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November 19, 2019

7 @ 7:00

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1. Gold has traded between $1,464 and $1,474 so far today…as of 7:00 am Pacific, the yellow metal is off $2 an ounce at $1,469 as it continues to consolidate above important support at $1,450…the TSX Gold Index is looking quite healthy from a technical perspective, suggesting Gold and Silver could be preparing to rally after their recent pullbacks…Silver is unchanged at $17.02…Nickel continues to struggle, down 19 cents at $6.57, but the retreat in Nickel is not unlike any of the previous 3 corrections in this ongoing bull market for the metal that started in 2016…Copper, Zinc and Cobalt are all unchanged at $2.65, $1.08 and $16.10, respectively…Crude Oil has slipped $1.12 a barrel to $55.93 while the Dollar Index is relatively flat at 97.81…President Trump is trying to talk down the greenback again, tweeting yesterday: “At my meeting with Jay Powell this morning, I protested fact that our Fed Rate is set too high relative to the interest rates of other competitor countries.  In fact, our rates should be lower than all others (we are the U.S.).  Too strong a Dollar hurting manufacturers & growth!”…still, the U.S. economy is faring better than most, thanks to tax cuts and deregulation, and there is some growing evidence the global economy may pick up…Caterpillar (CAT, NYSE), a bellwether for the global economy because of its central role in the heavy industrial supply chain, is up almost 21% since the end of August and is showing the strongest upward momentum in nearly 2 years…in the bond market, the U.S. Treasury yield curve has un-inverted, with yields on 10-year notes now 19 basis points above 3-month bills, from a discount of 52 basis points near the end of August…economic data released this morning showed U.S. homebuilding rebounding in October…permits for future home construction jumped to a more than 12-year high, pointing to strength in the housing market amid lower mortgage rates…

2. The B.C. government’s attack on the Oil and gas sector continues – the NDP has now introduced legislation to force Oil and gas companies to reveal to consumers how gas prices are set…the “Fuel Price Transparency Act“, if passed, will allow the B.C. Utilities Commission (BCUC) to collect information from Oil and gas companies on the market conditions involved in setting gasoline prices…this information, sensitive and proprietary as it would be to any business in a free enterprise economy, will be made available to the public…“It’s incredibly frustrating to watch the price of gas shoot up for no reason, and British Columbians are tired of feeling ripped off whenever they fill up their vehicles,” Jobs, Trade and Technology Minister Bruce Ralston said (nice sound bite, Ralston, but the rip-off is more from Big Government – when they fill up their gas tanks, British Columbians are tired of being over-taxed by their provincial government, and other levels of government, as the taxes on a litre of gasoline in B.C. are the highest anywhere in North America)…“This legislation sends a message to Oil and gas companies: the days of setting your prices in total secrecy have come to an end”…the message it actually sends is that British Columbia is not as open for business anymore, which always seems to occur whenever the NDP grabs the reigns of power…with this proposed legislation, the Oil-hating socialists in B.C. are going down yet another very dangerous path, shortly after becoming the first province in Canada to introduce legislation aimed at adopting the United Nations Declaration on the Rights of Indigenous Peoples…

3. Goldman Sachs believes the U.S. economy is poised to snap back and certain stocks could have the most upside from the economic recovery…cyclical stocks, those typically tied to economic growth like Caterpillar, have led the record-setting rally in the past 3 months…while the S&P 500 surged about 8% during the period, cyclical stocks have outperformed their defensive counterparts, with a return of about 12%, Goldman said…the bank predicts that trend will persist on the back of a rebound in the U.S. economy…“The equity market is anticipating an acceleration in U.S. economic growth during the coming months,” David Kostin, Goldman’s chief U.S. equity strategist, said in a note…“Investors who want to capture further cyclical upside can improve risk-reward by narrowing their focus to select cyclical stocks”…the Federal Reserve has cut interest rates 3 times this year to combat the economic slowdown…Goldman believes the effect of easier monetary policy will flow through with a lag of about 3 quarters, which sets up for a strong 2020…furthermore, the bank said the U.S.-China trade battle, which roiled the financial markets for nearly 2 years, is only going to ease now (not so sure about that!)…“Our economists believe that tariffs have peaked and that the drag on U.S. GDP attributable to the U.S.-China trade war is now abating,” Kostin said…“Their base case is that tariff levels on imports from China remain flat in 2020…other catalysts to drive the economic acceleration include a stabilization in Oil prices and the GM strike resolution, Kostin added…

4. The Dow is off 32 points through the first 30 minutes of trading…gains from Boeing (BA, NYSE) helped offset disappointing quarterly numbers from retailers such as Home Depot (HD, NYSE) and Kohl’s (KSS, NYSE), lifting the Dow to a new record high at the open…in Toronto, the TSX is 40 points lower with the Gold Index holding steady at 243…the Venture is off slightly at 523…China’s JCHX Mining Management Co. Ltd. has agreed to make a strategic investment in Cordoba Minerals (CDB, TSX-V), acquiring a 19.9% stake in Cordoba to advance the San Matias Copper-Gold-Silver Project in Colombia…Cordoba will issue 91.4 million common shares to JCHX through a private placement at a price of 12 cents per share, yielding gross proceeds to Cordoba of approximately $11 millionCDB will soon have half a billion shares outstanding, but it seemed to work for Wallbridge (WM, TSX)…Canada Cobalt (CCW, TSX-V), very active in northern Ontario, closed at a new 8-month high yesterday following news that Matt Halliday has been appointed VP-Exploration, effective mid-December…Halliday will be leaving his position as Resource Geologist for Kirkland Lake Gold (KL, TSX, NYSE), a decision that came after CCW’s acquisition of the PolyMet facility in Cobalt…prior to being recruited by KL at the beginning of 2019, he served for nearly 8 years with SGS Geostat, a global leader in resource modelling and reserve valuation…Halliday also has extensive experience with large drill programs in Ontario and Quebec and sees great potential for a new deposit at CCW’s Castle East where the company will soon be following up on a bonanza grade Silver hit (1,194 oz/ton over 0.45 m within 3.1 m of nearly 200 oz/ton) at depth within 2 km of 3 past producers…

5. Blue Moon Zinc (MOON, TSX-V) announced this morning that a 10,000-m drill program will commence shortly at its Blue Moon Zinc-Copper-Gold-Silver Project in Mariposa County, through JV partner and Australian-listed Platina Resources…crews will complete 2,000 to 2,500 m before the end of December and the balance during 2020…initial holes will test the potential southern plunging of the main mineralized zones which contain the majority of the existing resource…this includes the down dip extension of hole BMZ-78 (9.35 m of massive sulphide mineralization grading 30.3% Zn, 1.7% Cu, 1.7 g/t Au and 71 g/t Ag)…BMZ-78 was the best result ever from the property and suggests there is a higher-grade core to the deposit…initial holes will also test the under-explored upper extension of the main and east mineralized lenses…the east mineralized lens appears to be Gold-Silver-rich…once all drill core is assayed and logged, it will be used for preparing an updated mineral resource, metallurgical test work and a Pre-Feasibility Study…MOON appears to have formed an important bottom between 2 and 2.5 cents…

6. Another doomed pot deal with a poor share structure made its debut on the Venture yesterday…Terrace Global (TRCE, TSX-V), with 167 million shares outstanding, raised $15 million at 50 cents...very little trading so far, but it opened at 30 cents yesterday and is now at 13 cents this morning…the sector, of course, is mired in a brutal bear market that has wiped more than 70% off the value of the Canadian Marijuana Index over the last 8 months…disappointing results last week from Canopy Growth (WEED, TSX; CGC, NYSE) and Aurora Cannabis (ACB, TSX, NYSE) added to the woes…on Friday after the close, MedMen Enterprises (MMEN, CSE), one of the first U.S. cannabis companies to sell shares to the public, said it would dismiss 190 employees, including about 20% of its corporate workforce, as it struggles to preserve a dwindling cash pile…“The capital markets have gone from frothy to completely closed,” co-founder and CEO Mark Bierman stated…“We’re now entering a stage where businesses are going to have to be self-sustaining”…the Canadian Marijuana Index, which plunged 20% last week, has rebounded 4 points to 201 through the first 30 minutes of trading today…however, there is still not enough evidence of capitulation in this market…

7. Canadians are saving much less than they used to…the household savings rate  – the percentage of disposable income left after spending – most recently clocked in at 1.7%, near its lowest point in 6 decades, according to Statistics Canada…in dollar terms, the plunge is substantial…last year, $852 was saved per household, compared with greater than $3,500 in 2013…moreover, Canada finds itself in a starkly different situation from the United States and Germany, where consumers have ramped up saving despite interest rates that offer little reason to do so…in isolation, a low savings rate is not cause for alarm, economists say…however, it suggests many households are not putting money aside for a rainy day…when the next economic shock hits, they could be forced to rein in spending to get by, or take on even more debt…if consumption spending collapses, then you would actually see GDP growth slow down significantly, which would raise the possibility of a recession…

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