength of equity markets since the beginning of 2013 has been particularly problematic for Gold…when it comes, and it will eventually, a major correction in the Dow can be expected to have a very bullish impact on Gold

DOWGOLD1

Gold 1-Year Daily Chart

Gold’s challenge this week will be to hold support around the $1,150 level (give or take $10 or $20) as shown in John’s 5-year weekly chart posted Saturday…this 1-year daily chart shows RSI(2) levels at an extreme low (less than 1%) which suggests that some near-term relief could be on the way…note how the 50-day moving average (SMA) reversed to the downside at the end of August and provided stiff resistance last month when Gold tried but failed to push through the $1,250’s…sell pressure (CMF) has weakened since peaking in September/October…

GOLD210

Reservoir Minerals Corp. (RMC, TSX-V) Update

One Gold stock that managed to buck the trend last week was Reservoir Minerals (RMC, TSX-V)…its action this week – whether it confirms a possible reversal – is something to keep an eye on for another piece of evidence that the quality juniors are stabilizing…Reservoir, which had just over $40 million in cash at the end of August, reported last week that diamond drilling has resumed with 5 rigs operating on its Cukaru Peki deposit and other Copper-Gold targets as part of the very promising Timok Project in eastern Serbia…Freeport-McMorRan (FCX, NYSE) is the operator of the JV and picking up the tab on all exploration expenses…

Oversold RSI(14) conditions have emerged on this 1.5-year weekly RMC chart, mirroring the overbought conditions during February/March when the stock hit an all-time high of $7.54RMC hit a yearly low of $3.40 October 15…there is strong Fib. support in the $3 to $4 range ($3.24, $3.56 and $3.88) and chart resistance around $5

RMC is off 14 cents at $3.75 as of 8:30 am Pacific

RMC7

Mission Ready Services Inc. (MRS, TSX-V) Update

Mission Ready Services (MRS, TSX-V) has been a Venture “out-performer” over the past couple of rocky months, climbing 60% since the end of August on the strength of new contracts and the successful completion of a $4 million financing…the company provides solutions to the global defense, security and first-responder markets (a good space to be in right now) in the areas of cleaning, logistics, maintenance, program management and client representation…

Technically, MRS remains within an upsloping channel on this 6-month daily chart after recently hitting a high of 48 cents and retracing last week to support at 35 cents…a good test this week will be whether MRS can push through new chart resistance at 40 cents…the stock is down a penny at 38 cents as of 8:30 am Pacific

MRS10

Graphene 3D Lab Inc. (GGG, TSX-V) Update

If you can stomach volatility, you’ll want to continue to keep a close eye on Graphene 3D Lab Inc. (GGG, TSX-V) which has been bouncing around significantly, creating opportunities for savvy traders…the 50-day moving average (SMA), currently at $1.70, has been providing support on pullbacks but is flattening out, and GGG will have to push hard in the week ahead to avoid a reversal to the downside in this SMA…

GGG is off 2 cents at $1.73 through the first 2 hours of trading…

GGG4

Slyce Inc. (SLC, TSX-V)

Slyce (SLC, TSX-V), formerly Oculus Ventures, was a solid performer on strong volume in October, and it’s starting November off on a powerful note…the company’s strategy is to position itself as a pivotal player in the emerging visual web by providing its technology to retailers, brands, app developers and digital publishers, enabling their apps to recognize products for instant purchase…Slyce will provide its technology in exchange for integration, licensing and per search fees, percentage sales splits and big data provision and analysis…the company is currently working with a growing list of Fortune 1000 brands and companies as well as multiple innovative developers…

Technically, SLC has found strong support at 70 cents and the primary trend is bullish according to the ADX indicator…as always, perform your own due diligence…

SLC is up 12 cents at 90 cents as of 8:30 am Pacific

SLC1

Silver Short-Term Chart

What’s encouraging about this short-term Silver chart is the divergence between RSI(14) and price, and the spike down to the $16 level (and slightly below) that we were hoping and expecting to see as a sign of at least a near-term bottom…note the downtrend line in place since July…a large gap has opened up between the current price and that downtrend line which is serving as major resistance…

SILVER215

Silver 11-Year Monthly Chart 

In this 11-year monthly chart, note the two downtrend lines since the 2011 peak…of concern is the bearish trend (-DI has increased significantly over the last few months but there’s room for that trend to accelerate)…for now, Silver is holding within a support band…

SILVER214

Silver 34-Year Monthly Chart

This 34-year monthly chart suggests that Silver is in the process of bottoming out but may not have found a final low just yet, though RSI(14) is at previous support…this can be considered a “Wave 4” move to the downside that could certainly test strong Fib. and chart support around $15 before reversing…sell pressure has really intensified this year…

SILVER213

Note:  John, Terry and Jon do not hold share positions in RMC, MRS, GGG or SLC.

15 Comments

  1. Although i was feeling positive for a better November, i kind of
    lost it after reading the first part of BMR’s report this a.m.. I
    didn’t think that we would need as many different happenings, to
    change the scenery out there from negative to positive. For
    goodness sake,it seems everything is still stacked against us.

    We need the Republicans to win the senate tomorrow
    We need Gold to stay above $1,200.00, otherwise look out for downgrades
    We need Russia and/or OPEC to cut back on oil production
    We need a dovish outlook from the ECB meeting
    We need Japan to repeal it’s stimulus
    Finally
    We need Miss Romney to finally admit he lost the election

    Comment by Bert — November 3, 2014 @ 9:23 am

  2. I noticed something positive.

    At 3 pm Nfld time

    Palladium up 11.90, Platinum up $6.95

    Comment by Bert — November 3, 2014 @ 10:30 am

  3. What do you guys think of BLO continued drop in price?. We must be nearing a bottom and reversal. Everything still on track with getting the breathalyzer completed? Quite a bit of volume again today. Good sign I think .

    Comment by Ed — November 3, 2014 @ 1:16 pm

  4. Hi Jon, you said there would be another excerpt on GGI. When will you release it? GGI put out that mouth watering core so hope to see assays soon. Also, BLO falling knife for some reason. Heavy volume today…something doesn’t smell right about BLO, especially that they are supposedly on the brink of a prototype breathalzer for marijuana. I should have listened to my inner voices and sold at 17 cents.

    Comment by Dan — November 3, 2014 @ 3:13 pm

  5. Jon. Could you commentt on the recent dumping by pinetree which really beat down lsa.to and agg.v? Would it be with looking at these stocks?

    Comment by tony t — November 3, 2014 @ 3:57 pm

  6. Gold started trading 15 minutes ago & according to CNN
    it’s down over $4.00 already. Oil continues it’s
    downtrend, being down 0.64 & now below $78.00.. I have to
    concede defeat, this is just too much of a drain on one’s
    system. There must be better things in life than watching
    this dreadful market take everyone’s cash. I haven’t sold
    out yet, but i am tired of it all & need a long, long break.
    I wish you all the best. R !

    Bert

    Comment by Bert — November 3, 2014 @ 4:04 pm

  7. New GGI fact sheet dated Oct 30th. Seems like focus is on Mexico (Rodadero) more than Grizzly but I am ok with that because I believe Rodadero will be the GGI company maker before Sheslay in my opinion.

    Garibaldi Resources -> Investors -> Presentations

    Comment by Dan — November 3, 2014 @ 4:43 pm

  8. R will renounce to 90 cents…….. believe it or not!

    Comment by Theodore — November 3, 2014 @ 7:05 pm

  9. I’m guessing that GGI will give us a good outline of their plans for all of their properties when they announce the 1st batch of results. They could have told us about the Grizzly in the last PR, so maybe they have not decided 100% if any drilling will take place there this year.

    Comment by Tom UK — November 3, 2014 @ 8:55 pm

  10. Hi Dan, we’ll have more on GGI, possibly today. Looking very good. As far as BLO is concerned, I added significantly to my position at a nickel yesterday as I viewed it as an ideal time to jump back into the market – especially with the PP stock from the early summer officially becoming free-trading, though I believe there has been some front-running on that stock the last 6 weeks. Anyway, it’s doing volume, it’s on track with its development plans, and I believe November will be a turnaround month. These things can be volatile, especially in their early stages, but this one has the capacity to charge right back up to its yearly highs very quickly. Watch it firm up soon but be patient with it. Yesterday’s action was very encouraging.

    Comment by Jon - BMR — November 4, 2014 @ 4:54 am

  11. Sheslay guys… why is RG going straight up? This one is also right in the middle of the Sheslay valley. Any insight on this board?

    Comment by alphatrading — November 4, 2014 @ 6:45 am

  12. RG has a number of projects of course in its pipeline; obviously something is cooking for this kind of action, especially on a weak market day.

    Comment by Jon - BMR — November 4, 2014 @ 6:59 am

  13. RG IS ROCKING! IT’S IN THE SHESLEAY AREA! THIS COULD BE WHAT WE’RE WAITING FOR??! JON?!

    Comment by STEVEN1 — November 4, 2014 @ 7:04 am

  14. US dollar down and so is the Venture. Has the venture ever performed this poorly for this length of time?

    Comment by Tony T — November 4, 2014 @ 7:56 am

  15. What have Romios done in the Sheslay? Nothing as far as I know, certainly no drilling taken place by them has there? Probably linked to something else, unfortunately!!!!

    Comment by Tom UK — November 4, 2014 @ 8:20 am

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