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March 18, 2015

BMR Morning Market Musings…

Gold has traded between $1,145 and $1,153 so far today…as of 8:00 am Pacific, just 3 hours before a fresh and much anticipated Fed policy statement, bullion is unchanged at $1,148 an ounce…Silver is off a nickel at $15.48…Copper has fallen 7 cents to $2.56…Crude Oil is down nearly $1 a barrel to $42.50 while the U.S. Dollar Index (see this morning’s updated chart) is up slightly at 99.64, preparing for either an explosion through the 100 level or a “cooling off” period – depending on the Fed’s statement and Janet Yellen’s news conference that follows shortly thereafter…

SPDR Gold Trust, the world’s largest Gold-backed ETF, said its holdings dropped 0.4% to 747.98 tonnes yesterday…

Gold hit its lowest level yesterday in 4 months on speculation the Fed will drop the word “patient” from their forward guidance on interest rates, potentially paving the way for the first rate hike since 2006 as early as June…what’s more important to watch for today, in our view, is whether the Fed directly addresses the parabolic move in the greenback…Marc Faber, the man known as “Dr. Doom”, believes markets are in for a surprise as he predicts the Fed will not raise interest rates this year, pointing to dollar strength and recent disappointing economic data.  “The economy simply (is) not taking off, so I don’t see there will be interest rate increase,” he stated this morning on CNBC’s “Squawk Box”…

Others have a different take on what could unfold…

The Federal Reserve risks causing a 1937-style stock market slump when it finally moves to raise interest rates, one of the world’s most powerful hedge fund managers has warned…Ray Dalio, founder of the $165 billion hedge fund group Bridgewater Associates, said in a note to clients and followers, as reported by various media outlets, that he was avoiding large bets on the financial markets for fear that the Fed’s expected change of policy could have unintended consequences…

“Clearly the Fed has created expectations that it will tighten in either June or September, and such expectations are difficult to deviate from,” Dalio wrote.  “For those reasons, we expect a Fed tightening and are cautious about our exposures.  To be clear, we don’t know – nor does the Fed know – exactly how much tightening will knock over the apple cart. What we do hope the Fed knows, which we don’t know, is how exactly it will fix things if it knocks it over. We hope that they know that before they make a move that could knock over the apple cart.”

Dalio’s note emerged as Christine Lagarde, head of the International Monetary Fund, warned yesterday that U.S. rate increases could trigger instability in emerging markets, leading to a re-run of the Fed-induced “taper tantrum” of 2013

Oil Update

Stored supplies of Crude Oil in the U.S. are at the highest level in about 80 years, according to the U.S. Energy Information Administration…concerns are mounting that Oil inventories could reach maximum storage capacity in some locations during the 2nd quarter, which could put further downward pressure on prices…

U.S. government data this morning showed inventories of U.S. commercial Crude rose for the 10th straight week ending March 13

Copper:  Antofagasta Cautious Short-Term But Bullish Medium To Long-Term

Antofagasta, the large Chilean-based Copper mining group, said it’s “cautious” about the Copper market for the next 2 years as 2014 profit declined 30% because of lower metal prices.  “I am cautious on the short-term, this year and next,” CEO Diego Hernandez said in an interview on Bloomberg TV.  “From then on, Copper supply-demand will be very tight and I am optimistic on the medium to long-term.”

U.S. Dollar Index Updated Chart

The U.S. Dollar Index recently broke out above important resistance at 96…it’s now poised to surge powerfully through 100 if the Fed doesn’t immediately throw a lot of cold water on this fire…

What has occurred since last summer, as demonstrated in our 1-year daily U.S. Dollar Index chart, is one of the fastest moves in the history of the greenback, fueled by the anticipation of higher interest rates and increasingly divergent monetary paths being followed by the U.S. and the rest of the world…

The Fed’s strategy of trying to prepare the markets for a “normalization” of interest rate policy is endlessly driving speculation in the greenback which in turn is impacting commodity markets and causing other distortions and stresses in the global financial system…it’s like when investors are expecting great drill results from a junior exploration company – the stock price keeps running and the bullish trend remains intact until the actual results come out…at that point, the anticipation and mystery are over and the trend sometimes reverses violently, at least temporarily…

The dollar likely won’t settle down until a) the market comes to the realization that an expected interest rate hike is actually not going to happen, at least not until much later than originally anticipated; or b) the Fed finally makes its move, and the “sell on news” effect comes into play…

This chart shows an extremely powerful Dollar Index trend that’s going to be hard to stop…next measured Fib. resistance is 106…RSI(14) is in overbought territory at 79% but could easily remain around that level for a couple more months at least…exceptionally strong support exists at 96, so traders still see the risk-reward ratio as very favorable with the Dollar Index at 100, especially if the Fed keeps signalling it wants to start raising rates…

USD13(1)

More “Bibi” For Obama

Despite the best efforts of the Obama administration, Benjamin Netanyahu has won a 4th term as Israel’s Prime Minister, with his conservative Likud party seizing a decisive and unexpected 5-seat advantage in parliament over the main opposition Zionist Party…Netanhayhu should have little difficulty in cobbling together a majority coalition over the next couple of weeks, and his re-election will certainly complicate the efforts of President Obama to secure his goal of a “nuclear agreement” with Iran that many believe will actually make it easier for that regime to become a nuclear-armed state…

On another note, President Obama will be facing increasing questions from both Democrats and Republicans over the role in the Israeli elections of the American non-profit OneVoice Movement…the group received $350,000 from the State Department and allegedly violated its tax-exempt status when it began backing the virulently anti-Netanhayhu Victory 15 campaign which was advised by former Obama campaign aides including his top field organizer, Jeremy Bird…

As Canadian-born Senator Ted Cruz (R-Texas) stated, also noting Obama’s well-known adversarial relationship with Netanhayhu, “What does it say about the President of the United States when he’s more concerned about undermining and attacking the Prime Minister of Israel than he is standing up to the mortal threat a nuclear Iran poses?”

Today’s Markets

Asia

Markets in China and Japan hit new multi-year highs overnight as monetary policies in both countries continue to fuel rising stock prices…the Shanghai Composite jumped another 2% (74 points) to close at 3577 while the Nikkei average added 107 points to finish less than 500 points shy of the 20000 level…

Europe

European markets are mixed in late trading overseas…

North America

The Dow is off 67 points as of 8:00 am Pacific…the behavior of the markets over the final 2 days of the week, not today’s “knee-jerk” instant reaction to the Fed statement and Yellen’s subsequent comments, will be the best guide as to what may unfold over the coming weeks and in Q2

The TSX is down 25 points as of 8:00 am Pacific while the Venture is flat at 659…key Venture Fib. support is in the low 650’s

NioCorp Developments (NB, TSX) Update

NioCorp Developments (NB, TSX) has really gained momentum since it moved from the Venture and started trading on the TSX March 9

Technically, John’s call on the breakout last month above 80 cents was bang-on with NB soaring as high as $1.90 last Thursday before a quick retracement to previous Fib. resistance (now support) at $1.13

On February 23, NioCorp released an updated NI-43101 resource estimate for its Elk Creek Niobium deposit…as a result of positive indications from the company’s continuing metallurgical testing and development program, Titanium (TiO2) and Scandium (Sc) were added to the mineral resource statement…both of these metals can be recovered with simple additions to the existing process flowsheet, according to NioCorp, and would provide additional revenue streams that would complement the planned production of Ferroniobium…the company is currently assessing these prospective revenue contributions, and plans to announce the results of a preliminary economic assessment for the project shortly…

This updated 2-year weekly chart shows Fib. measured resistance at $1.73 and RSI(14) at 73%, continuing to follow an uptrend line…whenever a stock breaks out of an extended horizontal pattern, as NB did after pushing through 80 cents, the possibility of an explosive upside move increases substantially…

NB is up 13 cents at $1.47 as of 8:00 am Pacific

NB3(2)

Agnico Eagle Mines Ltd. (AEM, TSX) Update

This Agnico Eagle (AEM, TSX) chart is interesting as it shows an ongoing bullish trend despite the approximate 10% drop in Gold and the 20% decline in the TSX Gold Index since the beginning of February…

If AEM can hold around current levels in the mid-$30’s (Fib. support coinciding with a still-rising 50-day SMA), then this would be a sign that Gold stocks could surprise investors with an imminent or near-term sudden reversal after a 6-week downtrend…

AEM is down 59 cents at $35.31 as of 8:00 am Pacific

AEM1(2)

Richmont Mines (RIC, TSX) Update

On the “razor’s edge” is Richmont Mines (RIC, TSX), our favorite producer, which entering today’s Fed statement is resting exactly at its uptrend support line that has held since last summer (great buying opportunity each time it has hit this line)…like with AEM, the action in Richmont over the next couple of sessions – can it hold this uptrend line? – will be a valuable clue as to the near-term direction of Gold stocks…

RIC is off 2 cents at $3.73 through the first 90 minutes of trading…

RIC5(2)

Note:  John, Terry and Jon do not hold share positions in NB, AEM or RIC.

23 Comments

  1. Dave – VGD – she is trading in a descending triangle. This is a bearish pattern.
    I sold out last week – whew. GLTA

    Bert – What’s going on buddy Dave, are you studying Geometry ? VGD is holding well,
    waiting for news. We are not studying triangles, instead, we are looking at
    making some cash to enhance our way of life & to see 302K on the bid at 0.18,
    is certainly not giving me the sell signal. If they strike, then you can post
    “””whew”””, if they don’t, i will accept a reply, stating you told me so…

    Comment by Bert — March 18, 2015 @ 7:40 am

  2. Yesterdays Market Musing headline:

    3 stocks on a train ride.

    I guess YFI was the concord.

    Just some humor Jon.

    Comment by dave — March 18, 2015 @ 7:52 am

  3. To Bert- fair enough. I want to see the news. If its good and I think it’s going to move, I will hop back in. I would rather miss some profit on the way up then take a loss the other way.

    Comment by dave — March 18, 2015 @ 8:13 am

  4. Interesting to see that NioCorp has a scandium component to its mineral resource statement. I’ve been looking at scandium for awhile now and I was wondering if you guys could comment on Scandium International Mining (SCY) and perhaps John could provide a chart.

    Cheers,
    John

    Comment by John — March 18, 2015 @ 8:32 am

  5. think it’s evident why no one is selling ggi,not me either,potenial is there,just a matter of time befour this one takes off.looks like you may have to buy the market to get on this train.

    Comment by tombc — March 18, 2015 @ 8:39 am

  6. Hi Jon, The sells on WRR just got bigger at .035. You had mentioned that you talked to management. Did you ask the question of when the drilling will start, or did you not ask?

    Comment by dave — March 18, 2015 @ 8:56 am

  7. VGD

    There was 332k bidding VGD at 0.18, then we had a trade, leaving 267k,
    then another trade leaving 241k, look at it now, total bidding 352k.
    The bidders are doing what we do, lining up for a bargain & if the news
    is good, watch the panic, if it is not so good, a sigh of relief from Dave.

    Comment by Bert — March 18, 2015 @ 9:04 am

  8. Nevermind Jon, .035 WRR sells almost gone. They got swooped up.

    Comment by dave — March 18, 2015 @ 9:54 am

  9. VGD – Lets see what happens. Those bids can change constantly or be gone in the morning. From a charting perspective, it has to break above that downward slope to turn bullish. This is more fun than Vegas, eh.

    Comment by dave — March 18, 2015 @ 9:56 am

  10. Fed statement out… no more patient… gold up 15 bucks short term.. Dow swings over 200 points, russell 2000 new intraday hi…

    when will it be the ventures turn?? has to be the most underperforming market in the world…..

    Comment by Jeremy — March 18, 2015 @ 10:12 am

  11. Dave

    No doubt, the bids can change & they did, prompting me to believe there may
    be a financing forthcoming & some may be selling to participate. I don’t
    see people selling now, while waiting for news, unless of course, there had
    been a leak & is quite possible on the Vampire, whoops! i mean the Venture
    exchange.

    Comment by Bert — March 18, 2015 @ 10:51 am

  12. I never go by level 2. Games are played with this. I go by the chart formations and TA. But thats me and it works for me.

    I don’t think they would do a financing so close to news.

    Comment by dave — March 18, 2015 @ 10:58 am

  13. WRR….3.5 BID AGAIN….CHEAP AT 3.5? JON?

    Comment by STEVEN1 — March 18, 2015 @ 11:10 am

  14. Jon?John. Can you guys comment on The feds statement today and what implications it may have on the venture.. I noticed the US dollar has dropped today and the venture turned up….

    Comment by Tony T — March 18, 2015 @ 12:29 pm

  15. May I turn your attention to IMT.V Very interesting property that may be a contact style NI-CU PGE mineralization similar to Sudbury. They have enough money in the til to drill one deep hole. The body according to the report is approx 1000 meters deep and the past drilling did not reach this dept. As always perform your own dd. Read on their website…

    Montoro’s drilling at Serpent River found uranium values in the mineralized quartz pebble conglomerates consistent with historic results. Montoro also intersected mineralized aplite dykes and sills below the conglomerate beds, as well as highly altered mineralized breccia along the unconformity between the Archean basement rocks and overlying Proterozoic sediments.

    Significant rare earth values accompany the uranium mineralization. Elliot Lake was a major producer of yttrium as a by-product of the uranium production. Immediately west of the Serpent River project, neighbor Pele Mountain Resources (TSX.V: GEM) is advancing its Eco Ridge uranium-REE project, and in July 2011 it announced the positive results of a Preliminary Economic Assessment. Pele Mountains’ testing indicates good recoverability of REE’s, and similar results could be expected from the Serpent River mineralization.

    But the uranium and rare earths at Serpent River may prove to be a sideshow to another deposit type. In a 2009 summary of Ontario Geological Survey field work, a strong geophysical anomaly on the claims that was previously thought to be caused by an iron formation was reexamined. The new interpretation of the Pecors anomaly concludes it may be the result of contact style nickel-copper-PGE mineralization similar to that found to the east at Sudbury. Sediment sampling from Pecors Lake has shown high levels of nickel and chromium, lending further weight to the new analysis.

    Montoro commissioned a geophysical specialist to further interpret the airborne survey data, and the resulting 3D representation of the anomaly shows a length of seven km and width of three km, with an estimated depth of almost two km.

    There was a new review of AB Geophysics in August 2014

    Report on a Review of Airborne EM & Magnetic Surveying on the Pecors Magnetic Anomaly – August 4, 2014

    Comment by Dan — March 18, 2015 @ 12:59 pm

  16. Tony, the Fed removed the word “patient” from its statement (essentially irrelevant) but showed a lot of cautiousness that contributed to a big drop in the dollar today, which is definitely positive for the Venture. No direct mention of the dollar, but the fact the Fed downgraded its economic growth outlook, and specifically mentioned lower export growth (because of the dollar), this had the effect of taking the wind out of the sails of the dollar bulls today. Trading tomorrow and Friday will be important. If the dollar has a cooling off period, the Venture can start to pick up some lost ground. Importantly, Venture support has held through this dollar surge. March may end on a much better note than it started. Personally, I’m in the camp that doesn’t see the Fed raising rates at all this year. They’re probably quite confused as to what to do. One of the major problems in the U.S., and in other parts of the world like the EU, is very weak government fiscal/economic policy, so central banks have had to step in to try and pick up the slack. This is creating market distortions. Economic growth in this expansion in the U.S. has been restrained by policies (or lack thereof) that have handcuffed the business sector. Unfortunately, we’ll have to wait for the next President to solve that problem.

    Comment by Jon - BMR — March 18, 2015 @ 1:02 pm

  17. Thanks for your thoughts Jon. Much appreciated!

    Comment by tony t — March 18, 2015 @ 1:17 pm

  18. Glad you mentioned IMT, Dan, good call…we were going to run a chart on it this morning but we have one for tomorrow. Looking good.

    Comment by Jon - BMR — March 18, 2015 @ 1:21 pm

  19. Great Jon, I picked up more IMT today and sold VGD as I couldn’t take a chance on early assays as I am afraid they won’t be what the market is hoping for but no doubt there are many holes to come and this is probably a big system. If they hit big then I guess I will miss out on VGD.

    Comment by Dan — March 18, 2015 @ 1:33 pm

  20. Dave

    gbcoish@gmail.com

    Comment by Bert — March 18, 2015 @ 1:58 pm

  21. An American talking about the problems in his own country, tells it like it is, peter schiff.. Check it out.

    Comment by Tombc — March 18, 2015 @ 2:41 pm

  22. NPH filled the gap. One to watch.

    Comment by dave — March 19, 2015 @ 7:14 am

  23. In NPH…..looks like a reversal is in the cards.

    Comment by d4 — March 19, 2015 @ 7:27 am

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