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Gold has traded in a range between $1,764 and $1,774 overnight…as of 5:20 am Pacific, the yellow metal is unchanged at $1,771…Silver is off 6 cents at $34.43…Copper is down 2 pennies at $3.72…Crude Oil is 36 cents weaker at $91.83 while the U.S. Dollar Index briefly climbed above 80 but is now down slightly at 79.83…

John has updated Silver charts (short and long-term) below this morning’s important Venture Exchange update…

Euro Zone Manufacturing Data – Some Improvement But Weakness Continues

Euro zone manufacturing put in its worst performance in the three months to September since the depths of the Great Recession, with factories hit by falling demand despite cutting prices, a business survey showed on Monday – pointing to a new recession in the euro zone which comes as no surprise…factories helped lift the 17-nation bloc out of its last recession but the survey suggests a downturn that began in smaller periphery countries has taken root in core members Germany and France…”Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September,” said Chris Williamson, chief economist at data collator Markit…”The sector will act as a severe drag on economic growth…it therefore seems inevitable that the region will have fallen back into a new recession in the third quarter”, he concluded…Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 46.1 in September from 45.1 in August and above the preliminary reading of 46.0…but that was its 14th month below the 50 mark that divides growth from contraction…separate data released today showed euro zone unemployment at 11.4% in August, unchanged from July…

Global Trade Stalling – Central Banks, Governments To Step Up Stimulus Efforts?

The Wall Street Journal reported over the weekend that global trade is stalling, dimming prospects that exports will buoy the U.S. economy in the coming months…trade rebounded after its collapse in the recession…now several indicators of export activity are flashing red as Europe’s recession, anemic U.S. growth and the slowing Chinese economy dampen exports world-wide…the World Trade Organization just projected the global volume of trade in goods would expand only 2.5% this year, down from 5% last year and nearly 14% growth in 2010…a Dutch government agency, the CPB Netherlands Bureau for Economic Policy Analysis, estimates it fell outright in June and July…”The problems of the advanced economies, particularly the euro zone, are being spread around the world,” said Andrew Kenningham, senior global economist at Capital Economics, a London-based consulting group…”Everybody is being dragged down”…

The trade shift could take a particularly big toll on the U.S. economy…exports had been, until recently, “a stunningly strong driver of growth,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets…exports have accounted for almost half of U.S. growth during this recovery, compared with an average of 12% of growth in economic cycles over the past four decades, he said…more U.S. companies may downgrade their global growth estimates in the coming weeks as they prepare to report earnings from the third quarter, which ended yesterday…FedEx Corp. and Caterpillar Inc. already have downgraded their global outlooks…

China Injects Record Amount Of Money Into Financial System

The People’s Bank of China (PBOC) injected a record amount of money into the financial system last week to alleviate short-term liquidity concerns…the PBOC issued Rmb365 billon of reverse repurchase agreements, the largest weekly amount in history…the cash inflow was effective immediately, causing the seven-day repurchase rate to fall 100 basis points from the three-month high of 4.75% reached earlier in the week, and the stock market responded accordingly with a big moves Thursday and Friday…the Chinese markets are closed this week week for a holiday and this is often when the government announces policy changes…however, after recently unveiling over $150 billion in infrastructure spending, experts say China is unlikely to unveil further stimulus measures until after the Communist party holds its congress on November 8, an event that is particularly significant this year because it will mark a once-in-a-decade leadership change…

Federal Reserve Has Embarked On “A Very Dangerous Strategy” – Feldstein

There is “Reflation Ahead”, “Asset Bubbles” – Gross

Martin Feldstein, former Chairman of the Council of Economic Advisers which consults with the American President, had critical words for the Federal Reserve in an opinion piece in the Financial Times Friday…Feldstein, an economics professor at Harvard University, said the Fed’s decision to buy mortgage-backed assets for an unlimited time means the central bank has now embarked on a “very dangerous strategy” that could lead to high inflation and destabilizing asset bubbles…Feldstein’s views are certainly shared by many others including Bill Gross, the founder and co-chief investment officer of Pimco, the holder of the world’s biggest bond funds…CNBC reports that Gross wrote via twitter last night, “There is reflation ahead…it will create asset bubbles but little growth”…

Today’s Markets

It appears the fourth quarter will get off to a good start on the equity front…trading was subdued in Asia overnight due to holidays in China, Hong Kong and South Korea…European markets are strong this morning…a slew of manufacturing data from across Europe provided a mixed picture but some numbers came in better than expected which has helped risk assets…in addition, Spain’s bank stress tests showed the country’s lenders needed just $77 billion of the $125 billion in aid promised by the EU to plug a capital shortfall…stock index futures in New York as of 5:20 am Pacific are pointing toward a positive open on Wall Street..the news from Spain has helped, and factory output data from the euro zone and China weren’t as bad as expected…investors will be watching for factory output data in the U.S. with PMI data due at 6:00 am Pacific and ISM Manufacturing due at 7:00 am…construction spending data will also be released at 7:00 am Pacific…

Venture Exchange- Why This Index Is Poised To Move Much Higher

The Venture Exchange posted its best quarterly advance (12%) since the 4th quarter of 2010, and that alone should be an indication that this market has turned the corner…many investors, however, are still looking at the Venture through their rear-view mirrors at the ugly 53% drop from 2465 in early 2011 to the June, 2012, low of 1154…because they’re staring at their rear-view mirrors, assuming that this “rally” will fizzle out just like some others since 2011, they can’t see the big picture of what’s unfolding and how this Index could become one of the world’s top performing markets in the coming months…it’s usually either feast or famine with the Venture, and we’re getting ready for the feast…

Technically, a hugely important event this month for the CDNX is the reversal to the upside in the 1,000-day moving average (SMA) which has been in decline since 2008…one must not under-estimate the importance of this because the 1,00-day SMA has been such a reliable indicator of the primary direction of this market for well over a decade…explosive moves – up or down – typically occur at reversal points…the evidence is overwhelming in our view that Q4 2012 and Q1 2013 have the potential to result in spectacular gains for the Venture…

As we mentioned a couple of weeks ago:

“Within six months of the launch of QE1, the Venture climbed 57%…within six months of Bernanke’s infamous Jackson Hole speech in late August, 2010, which clearly signaled QE2 was on the way, the Venture rallied 67%…this time, we have an open-ended QE program from the Fed as well as aggressive action from the ECB…with loose monetary policy in place on a global scale for an indefinite period, rising commodity prices and a weak U.S. Dollar, this is the best time since the summer of 2010 to be accumulating quality junior exploration stocks…be patient but bold when you have to be…there is an ‘overhang’ of paper in the market and some important CDNX resistance areas that will require volume and a bit of time to deal with, but once this ‘train’ gets moving it will be unstoppable until early next year at least.”

Besides the 1,000-day SMA reversal, let’s look at some other specifics that support a major upside move (one that perhaps becomes parabolic) in the Venture…

1. The Index has broken out relative to the U.S. dollar, ending a decline that started in the spring of 2011…there is a strong inverse relationship between the Venture and the greenback, and the current state of the U.S. dollar (technically and fundamentally) is very weak given QE3 (QE Infinity) and the growing probability of another four years of Barack Obama in the White House and a possible Democratic sweep (if there’s enough collateral damage from Romney’s inept campaign) in November’s elections…Ben Bernanke’s job is safe as Federal Reserve Chairman and the Americans won’t seriously deal with their debt issue until another major financial crisis forces them to…Christmas will come early as Obama will ride in on his horse after a lame-duck session of Congress and announce that he has saved the nation from The Fiscal Cliff (but the “rich” of course will have to pay more in tax);

2. Over the past couple of months the Venture has been outperforming the broader equity markets – this is another important change in trend and reflects a more “risk-on” environment as central banks across the globe pour liquidity into the system;

3. Commodities, in particular Gold and Silver, are going much higher for technical and fundamental reasons.

Now let’s look at two important charts…John’s first chart shows the performance of the Venture (and Gold) during each previous QE program (QE1 and QE2)…in each case, the Index got into overbought territory – we expect the same thing in QE3…at the moment, RSI(14) on this 4.5-year weekly chart is at 50 with a lot of room to move higher…note the recent increase in buying pressure…

John’s second chart compares the Venture with the U.S. Dollar Index…this is a five-year weekly chart that shows how the U.S. Dollar Index has broken down, and how the Venture has broken out relative to the Dollar Index…what’s also very important is that the Venture has not yet broken above its downtrend line in place since the spring of 2011…in fact, it’s currently right up against the downtrend line which is obviously resistance…for the reasons cited above, we do believe this resistance will be overcome in October – perhaps even this week…

Silver

Silver can continue to benefit from Gold’s positive momentum on investment interest but needs improvement in industrial activity, according to Suki Cooper, precious-metals analyst with Barclays Capital, in a Kitco article…Copper noted that Silver has been the strongest precious metal so far this year, rising 22%…Chinese imports have picked up in the last couple of months, but supply/demand fundamentals excluding investment have not tightened considerably, leaving Silver’s fate in the hands of investors…however, Cooper said, investment demand has been strong lately…“Silver ETP (exchange-traded-product) holdings have risen to their highest since May last year and inflows for the year-to-date across the open-ended products have reached 775 (metric) tons, almost the equal and opposite of flows last year (-793 tons), and inflows in September are set to be the strongest month since July, 2011, with inflows at 411 tons,” she stated…

“On the retail side, Silver coin sales have also gained momentum with the U.S. Mint reporting sales in September to be the strongest since January this year at just over 100 tons…although short-term positioning on Comex Silver has risen to its highest since April last year, it is still below the peak, and the source of the acceleration in demand last year from the investment community in China has also notably gained momentum at the end of August and into September…investor interest likely retains the scope to push Silver prices higher in the near-term, but given its short-term nature, industrial demand would need to follow suit,” Cooper concluded…

Silver Chart Updates – Short-Term & Long-Term

Silver’s short-term overbought condition has eased somewhat which opens up the possibility of another leg up in the immediate future…below is a 9-month daily chart…the EMA-20 is providing strong support…resistance is at $35.50…

Silver Short-Term Chart

Silver Long-Term Chart

What’s important to note on John’s 15-year monthly chart is the fact that we can expect RSI(2) to remain in an overbought state for an extended period of time, as was the case at various times historically including between 2009 and 2011…so this means we’re still likely in the early stages of a big move – Wave 5 – that will carry on perhaps well into 2013, albeit with some pullbacks along the way…John’s Wave 5 Fibonacci target (no timeline) is $78, more than double Silver’s current price…

Temex Resources Corp. (TME, TSX-V)

We suggest readers do their due diligence on Temex Resources Corp. (TME, TSX-V) which is looking strong from a technical standpoint and has several fundamental factors in its favor including growing resource numbers at its project in Timmins…the company is currently conducting a private placement (Stifel Nicolaus Canada Inc. is the lead agent) for gross proceeds of approximately $7 million at prices of 28 cents (hard dollars) and 32 cents (flow-through)…the PP is expected to wrap up by the end of next week…the stock closed Friday at 30 cents…below is a 2.5-year weekly chart from John that shows a nice reverse head-and-shoulders bottom…also, the 1,000-day SMA is at 25 cents and just starting to reverse to the upside…

Parlane Resource Corp. Chart Update (PPP, TSX-V)

As readers know, we’re very bullish on the Blackwater area in central British Columbia where Parlane Resource Corp. (PPP, TSX-V) is one of several attractive juniors…it has a project ready to drill, strategically located between New Gold’s (NGD, TSX) Blackwater and Capoose deposits…Parlane jumped 38% in September on increased volume…

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