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August 15, 2019

7 @ 7:00

Visit the BMR comments section throughout the day for updates and helpful information!

1. Gold has traded between $1,507 and $1,523 so far todayas of 7:00 am Pacific, bullion is off just $an ounce at $1,515…Silver is flat at $17.17…key nearest Fib. resistance for Silver is in the $17.20’sGold backed off and stock futures recovered ahead of the open following some better than expected U.S. economic data plus what the market interpreted as encouraging words out of China with respect to trade issues…a spokesperson at China’s Ministry of Foreign Affairs said China “hopes the U.S. will meet (it) halfway and implement the consensus reached by the 2 leaders during their meeting in Osaka”…trade negotiators from both sides have agreed to hold discussions again in 2 weeks…however, there are still many “structural issues” the U.S. needs to settle with China before they can reach a deal, White House trade advisor Peter Navarro said yesterday…these issues include cyber intrusion into U.S. business networks, forced technology transfer, intellectual property theft and currency manipulation…Nickel, continuing to look strong, is unchanged at $7.23…Copper is off a penny at $2.57 while Zinc is up a penny at $1.02…Cobalt is steady at $13.83…Crude Oil has slipped 76 cents to $54.47 while the U.S. Dollar Index has gained one-tenth of a point to 98.08

2. American shoppers boosted spending in July, providing a source of fuel for the economy at a time of heightened global uncertainty…retail sales, a measure of purchases at stores, restaurants and online, climbed a seasonally adjusted 0.7% in July from a month earlier, well above economists’ expectations, the Commerce Department reported this morning…excluding autos, retail sales were up a robust 1.0% in July…the broader trend this year shows steady growth in retail sales…consumer spending increased 1.8% in the May-through-July period compared with the previous 3 months…Americans increased their outlays in July at electronics stores, clothing stores and restaurants…online sales were particularly strong, a possible result of Amazon.com’s Prime Day, a day of deals on the e-commerce site…consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output…higher retail sales last month suggest spending was on solid footing, even against a backdrop of slowing global growth and fading tax-cut stimulus…spending gains will feed into the broader pace of economic growth for the quarter…earlier this week, forecasting firm Macroeconomic Advisers projected GDP grew at a 1.7% seasonally adjusted annual pace in the 3rd quarter, down from a 2.1% annual rate in the 2nd quarter and a 3.1% pace in Q1…Q3 projections are likely underestimating the strength of the American consumer…

3. It’s not just the U.S. consumer that is doing better than expected in the face of growing recession fears…regional data from the Philadelphia Federal Reserve and the New York Federal Reserve shows resilient strength in the manufacturing sector…today the Philly Fed said that its manufacturing business outlook survey dropped less than expected to a reading of 16.8, down from July’s reading of 21.8…however, economists were expecting to see a much sharper drop to 10.0…at the same time the New York Fed said that its Empire State survey rose to 4.8, up modestly from July’s reading of 4.3…economists had expecting to see a reading of 2.1…meanwhile, U.S. productivity increased at an encouraging pace in the 2nd quarter, a trend that could lead to higher wages if it continues…the Labor Department said today that productivity, or output per hour worked, rose 2.3% in the April-June quarter, down from 3.5% in the first 3 months of the year…the 1st quarter gain was the best in 4 years…greater productivity is a key ingredient in raising living standards…it also enables companies to lift worker pay without raising prices on costumers…the recovery, now in its 11th year, was held back during the Obama era by historically weak productivity growth…

4. Chinese paramilitary forces conducted exercises across the border from Hong Kong today, raising fears that Beijing may be preparing to act against mass demonstrations in the Asian financial hub it has described as “near terrorism”…hundreds of members of the People’s Armed Police could be seen at a Shenzhen sports stadium where parking lots were filled by more than 100 dark-painted paramilitary vehicles, prompting U.S. concerns they could be used to break up protests across the border in Hong Kong…China reiterated yesterday that Hong Kong’s protests were “near terrorism” as more street clashes followed ugly and chaotic scenes at the airport two days ago, when protesters set upon two men they suspected of being government sympathizers…17 people were arrested yesterday, bringing the total number detained since June to 748, police told a news conference, adding that police stations have been surrounded and attacked 76 times during the crisis…

5. The Canadian Marijuana Index has slumped to levels not seen since late 2017 after Canopy Growth (WEED, TSX; CGC, NYSE) missed the lowest revenue estimate for its fiscal 1st quarter ended June 30…revenue was $90.5 million, versus the consensus estimate of $111.1 million…the company also saw a significant decrease in quarter-over-quarter gross margins, or the spread between sales price and costs…gross margin before fair value impacts in cost of sales in the quarter was $13.2 million, or 15% of net revenue…in the same quarter of 2019, that metric amounted to $11.1 million, or 43% of net revenue…the company expects to bolster its margins in the coming quarters as processing and cultivation of its products reaches planned capacity, stated CEO Mark Zekulin… “Our recent harvests are proof that our focus on operational excellence is working, and we look forward to showing both our Canadian and U.S. customers what we’ve been working on behind the scenes to prepare for the next wave of products coming later this year”…nonetheless, Q1 results didn’t meet market expectations and the stock is off $3.54 a share to $39.03 as of 7:00 am Pacific

6. The Dow has rebounded 94 points through the first 30 minutes of trading after one of its biggest point drops (800) in history yesterday…the sell-off was triggered by media hysteria over a bond market phenomenon where the yield on the benchmark 10-year Treasury note briefly broke the 2-year rate…the inversion of this key part of the yield curve has been a reliable indicator, historically, of looming economic recessions…in Toronto, the TSX is up slightly while the Venture – pressured by weakness in the cannabis sector – has dipped another 5 points to 573Silvercrest (SIL, TSX), one of the top Silver plays in the market, has closed a $23.3 million bought deal financing….GT Gold (GTT, TSX-V) has mobilized a 3rd drill to its Tatogga Project in Northwest British Columbia…“The 2019 season is off to an excellent start,” stated Charles Greig, Vice President of Exploration…“The 3rd drill gives us flexibility to test additional targets on the large Tatogga Property while maintaining our focus on what’s most important, Saddle North“…GT Gold’s Phase 1 exploration program is now complete and the company expects to release its next set of assay results in early September…Phase 2 drilling at Saddle North will focus on resource definition…

7. Cool reception for New Gold offering:  New Gold’s $150 million stock issue at $1.55 was not as well received as underwriters expected and they remain stuck with about a third of the shares…Jon Case, precious metals portfolio manager with Sentry Investments, said he was offered a piece of the New Gold issue but turned it down…the less than enthusiastic reception for the New Gold issue points to a lack of interest from generalist investors, in sharp contrast to a couple of years ago…in 2016, the last time Gold bullion had a similar move upward in a short period of time, the appetite from investors for Gold equity issues was much stronger…“There was a New Gold-style deal every week,” Case recalled…“They were all oversubscribed, they all traded up because there was this absolute tsunami of money pouring into Gold equities.  The fact that the New Gold deal hasn’t gone well tells you that despite the pretty spectacular performance in the equities, you still haven’t really got that generalist capital”…over the past decade, interest from both specialist mining funds and generalist investors has fallen, in large part because of disappointing performance at many of the big Gold companies…unnamed sources cited the relatively slim deal discount given New Gold’s risk profile, uneven interest in the sector and questions over the miner’s long-term prospects as factors…New Gold is carrying about $780 million (U.S.) in long-term debt, largely incurred by big cost overruns at its low grade Rainy River mine in Ontario…New Gold said it intends to use proceeds from the bought deal in part to pay down that debt…

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  1. Jon do you think that the venture is acting as a leading indicator and telling us what we can expect in the near term with gold price and the overall general macro environment?

    Comment by Sameer — August 15, 2019 @ 9:58 am

  2. Relative to the broader markets the Venture has been holding its own, Sameer, and the resource side has been showing occasional signs of strength, helping offset losses on the cannabis side…the Marijuana Index is down more than 40% since mid-March…that’s a huge drop, but the Venture’s decline has been much more muted…August is a funny month and prone to big swings…what we’re seeing now looks like the set-up to a strong seasonal reversal that often occurs late August going into September…will be interesting to see how everything unfolds…

    Comment by Jon - BMR — August 15, 2019 @ 10:59 am

  3. I hope CLM doesn’t turn out to be Right people, Right Area, Right time, Wrong share structure. I hope your right Jon with the rest of that PP in strong hands but seems like endless amount available.

    Comment by Weatheritout80 — August 16, 2019 @ 6:34 am

  4. Some relief today but hasn’t been a good week for the Venture in general, weatheritout – look how recent high flier Tudor and others have performed…you cannot ignore the broader market…most of those on the sell side this week have been nervous traders with a tendency to panic at the wrong time, not strong holders…specifically with respect to CLM’s PP, almost 30% of it was taken by the exploration services company (none of that is coming into market) and another large chunk was taken by a very committed group of strong investors…just 25% (5 million shares) in the hands of traders…RSI(2) is now at its most oversold extreme position all year – if someone thinks that’s a good time to sell, glad to take their shares off their hands…

    Comment by Jon - BMR — August 16, 2019 @ 6:43 am

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