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Gold got hit hard overnight as the greenback surged, not surprisingly, following midterm elections in the U.S. that delivered an overwhelming victory for Republicans…bullion dipped to a 4.5-year low of $1,136 but is trying to claw its way back…as of 8:15 am Pacific, Gold is down $23 an ounce at $1,145…as John’s charts have shown, there is a general area of support in the vicinity of $1,150 – give or take $10 or $20 an ounce – so we’ll see if buyers step up to the plate over the next couple of days…clear evidence of strong physical support is what’s required very quickly to help put a floor under the price of bullion, otherwise $1,000 Gold won’t be far off…Silver nearly touched $15 overnight, a key support area, but has trimmed those losses…it’s off 54 cents at $15.49 as of 8:15 am Pacific…Copper is down 3 pennies to $3.03…Crude Oil is rallying, up $1.39 a barrel to $78.58 after data this morning showed that U.S. inventories rose less than expected…as well, rumors are circulating of a pipeline explosion in Saudi Arabia (Vladimir, are you up to something again?)…the U.S. Dollar Index, meanwhile, has climbed nearly half a point to 87.47 (see updated charts below) as it closes in on Fib. resistance around 88…

King Dollar, with a lot of momentum behind it, is weighing heavily of course on the commodities’ sector…2 other factors this week may further bolster the greenback or temporarily slow it down…the regular monthly meeting of the European Central Bank is tomorrow – continued weak economic data out of the euro zone may push the ECB to enact more monetary stimulus – while the October U.S. jobs report is due Friday…

Reflecting current investor sentiment toward Gold, holdings in SPDR Gold Trust, the top Gold-backed ETF, fell 0.32% yesterday to 783.22 tonnes, the lowest total since September 2008…

Bullion has lost nearly $100 an ounce over the past week, rekindling memories of a stunning 2-day drop in the spring of last year that did ignite some physical buying…

Today’s Equity Markets

Asia

Asian markets were mixed overnight…China’s Shanghai Composite was off 10 points to close at 2040…HSBC’s China services PMI for October hit a 3-month low…the report follows data earlier this week showing mixed readings on China’s manufacturing sector…Japan’s Nikkei average climbed for a 5th straight session, hitting a new 7-year high…

Europe

European markets rallied strongly today, with all major indices up over 1%…weak economic data for the euro zone did little to dent sentiment…

North America

The Dow is up 79 points as of 8:15 am Pacific…traders are cheering a new form of “hope and change” in Washington while the ADP jobs report came in better than expected this morning…private employers added 230,000 jobs last month, the largest gain since June which casts a positive light on the labor front 2 days before the non-farm payrolls report…

Shakeup On Capital Hill

In a clear rebuke of President Obama, his agenda and leadership, Republicans swept to victory in yesterday’s U.S. Congressional elections…politically, how this plays out over the next couple of years – and the impact this will have across the broad markets – will prove to be highly interesting…the Republicans, who now control both houses of Congress for the first time since 2006, don’t have a filibuster-proof majority (they also have some of their own internal divisions) so theoretically they could bring up all the pro-drilling, anti-EPA, pro-Keystone bills they want, but either Democrats will likely filibuster them or Obama, who has shown little desire or few skills for the art of compromise, will veto them…

Washington’s dysfunction probably won’t end anytime soon – the rancor may get worse leading up to the 2016 Presidential elections – but the Republicans may be able to motivate the Obama administration in some specific areas (certain energy and tax reform initiatives, international trade deals, etc.)…at the very least, they’ll derail any agenda the President may have had for his final 2 years in office, and likely make life more than a little miserable for him…Republican senator Ted Cruz, who’s eying a potential Presidential bid in 2016, recently told the Washington Post that the first priority next year should be a string of hearings on President Obama, “looking at the abuse of power, the executive abuse, the regulatory abuse, the lawlessness that sadly has pervaded this administration.”  For their part, the Republicans’ national brand needs some work if they hope to not only maintain Congressional control in 2016 but also win back the White House…

President Obama, who stated last month that his “policies are on the ballot…every single one of them,” will hold a news conference later today…he has invited congressional leaders to a meeting at the White House on Friday before he disappears to Asia for 8 days…????

U.S. Dollar Index Long-Term Chart

The problem commodities are having can be explained by an updated version of this long-term U.S. Dollar Index chart (34-year monthly) which we’ve shown previously as it gave an important “heads up” that the greenback was headed significantly higher on a major technical breakout…

The action in the Dollar Index we’re seeing now is comparable to that witnessed at the beginning of 1997 when it also broke above an 8-year triangle formation…the Index took off from just below 95 and peaked at 120 by early 2002…

Based on this chart, the Dollar Index is facing resistance in the high 80’s and also at the long-term downtrend line which currently intersects around the high 90’s…it’s reasonable to expect that, over time, the Index will eventually test resistance at that long-term downtrend line…

U.S. Dollar Index Short-Term Chart

Short-term, the greenback is clearly in overbought territory – a condition that will have to unwind in the not-too-distinct future…in addition, the 50-day moving average (SMA) is rising in near-vertical fashion and this is simply not sustainable…look for a potential major rally in Gold and commodities when the Dollar Index decides to correct – at the moment, a key area to watch is Fib. resistance at 88…

Philadelphia Gold & Silver Index 

The highly respected Frank Holmes, CEO and Chief Financial Officer for U.S. Global Investors, pointed out this chart in his weekly Investor Alert last weekend – in 3 decades, the XAU (Philadelphia Gold & Silver Index) has NEVER experienced a losing streak of more than 3 years…will a 2014 year-end rally prevent that from occurring?…we’ll have to wait and see…

HUI Index Long-Term Chart 

The HUI Index briefly plunged below 150 in early trading today, a few points under its 2008 Crash low, but it has since pulled back to 154…in a worst-case scenario, an eventual drop to the 100 area probably can’t be ruled out…neither can a sharp rally in the near future given the extent of bearish sentiment…

WTIC Updated Chart

The Saudis, it appears, have declared war on the U.S. shale industry but most analysts believe WTIC would have to remain at or below $70 a barrel for an extended period in order to put a serious dent into U.S. production…Crude prices tumbled again yesterday as the market reassessed the latest pricing announcement from Saudi Arabia and banks scrambled to hedge outstanding derivative positions…

OPEC is due to meet in Vienna later this month (Nov. 27) but whether they’ll be able to agree on lowering output and propping up prices is questionable…OPEC has long targeted $100 Oil, but that also provided an incentive for North American companies to develop shale plays and lift production…so shale is the fundamental imbalance in the system that has triggered Oil’s pullback…

WTIC has long-term support band between $70 and $75…the trend has been bearish since early July, as you can see on this 6-month daily chart, and the break below the downsloping channel last month was a huge red flag…plenty of technical resistance in the $80’s on rallies…

Blackbird Energy Inc. (BBI, TSX-V) Chart Update 

Blackbird Energy (BBI, TSX-V) is cashed up (recently closed a $30 million financing) and has held up much better than most of its peers in the energy space in recent months…BBI began the year below a dime and hit a multi-year high of 44.5 cents just a couple of weeks ago (slightly above Fib. measured resistance)…technically, it’s well-supported by a rising 100-day SMA currently at 30 cents…

BBI is off half a penny at 35.5 cents as of 8:15 am Pacific…

Cannabix Technologies Inc. (BLO, CSE) – Another Winner In Yesterday’s U.S. Voting

In historic votes in conjunction with yesterday’s midterms, residents in Alaska, Oregon, and Washington, DC, voted to legalize marijuana…but the measures won’t take effect immediately as they need to work through some final procedural hurdles to become law…Florida’s medical marijuana amendment, meanwhile, fell short of the 60% approval it needed to pass, although it got majority support from voters…

All the more reason we see a compelling opportunity in Cannabix Technologies (BLO, CSE) which is a first-mover in the development of a patent-pending marijuana breath-analysis device for law enforcement and the workplace…the downward pressure on the stock over the last number of weeks appears to have reversed and was related entirely in our view to volatility in the markets and, more importantly, a substantial amount of 5-cent private placement stock, most of which seems to have been soaked up…volume in BLO continues to be impressive, and the company is inching closer to unveiling an initial prototype of the Cannabix Breathalyzer…

Technically, BLO may have formed an important low Monday at 5 cents on high volume…it opened at a nickel and closed at 6 cents Monday, moved half a penny higher yesterday and is up on strong volume again this morning…while BLO has been very volatile since its debut on the CSE in late June, we see great upside potential here for a variety of reasons including a likely ramping up of exposure for the Cannabix Breathalyzer in the huge U.S. market…

BLO is up a penny at 7.5 cents as of 8:15 am Pacific…

Cannabix has the potential to benefit enormously from the growing social acceptance of marijuana…while it’s a trend we believe is unfortunate, the change in attitudes (like toward same-sex marriage) over the last several decades – particularly since the Clinton Presidency – is astounding as you can see in this chart below from the Pew Research Center…

Meanwhile, the latest figures on marijuana tax revenues from the Colorado Department of Revenue hit a new high in the month of August, with recreational sales totaling about $34.1 million, compared to $29.3 million the previous month…and Colorado has taken in about $45 million in total tax revenues from both medical and recreational marijuana year-to-date…the industry has also served as a jobs creator across Colorado…as per a September report, the state has licensed more than 18,660 individuals (and counting) to work in Colorado’s cannabis industry, indicating the prospect for new jobs is only growing…

Note:  John and Jon both hold share positions in BLO.