BullMarketRun.com

Gold is off $21 as of 7:00 am Pacific time this morning to $1,117 an ounce, after a strong move yesterday…we are of the opinion, however, that gold’s correction is nearly over and we note that the TSX Gold Index has largely unwound its overbought condition from a couple of weeks ago…we strongly believe the Gold Index will not drop below the 325 level, which is its 200-day moving average….currently it’s at 340, just above support at its 100-day moving average…the Venture Exchange is off 14 points so far this morning to 1426, but overall the CDNX holding up very well – its 20-day moving average is still on the increase – which tells us that, indeed, gold’s correction is nearly over and now’s the time to be buying into any weakness…the U.S. dollar is rapidly approaching 80 on the Index where it should run into severe resistance at its declining 200-day moving average and turn south again, lifting gold prices…at worst, we now see gold dropping no further than just under $1,100 where it has extremely strong support technical support around the October high…..

In the face of a declining 10-day moving average, and predictions of further weakness in gold, the Venture Exchange – which has been our #1 leading indicator over the past 18 months – has reversed course this morning and is quickly headed north, up 13 points in the first 20 minutes of trading…we are advising readers to lock in long positions on some of our favorite stocks including Seafield Resources (SFF, TSX-V), Colombian Mines (CMJ, TSX-V), Kent Exploration (KEX, TSX-V) and Westscore Energy (WTR, TSX-V)…

We also strongly suggest IMMEDIATE accumulation in Gold Bullion Development (GBB, TSX-V) which has already traded over 200,000 shares this morning at 7.5 cents…we expect a very substantial move in GBB by month-end/early January, and we’ll soon be issuing a more comprehensive report on this intriguing Quebec gold play which could be a near-term producer with its Granada Mine…

Not a lot to report on the markets so far this morning, so we’ll take the opportunity to introduce a situation we’re quite bullish on – Westcore Energy (WTR, TSX-V)…we made some money on Westcore this past spring when it ran to as high as $1.23 in April on drill results from its Black Diamond coal property along the Saskatchewan/Manitoba border…WTR is tightly held and fairly thinly traded, but at 55 cents we believe it represents excellent value and low risk…investors should read WTR’s news release last Friday as it has formed a very interesting working partnership with Goldsource (GXS, TSX-V)…Westcore is currently drilling its Hudson Bay coal property, just north of Goldsource’s Border property…we expect it’ll be an active few months for both WTR and GXS…WTR is currently closing a flow-through financing at 60 cents to raise $1.2 million…technically, the stock has exceptionally strong support at 45 cents and a turnaround in its 20-day moving average appears imminent…an excellent entry point for Westcore, we believe, would be anywhere between 50 and 60 cents, and we see a high probability of a move to the 75-80 cent area by early January…as of 7 a.m. Pacific time, Westcore is bid at .52 and offered at .57…

We have been cautious on the gold market over the past two to three weeks, urging readers to lock in some profits on their high-flying precious metals stocks as gold hit a record high of $1,225 early this month. We remain cautious as there is, we believe, continued near-term downside risk before gold resumes a powerful advance early in the New Year. Ultimately, we see gold reaching new highs (between $1,300 and $1,500) in 2010.

We urged readers yesterday to review Clive Maund’s gold market update at www.clivemaund.com (that article is available to everyone, just scroll down to the bottom of his home page). Clive is one of the best technical analysts in the business when it comes to the commodity markets, and we do subscribe to his site and highly recommend it. Clive is at his best when he stays away from fundamental analysis, which he sometimes slips into, and sticks instead to strictly technical analysis. His individual stock picks are not as accurate as his precious metal and oil forecasts which often are bang-on.

Our view on the current gold market is this: We are likely to see gold re-test the $1,025 area in the near term (as it did in late October) which will present an incredible buying opportunity. The gold bull market remains firmly intact and $1,000 is here to stay (there’s also strong support for gold just below $1,100, so at the very least we expect a decline to about $1,080).

Gold often moves in the opposite direction of the U.S. dollar, and right now the American dollar has regained some technical strength after being deeply oversold. Recently, it broke out out of a bullish “falling wedge” pattern and moved past its 50-day moving average for the first time in eight months. This morning, as of 6:30 am Pacific time, the U.S. dollar is trading at nearly 77 on the Index. It seems certain to us that it will soon move up to its declining 200-day moving average of 80 cents before meeting major resistance (the 200-day M.A. should continue to decline for some time). We expect the dollar to react around 80 cents, and that should be when gold turns the corner and resumes its advance.

Another reason why we’re so bullish on gold right now is the action we’ve seen in the Venture Exchange, the CDNX. While gold is down nearly 10% since its peak a couple of weeks ago, the TSX Gold Index has lost 11% but the Venture Exchange is down only 2.5%. This is very significant because the CDNX has been an extremely accurate leading indicator of the gold and commodity markets in general over the past 18 months (the Venture broke down in July, 2008, before the commodity markets broke down and before the other major markets broke down. Since near the end of last year, the Venture has been telling us that gold is going higher).

We are, however, beginning to see some short-term technical weakness creep into the CDNX, but what we believe that’s telling us is that gold’s correction has not yet run its course. We believe it’s possible the CDNX could again test its 50-day moving average in the coming days, which means a decline to about 1,365 from yesterday’s close of 1,425. The last few trading days of the year are historically very bullish on the CDNX, so we expect any weakness to occur between today and the 23rd of December (8 trading sessions). This will be a buying opportunity in advance of what we expect will be a significant move to the upside in January. At some point next year, we expect a major CDNX correction of around 20% but that may not happen until it has jumped to between 2,000 and 2,250 which is a very significant move from current levels.

Gold is clearly in a long-term bull market, and every major gold bull market in modern history has consisted of three main stages:

1) Currency devaluation stage
2) Investment demand stage
3) Mania stage

During these three stages, gold prices typically rise in parabolic fashion – the 1970’s gold market is an excellent example.

We have seen evidence of the first two stages (currency devaluation and investment demand) of this gold bull market, but the “mania” stage has yet to arrive. That will happen when everyone is literally in a panic to buy both physical gold and gold shares.

Two junior resource bellweather stocks – Ventana (VEN, TSX)) and Noront Resources (NOT, TSX-V) are breaking down technically and we caution that this could be a strong indication of an imminent CDNX correction and a further drop in gold…more on this tomorrow…

Gold was up almost $14 overnight but has since pulled back a bit, and as of 6:10 Pacific time this morning is ahead $8.00 to $1,123…we suggest readers take a look at Clive Maund’s technical analysis on gold and gold stocks at the moment which can be found at www.clivemaund.com. Just scroll to the bottom of the home page – non-subscribers can read that update…Clive is one of the best technical analysts in the business, so his cautious stance at the moment should be taken very seriously…our best indicator for the direction of the gold and precious metals markets over the last couple of years has been the Venture Exchange, and the CDNX has held up impressively well since gold when into retreat just recently…we’ll be posting an article on this tomorrow…the Venture, however, is beginning to show some signs of technical weakness…it will be important for this market to hold above a key support level of 1,400 this week…we have a new stock situation we will be alerting investors to tomorrow…Noront Resources (NOT, TSX-V) has lost the battle for Freewest Resources (FWR, TSX-V) and we’ll be commenting more on that tomorrow as well…

The U.S. dollar has broken out of a downtrend recently and has now moved above its 50-day moving average for the first time in eight months…this, of course, helps explain gold’s recent drop, and suggests that gold may indeed drop further and perhaps even test the $1,000 level again in the near future before resuming its upward trend….the Venture Exchange, however, continues to hold up extremely well…the Venture Exchange has proven to be a very reliable leading indicator of precious metal and commodity prices, so one has to keep that in mind…we believe next week will be an important test of the Venture and we’ll have more on that over the weekend…Cliffs Natural Resources (CLF, NYSE) seems to have gained the upper hand against Noront Resources (NOT, TSX-V) in the battle for Freewest Resources (FWR, TSX-V)…Noront has had a disappointing week after momentum appeared to be in its favor at the end of last week…we still believe Freewest shareholders are better off joining with Noront, but investors’ time spans are very short and Freewest shareholders have no doubt not been too impressed with the performance of Noront’s stock this week…

It’s rather ironic, given the battle over Freewest Resources‘ (FWR, TSX-V) chromite deposit at McFauld’s, that Noront Resources (NOT, TSX-V) actually is the first to come out with an NI-43-101 resource estimate for its chromite…a flurry of news releases have come from Noront over the past 24 hours as they try to “close the deal” with Freewest shareholders by emphasizing the upside of the Ring of Fire, but Noront needs to deliver with its share price today or it could be game over for them…Noront’s offer expires at midnight tomorrow…meantime, Cliffs Natural Resources (CLF, NYSE) has increased its offer for Freewest this morning to $1.00 per share…the maneuvering in this great chase game is getting complex and difficult to understand for many investors…Cliffs this morning continues to downplay the value of Noront’s $4 share purchase warrant offer to Freewest shareholders which we believe offers tremendous value given the bull market the Venture Exchange is in and the fact Noront has such incredible upside potential over both the short and long term…why a Freewest shareholder would prefer to hold shares of Cliffs over Noront, and therefore lose valuable upside exposure to the Ring of Fire, is something we just don’t understand…Freewest shareholders have benefited enormously from their company’s exploration and discoveries in the Ring of Fire, so why not jump in with the “King of the Ring” to take that success even further in an all-Canadian effort…the bottom line is that Noront shares offer far greater upside potential over the next year and several years than Cliffs‘…the share performance of each company over the past year speaks volumes…Colombian Mines (CMJ, TSX-V) enjoyed another solid day yesterday, jumping another 12 cents to .83…any pullback or weakness should be viewed as a buying opportunity…we see some big things soon for Gold Bullion Development (GBB, TSX-V) which we first mentioned yesterday…we’ll have more
on Gold Bullion soon, but investors should do their due diligence and consider accumulating around seven cents for a significant move by early January we suspect…