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July 27, 2013

The Week In Review And A Look Ahead

TSX Venture Exchange and Gold

The Venture’s slow but gradual recovery continues as the Index posted its 4th consecutive weekly gain, climbing 5 points on another moderate increase in volume to close at 925.  Significantly, the Index confirmed a breakout above resistance at 918 (now new support – interestingly, that’s also where the 10 and 50-day moving averages currently are) which it pushed through July 19.  The Venture managed to hold above that 918 level throughout the week.  The rising 20-day SMA is at 901, providing strong secondary support in the event of a sudden pullback.  There’s no question in our view, looking at all the technical evidence, that a bullish new trend has started with the next major resistance at 970.

It’s still too early to tell at this stage, but theoretically what appears to be forming with the CDNX is a very bullish inverted head-and-shoulders bottom.  The scenario in terms of how this could potentially play out is a near-term move up to resistance at 970 followed by a minor consolidation to unwind temporarily overbought conditions at that time.  The market would then recoup the strength it needs for a powerful push on strong volume through that important resistance.  If and when that occurs, it’s game on for a major rally – one that would likely test the 200-day SMA currently sitting just below 1100.

Is the bear market over?  Did the Venture finally hit bottom at 859 June 27 at the same time Gold slipped below $1,200 an ounce?  Our simple answer is, we don’t know – no one has a crystal ball.  But one thing appears quite certain at the moment – the Venture is currently in rally mode, and this 3rd quarter is shaping up to be very positive.  Some investors, asleep at the switch this summer who also forgot the notion that the best time to buy is when almost everyone is bearish, are sure to be caught by surprise at the strength of this potential move.   The Venture’s 50-day SMA is flattening out and appears poised certainly by sometime in August to reverse to the upside after being in decline since November of last year.  So this bullish trend could really start to accelerate in the next few weeks.  PREPARE NOW.

Other technical indicators support this bullish view.  The recent +DI/-DI bullish crossover in the ADX trend indicator is exactly what occurred in August 2012 and January 2012 – just prior to significant upside moves in the Index.  In addition, the rapid surge in buy pressure suggests that an underlying shift in investor sentiment is underway.  This is the strongest buy pressure we’ve seen in the 9-month daily chart we normally use for our weekend reviews since January 2012.  Something big is brewing, in our view, and we’re also seeing highly encouraging signs in a number of individual stocks we’re tracking.  On Friday, for example, Garibaldi Resources (GGI, TSX-V) – 1 of our favorites – blew past major resistance on strong volume after recently breaking above long-term RSI(14) trend resistance.  A game-changing event for Garibaldi, which also has strong fundamental factors in its favor, but when you see things like that it’s usually a clear indication of a major shift coming in the market.

Below is John’s updated 9-month daily Venture chart.  At 59%, RSI(14) is showing increasing up momentum and should continue to head higher.


British Columbia is an exploration hotspot that could provide the spark this summer that lights up the market, and Garibaldi will be in the heart of that action along with numerous other companies including of course Prosper Gold (PGX.H, TSX-V) and Colorado Resources (CXO, TSX-V).  Meanwhile, in Ontario, Zenyatta Ventures (ZEN, TSX-V) continues to sizzle. Excitement over ZEN’s graphite deposit has started a mini-area play that has breathed new life into a few struggling penny stocks, bringing more volume and new players into the market. Some energy stocks are performing extremely well, too, with WTIC prices (and Canadian heavy crude) surging recently.

In the other world, “Taper talk” should pick up again this coming week as the Federal Reserve gets set to meet Tuesday and Wednesday. While Fed officials are not expected to make any major changes in their statement or policy, traders will be watching for any subtle tweak that could shed light on the Fed’s views as to when it may begin to scale back its $85 billion a month bond-buying program.

About a fifth of the S&P 500 companies report earnings in the coming week, and it’s a first look at big Oil, with BP, Exxon and Chevron all reporting. Then there are 2 major U.S. data releases – the Friday jobs report, always important to the equity markets and Gold, and 2nd quarter GDP on Wednesday.  Many economists expect 2nd quarter GDP to come in at less than 1%.  But the big deal may be the government’s special release of revisions going all the way back to 1929, which could make the economy look slightly better, at least on paper. The last time the government issued major revisions was 2009.

Gold

It was a strong week for Gold, which is helping the Venture, as bullion cracked the $1,300 barrier last Monday and held above that level the rest of the week.   RSI(14) on John’s 2-year weekly chart has broken out of a downtrend, sell pressure is declining rapidly as shown by the CMF(20), while a strong bearish trend is clearly showing signs of weakening according to the ADX trend indicator.

Gold, which is up for July after declining for 3 straight months, gained $37 an ounce last week to close at $1,334, right in the middle of the resistance band between $1,320 and $1,350 as shown again on John’s chart below.  Our guess, based on technical evidence and seasonal patterns, is that Gold is going to break above $1,350 this summer and then quickly challenge the $1,400 area.  It could also certainly go higher from there, and even climb its way back up to resistance between $1,550 and $1,600.  The trend at the moment is bullish (Gold is also getting help from strong Oil prices) but it’s still too early to determine if the bullion correction has run its course.


Silver closed 46 cents higher last week at $19.99.  Crude Oil (WTIC) took a breather, falling $3.35 a barrel to $104.70 but strong support exists between $100 and $104.  Copper fell 3 pennies to $3.10 while the U.S. Dollar Index closed down nearly a point to 81.66, falling below important support at 82.  Our most interesting and revealing chart last week, we believe, was the 10-year monthly WTIC last Tuesday.  Crude is looking very strong, and if it pushes past long-term resistance at $110 – look out.  This could catch a lot investors by surprise and would give Gold a boost as well.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, has had a huge impact on bullion.  Despite this year’s weakness, the fundamental long-term case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates, a Fed balance sheet now in excess of $3 trillion and expanding at $85 billion a month, money supply growth around the globe, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, emerging market growth, geopolitical unrest and conflicts…the list goes on.  However, deflation is prevailing over inflation in the world economy and this had a lot to do with Gold’s plunge below the technically and psychologically important $1,500 level during the spring, along with the strong performance of equities which have drawn money away from bullion.  Where and when Gold bottoms out in this cyclical correction is anyone’s guess (has it already found a bottom?), but we do expect new all-time highs later in the decade.  There are many reasons to believe that Gold’s long-term bull market is still intact despite a major correction from the 2011 all-time high of just above $1,900 an ounce.

16 Comments

  1. Hopefully, this time Jon is correct & hopefully picking up
    as August progresses. It’s been a long & bothersome journey
    & those who have been in the market for sometime & who are
    now willing to break open their piggy banks, to invest in new
    picks, are all nerves. I have to regain my confidence before
    investing over the longer term. I have to give credit to
    BMR for continuing to beat the stock drums, because i don’t
    hear from any IR persons now, as compared to at least one per
    day, before the downturn. I agree with having a basket of stocks
    & i have loaded up on one in particular, that is Sunridge Gold,
    which hopefully will take care of my losses. It’s also quite
    clear how advanced they are & it’s a known that suitors are
    encircling the company. I will not mention this company again,
    unless they are taken out & then i will come forward. Good luck !
    R !

    Comment by Bert — July 27, 2013 @ 4:36 pm

  2. Jon

    do you think GGI will come back and fill the gap anytime soon? it went from 7 to 9 then to close at 15 cents, your opinion would be helpful

    thanks

    Comment by Greg — July 27, 2013 @ 7:25 pm

  3. Hi Greg, a very powerful set of dynamics are at play with the Sheslay River Project and the Grizzly for numerous reasons: 1) The people and expertise behind it. Bernier and Tempelman-Kluit have incredible track records, and they know how to execute on the ground and in the market. As a geologist, there is no one more capable than Tempelman-Kluit of finding a massive deposit here like he did at Blackwater; 2) The geological facts that are known about Sheslay River strongly point in the direction of a major porphyry system on this property. It is already at an advanced stage of exploration, and it’s right on trend with all those huge deposits/mines to the south; 3) The Sheslay and the Grizzly are intimately associated geologically – a major intrusive driving mineralizing fluids at both properties rests in the NW corner of the Grizzly and is 4.5 km x 6 km in size; 4) Speaking of size, the Sheslay and the Grizzly combine for 240 sq km – 5 x the size of Colorado’s property; 5) The Garibaldi team is also first-rate and have already demonstrated their ability to make discoveries when they were able to sell Temoris in Mexico to Paramount Gold and Silver – they know what they’re doing and have an exceptional team; 6) Bernier has a powerful network behind him, the ability to raise large amounts of money, and some of this big money (from people who followed him with Richfield at Blackwater and made fortunes) is of course going to come into the open market – I think to an extent that process has already started with Garibaldi and will naturally continue; 7) BMR is going to shine the spotlight on this area (we were first to do so beginning a few weeks ago) because we’re so convinced this has all the ingredients of a major winner. We’ve done our homework over the last 2 months through a visit to the Iskut area and speaking to countless geologists, prospectors, and company management. Also, rumor has it, some heavyweights on the newsletter side are going to be lining up behind this as well; 8) The overall market is heating up, there is ample money out there that is looking for special opportunities just like this – it has a “Zenyatta-like” flavor to it – and it will move at lightening speed. Bernier will drill, drill, drill, and keep on drilling all winter if he has to; 9) The Grizzly is a whopping 17,000 hectares with enormous “blue sky” potential given the information known to date; 10) And here’s a fact I also love – Garibaldi hasn’t done a financing for 4 years. So many stocks right now are fighting thru cheap paper that has been sold the past couple of years to keep these companies alive. No cheap paper exists with GGI, or of course with Prosper Gold. The runway, so to speak, is clear for take-off on both. Share structure is always so important. All these points should answer your question, Greg. This deal is for real and GGI and PGX are going to be leaders in this market the rest of the year, IMHO. GGI also holds some very interesting properties in Mexico and other properties in B.C., so it has a strong foundation and a healthy working capital position. This is a very different situation than anything we’ve brought our readers attention to in quite some time, which is why we issued several eAlerts the past few weeks when GGI was trading between 5 and 8 cents, and I added to my GGI position Friday. For what it’s worth (this is not a price target), but it’s interesting to note that John’s Fibonacci numbers point to the upper 80’s with GGI. That may be hard to imagine at this point for some, but it certainly underscores the potential of this. I’m sure most of our readers will agree, John is very skilled at TA and also the use of Fib. analysis. So I look at both the technicals and the fundamentals with this play and I am personally extremely fired up. As always, do your own DD, don’t just take my word for it, John’s or anyone else’s for that matter.

    Comment by Jon - BMR — July 28, 2013 @ 6:59 am

  4. JON: the ground that VVN picked up in this area, is it in a good location? thx

    Comment by STEVEN — July 28, 2013 @ 10:09 am

  5. Greg

    There’s no gap on GGI. R !

    Comment by Bert — July 28, 2013 @ 11:06 am

  6. Bert, you’re correct that there was no GAP on GGI Friday; Steven, with regard to your comment re: VVN’s claims, are they are in a favorable location? Absolutely. On trend, same rock types, contiguous to the Grizzly NW border. They will need to start the process of nailing down specific areas of interest on that 20 sq. km property through sampling, geophysics, etc., and hopefully from that they’ll define some high priority drill targets. Other staking has occurred just recently around the Sheslay-Grizzly area. A growing number of eyes on it. This will heat up for sure.

    Comment by Jon - BMR — July 28, 2013 @ 12:18 pm

  7. Thanks Jon
    for the detailed answer above

    Comment by Greg — July 28, 2013 @ 12:21 pm

  8. PGX and GGI should be an interesting play coming.I was in Rvc early but sold out way to soon around 3 bills

    Peter has mega people backing him and a very Honest Person

    I may add a some more GGI this coming week as i have just a smaller position now

    Comment by bob — July 28, 2013 @ 2:12 pm

  9. You hit the nail on the head when you said Pete is a very honest person. He tells it like it is, and he does what he says he’s going to do. And with excellence. He’s a breath of fresh air for this industry at a time when this industry really needs it. That’s one major reason we have so much confidence in how this Sheslay River play is going to unfold. Loads of credibility. I’ve also had several conversations with Steve Regoci at Garibaldi. He and Bernier share similar characteristics.

    Comment by Jon - BMR — July 28, 2013 @ 3:32 pm

  10. Thats what good management is about with juniors.

    Aubrey at Zenyatta another First Class Honest person and all for shareholders and he is working for shareholders on the company

    WE need a lot more of these people running Juniors

    Pgx going to get a nice welcome back to the market after halt is lifted and I see Pgx trading 1 to 2 dollar range very fast

    I see GGI in the 30 to 40 cent range

    Comment by bob — July 28, 2013 @ 4:35 pm

  11. Satellite imagery may kindle your imagination,and make you think how big the Telegraph Creek play might end up being.

    earthstreetview.com/?lid=5988791_CA_TMT_02&place=Kaketsa-Mountain-Canada

    Comment by bob — July 28, 2013 @ 4:51 pm

  12. You’re right, Bob, that we need a lot more of these people running juniors…

    Comment by Jon - BMR — July 28, 2013 @ 5:11 pm

  13. Jon,what do you think of AOS’s recent stock price climb and update on their Clearwater leases being cancelled. How high do you think their share price will go before the province of Alberta gives a firm announcement on compensation? Thanks

    Comment by Roger Bauman — July 28, 2013 @ 6:13 pm

  14. Jon
    any idea when the halt will be lifted on prosper gold and what is your best guess at what price the stock could be at when it is lifted?

    Comment by Greg — July 28, 2013 @ 7:26 pm

  15. Prosper Gold and Firesteel have signed a definitive agreement, and an exploration program has already commenced at Sheslay which will lead to the start of a 5,000-metre drill program in early August as per the July 18 news release. The Exchange of course needs to approve the transaction, but considering the players involved – this is believed to be a formality and very imminent, meaning it could be any day now. From sources I’ve spoken with, it’s reasonable to expect that PGX will be trading by early August which is just around the corner. It last closed at 42 cents. I believe Bob’s numbers are very realistic as the summer progresses. It should be a very hot play. Dirk has had time to figure out the ground game, so I believe there’s a strong probability they’ll produce some excellent results immediately. He’s had a lot of historical information to work with, including a couple of dozen drill holes – many of which returned impressive values and all ended in mineralization (Firesteel never drilled deep enough). Keep in mind, in terms of data compilation and interpretation, among other things, Tempelman-Kluit is one of the best in the business. He will execute this very well and advance things quickly IMHO. As far as GGI is concerned, they’re not just going to sit back and watch the drills turn across the boundary. I suspect they’re going to get aggressive at the Grizzly because that western block in particular is so prospective. In fact, it hosts an important “heat engine” – the Kaketsa Pluton, a very large intrusive – that was referenced in PGX’s most recent release.

    Comment by Jon - BMR — July 28, 2013 @ 8:27 pm

  16. AOS has a few things going on and obviously they expect fair compensation with regard to Clearwater. Looking at John’s chart Friday, I would say a near-term move to 20 cents is certainly a strong possibility. Will be interesting to see how this trades Monday. Chart has definitely turned bullish.

    Comment by Jon - BMR — July 28, 2013 @ 8:41 pm

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