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November 29, 2016

BMR Morning Market Musings…

Gold has traded between $1,180 and $1,193 so far today…as of 10:30 am Pacific, bullion is down $5 an ounce at $1,189…Silver has bounced off its lows and is now up 12 cents at $16.69…Copper has slid a nickel to $2.59…Nickel has retreated 16 cents to $5.01…Crude Oil has fallen $1.93 a barrel to $45.15 ahead of tomorrow’s critical OPEC meeting in Vienna while the U.S. Dollar Index is off slightly at 100.99

TD Securities describes the precious metals complex as “down but not out” after Gold’s fall below $1,200 an ounce.  “Much of the move can be traced to the now 100% certainty that the Fed delivers another rate hike in December, while the risks to faster rate hikes in 2017 have grown substantially,” TDS says. “Many point to rising inflation expectations as cause for concern and that for now has driven real rates quite a bit higher.  However, if inflation does continue to creep higher, and the FOMC remains dovish in their approach to normalizing rates, real rates are likely to fall lower again, and 2017 would set up to likely surprise the current pessimism.”

Stronger-than-expected U.S. economic data was released this morning…

  • Consumer Confidence Index hit 107.1 in November, up from 98.6 in October, and well above expectations of 101.2
  • Q3 GDP increased at a 3.2% annual rate instead of the previously reported 2.9% pace, though a surge in soybean exports contributed to approximately one-third of that growth…
  • U.S. home prices came in 5.5% higher in September, up from the 5.1% annual gain in August, according to the S&P CoreLogic Case-Shiller Index which has surpassed its previous peak of July 2006

Uprisings In India

Tens of thousands of people have taken to the streets of cities throughout India to protest Prime Minister Narendra Modi’s new economic policy of demonetization…Modi estimated that forcing people to exchange the country’s largest currency bills for new banknotes would allow the government to crack down on “black money” – unaccounted-for cash holdings that haven’t been taxed but, under the law, should be (the government recently released data that showed that in 2013, merely 1% of Indians paid taxes – obvious this is a country still in need of major reforms)…

modi

Narendra Modi, India’s Prime Minister who has stirred up the nation in recent weeks with a demonetization scheme.

Modi’s agenda, beyond the broad approach that he wants to push India toward a cashless society, is to force people with “illegal” cash holdings to deposit their money into bank accounts and pay taxes on them…his advisers thought this plan would work just fine, but the Law of Unintended Consequences always applies when governments act in such fashion…

Just one problem is that the supply of new banknotes has been far smaller than the supply of old ones…average Indians have been hit hard, and the country itself may pay a heavy price – many economists expect the growth of India’s booming economy to slow substantially in the final quarter of 2016…farmers looking to sow their next set of crops can’t buy the full quantity of seeds they need…property sales, which typically require huge cash investments, are slowing…weddings, which can cost millions of rupees, are taking a serious hit…

Most “black money” in India, however, doesn’t actually take the form of cash held in the country but is rather in Gold, Silver, real estate, and overseas bank accounts – what does Modi plan to do about that?…

How current events in India may impact the Gold market in the coming months remains to be seen…rumors have circulated that a ban on Gold imports is next…India has tried that before and it hasn’t worked…Modi’s policies should further solidify the value of Gold in the minds and hearts of Indians…

Mining Shares Are Cheap!

While some investors say the bull market in mining stocks is over after Gold’s $200 drop, a more than 30% collapse in the TSX Gold Index and a 15% fall in the Venture from its August high of 848, the chart below shows that mining shares as a percentage of global market cap is still fairly depressed with the overall trend remaining very positive…

global-market-cap

Venture Long-Term Monthly Uptrend/Downtrend Periods

Now’s a great time to review some Venture history through an updated chart from John that carves the Index into 6 distinct trading periods going back to 2001…we’re currently in “Period 6” – a confirmed bull cycle that should last for at least a couple of years…

Period 1 (2001 into early 2003) is best described as “neutral” – mostly range trading as the Venture gauged developments including 9/11 and the war and recession that followed…

Period 2 (early 2003 to early 2007, a bull cycle) delivered a stellar return of 280%…

Period 3 (early 2007 to the end of 2008) was nasty – an 80% wipe-out thanks to the Great Crash…

The gain during Period 4 (2009 to early 2011, another bull cycle) was staggering, similar to Period 2 but over a shorter time frame, at 264%…

Period 5 (early 2011 to early 2016) was an ugly bear market as we all know, and the Venture declined a whopping 81% (same percentage decline but worse in many ways than Period 3 because it dragged on for 5 years)…

If Period 6 is similar to Periods 2 and 4, we can expect the Venture to make its way to at least 1700 during this cycle…

Steady buy pressure has replaced sell pressure which was dominant since mid-2012…the 300 and 500-day SMA’s – not shown on the chart below – have reversed to the upside, while the ADX indicator confirms the bear market peaked in late 2015/early 2016…RSI(14) has made a big move this year out of extreme oversold conditions and should find support around 50% on this monthly chart…note the critical breakout, as well, above the downtrend line on a jump in volume…

All those signals confirm a new bull market…

venture-nov-29

In Today’s Morning Musings

1. Another Zinc play ready to leap with a resource and a whole bunch of drilling on the way…

2. Understanding what’s in store for DBV – as simple as A-B-C-D-E-F…

3. HIT takes a hit on old news but the chart and upcoming quarters give a bullish outlook…

4. If Uranium is about to turn, the NXE 50% off sale was a steal…

5. Has the Silver recovery started?…

6. Daniel’s Den – how about these Zinc picks?…

Plus more…click here to read the rest of today’s Morning Musings and all BMR exclusive content, through a risk-free Pro, Gold or Basic package, or login with your username and password…

15 Comments

  1. TK – We visited Churin and Oloyn while in Peru, both very close to TK property. That area looked loaded with mineral, but the infrastructure is not good. About 7 hours to Lima on steep mountain terrain.

    Comment by dave — November 29, 2016 @ 11:44 am

  2. Public roads, water, power—-they’re all there, Dave…historical mining area…

    Comment by Jon - BMR — November 29, 2016 @ 12:22 pm

  3. Jon, given the volatility of the oil market on the eve of Wednesday’s OPEC decision, what are your thoughts on HOU?

    Comment by dermo63 — November 29, 2016 @ 4:38 pm

  4. We’ve maintained a case that it’s really hard not to be bullish on Oil going forward into 2017, dermot63, for a variety of factors, and nothing has changed with that no matter what OPEC does tomorrow…there’s no question the Saudis are highly motivated to get a production cut and Iran appears to be the only country standing in the way at this point…we’ll see how that unfolds tomorrow at the talks in Vienna…looks like 50/50 on reaching an agreement…I’m personally expecting one but the market has sharply toned down its expectations in recent days as the price action indicates…either way, we remain in the bullish camp even if there isn’t a deal and Crude temporarily gets knocked down a little more…

    Comment by Jon - BMR — November 29, 2016 @ 6:30 pm

  5. Sure felt like tax loss on some stocks today yet only a 2pt drop on Venture.

    Comment by STEVEN1 — November 29, 2016 @ 7:32 pm

  6. Yes, roads power water there. But its still about 7 hours to lima. Thats a,long way to truck goods.

    Comment by dave — November 29, 2016 @ 7:45 pm

  7. https://www.ceo.ca/@goldfinger/the-tsx-venture-will-bottom-next-week

    Comment by STEVEN1 — November 29, 2016 @ 7:49 pm

  8. GGI nr the venture has accepted the gold fountain property agreement. i hope that will move the sp tomorrow

    Comment by kelly — November 29, 2016 @ 7:55 pm

  9. GGI news
    Everett Makela and Raymond Goldie join GGI advisory board
    Big time nickel experts!

    Comment by Greg — November 30, 2016 @ 4:45 am

  10. Indeed, and Goldie wrote the book on Voisey’s Bay…more Nickel and market pros will be added soon is the feeling I get…

    Comment by Jon - BMR — November 30, 2016 @ 4:55 am

  11. GGI – NICE

    Comment by dave — November 30, 2016 @ 5:41 am

  12. GGI – where’s the money to let the new boys play?

    Comment by david — November 30, 2016 @ 6:45 am

  13. GGI- Everything’s starting to fall into place going forward.

    Comment by pole — November 30, 2016 @ 7:17 am

  14. It definitely is, pole, with much more to come regarding the E&L, Red Lion (another surprise, I suspect), and Mexico…great to see some fresh blood coming into the company, that’s a very positive sign…Goldie wrote the book on Voisey’s Bay – he could be a great messenger, and we’ve learned he’s been on the E&L…

    Comment by Jon - BMR — November 30, 2016 @ 7:23 am

  15. Ah, yes, that’s always important, David, good point…I think the Chinese deal and this morning’s news answer that question…I don’t believe Makela or Goldie would come on board if they didn’t think something was in the bag…this project is a no-brainer for some significant players to plow serious money into, and you won’t see Regoci dilute at silly prices…

    Comment by Jon - BMR — November 30, 2016 @ 7:29 am

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