BullMarketRun.com

Gold is off its lows of the morning and at 8:10 am Pacific time is trading at $1,097 per ounce, down $0.50 after falling as low as $1,084…Gold Bullion Development Corporation (GBB, TSX-V) came out with a convoluted news release but encouraging initial results this morning from its drill program at the Granada Gold Property near Rouyn-Noranda, Quebec…the “sell on news” adage seems to apply here as some traders, we suspect, simply read the headline and dumped some stock at the opening bell – an unfortunate mistake, we believe, but that’s what makes a market…the company was drilling for structure at this stage, not necessarily grade, and they have been successful…we will be going into more detail on this in the days ahead…assays were released on the first three of 25 holes drilled and included 32 metres of 1.74 g/t and some longer intersections of lower but definitely mineable grade…significantly, these first three shallow holes were drilled east of Pit #1…this is the first drilling Gold Bullion has done at Granada and we suspect the assays on the remaining 22 holes will demonstrate that this largely unexplored property (2 km x 7 km) has enormous potential as a bulk tonnage deposit…this morning’s release stated “all holes intersected significant intense silicification and sericitization alteration associated with quartz veining in sediments and porphyritic felsic intrusives. Most holes have had visible gold associated with quartz veining and detailed logging is progressing”…Gold Bullion is down two cents to .085 as of 8:00 am this morning…it has very strong technical support at its rising 100-day moving average of 8 cents which we consider to be an extremely attractive entry point…the Venture Exchange is off 21 points so far this morning, which also has not helped Gold Bullion, to 1,526…it’s “settlement day” for accounts which often can bring some additional selling into the CDNX…we suspect the market will find support around this level (the Dec. 31 close was 1,521) and firm up in the days ahead as our earlier analysis laid out…

Markets are relatively calm this morning but looking for direction after a sharp three-day pullback…gold is up $2.00 per ounce at $1,094 as of 8:40 am Pacific time…the key for gold in the days ahead is to see if it will hold above the December low of around $1,075…the CDNX is flat on the day at 1,550…month-end settlement is tomorrow which means we could see some sloppy trading for another day or so…we posted an article on Kent Exploration (KEX, TSX-V) this morning which is currently trading at 18 cents, down 1.5 cents on the day on just 15,000 shares…Kent is a junior gold explorer with superior management and strong assets which we initiated coverage on about three months ago…it remains one of our favorites and it’s possible a major breakout could occur very soon on assay results from its Flagstaff Mountain Property in northeastern Washington State…regardless of those results, however, Kent is resting on a very solid foundation with the barite deposit at Flagstaff and highly prospective gold properties in New Zealand and Australia…at 18 cents, its market cap is a paltry $6 million…Greencastle Resources (VGN, TSX-V) is showing some strength this morning, up 1.5 cents to .18 on nearly 200,000 shares…we love Greencastle for its oil, gold and cash, with a little bit of coal sprinkled in…Greencastle has been drilling some wells in southwestern Saskatchewan and we’re hoping for an update soon…

Kent Exploration (KEX, TSX-V) is a tremendously well-managed junior exploration company that is so close, in our view, to reaching a new level in its development.

We first initiated coverage on Kent about three months ago at 16 cents. We have followed the company’s progress closely since then, and just recently we met with President/CEO Graeme O’Neill. We have an extremely high “comfort level” with Kent and it’s obvious to us that the share price, though it has risen since early October, has not caught up with the company’s improving and underlying fundamentals (current market cap is only $6.5 million based on the January 22 closing price of 19.5 cents).

Kent has three flagship properties and one of them has the potential of delivering a major surprise any day now: Nine shallow holes were drilled at Kent’s Flagstaff Mountain Property in northeastern Washington State last October. The aim of that program was to confirm impressive historical gold grades and widths encountered by CE Minerals (Combustion Engineering) when it was drilling for barite 30 years ago (one of their holes cut a stunning 1.3 ounces of gold per ton over 18 metres).

Considerable effort and geological skill went into determining CE’s precise drill hole locations, and Kent’s geological team felt very confident with its preparation and drill plan. Assay results were expected by around the end of December but nothing has yet been received. One possible explanation (strictly speculation on our part) is that some of these holes had to be re-assayed due to unusually high grades, a standard practice in the industry.

CE, which mined barite at Flagstaff between 1982 and 1984, was an industrial minerals company and didn’t have a whole lot of interest or expertise in the area of precious metals. Their primary goal, obviously, was the definition of a barite orebody. What’s interesting is that many of their holes along the east side of the barite deposit, in particular, contained significant and consistent gold values.

The geologic map for the area shows a fault along the east side of the barite deposit, and this fault is believed to be the controlling factor in a quartz vein that has been traced for a considerable distance. A detailed September, 2008, report on the Flagstaff Property stated, “The current known strike length of the vein, from the prospect pit at the north end of the mine area to the intercept in CE Minerals drillhole 54E, is approximately 410 metres – certainly adequate strike length to develop a mineable orebody. The strike length of the vein remains open at both ends…the fact that the vein is of a mineable width (>1 metre in most exposures) is also a definite plus.”

There were also several CE gold intercepts that did not correlate with the vein trace (secondary mineralized structures that will require further testing), and high grade silver values that were encountered on the south side of the barite deposit.

In total, CE assayed 924 samples for gold and silver with very significant results, indicating a real potential for the discovery of a gold/silver orebody.

In 2008, Kent Exploration’s consulting geologists completed a painstaking and detailed task of trying to extrapolate the exact locations of most of CE Minerals’ drill holes that encountered significant precious metal values, and to get a better overall understanding of the property’s structural controls in preparation for the drill program that took place late last October. This was an exhaustive and impressive effort.

Given the historical drill results from this property, and Kent’s efforts to try to accurately pinpoint those drill locations and gain a better overall understanding of the Flagstaff mineralized system, we believe there’s a very reasonable chance that at least some of the upcoming assay results could be very good, if not spectacular.

O’Neill is a man of integrity, a quality that unfortunately is too often missing in business these days including the mining industry. As soon as the drill program started last October, he created a “firewall” to prevent any leaks whatsoever (even to him) with regard to results. Rumors on Stockhouse recently that Kent was sitting on poor results from Flagstaff were utterly false.

Truth is, we can speculate all we want about what those holes in October may have encountered, but we won’t know for sure until the news hits the wire. We’re hopeful, though, and at 20 cents we believe the risk-reward ratio here is exceptional.

The best-case scenario is that Kent confirms CE’s historical drill results – the stock blasts off like a rocket to new all-time highs.

The worst-case scenario is that every hole drilled at Flagstaff last October turns up empty – in that case, though, Kent is still sitting on a substantial high-grade barite deposit at Flagstaff, for which there is a guaranteed buyer when production commences through a deal with Matovitch Mining Industries, and the company has outstanding gold prospects in New Zealand and Australia which are coming along very nicely.

“This is not a one-dimensional, one-trick pony,” O’Neill declared to us. “We have significant prospects that could bring extraordinary value.”

O’Neill, a native New Zealander who moved to British Colombia in 1971, is a sharp businessman who knows how to run a company. He is focused and results driven. He has the respect of his entire staff and over the last year has recruited some outstanding talent, from geologists to IR, to move this company forward. For someone who doesn’t have a geological background, he has an amazingly strong grasp of this industry. He’s heavily invested himself in Kent and has done an extraordinary job at managing the company’s assets (including its cash) and keeping share dilution to a minimum. This is an exceptionally well-run junior exploration company.

“Last year at this time when everyone was looking to survive, I felt my shareholders wanted more than survival,” O’Neill told us. “They wanted us to thrive and prosper.”

At BullMarketRun.com, we strongly believe Kent shareholders will thrive and prosper.

Part 2 of this article, later this week, will reveal what investors are missing in terms of valuation with Kent’s Alexander River Gold Property in New Zealand and its Gnaweeda joint venture with Teck in Australia.

Welcome to our site, or at least a sneak preview of it! The final version will look much different than this as we develop a fully-integrated and very unique business, investment and money-management resource site.

An important component of this site is going to be original research on small and undiscovered junior resource companies that offer very real and significant upside potential. We are extremely selective in the companies we feature and put forward to investors – we prefer quality over quantity. Management is the first thing we look at – it’s our #1 criteria – because without superb or solid management, a company with the best properties in the world is either going to underperform or flat-out fail. As simple as that. So we look for superior management guided by strong business ethics and integrity, followed by an outstanding portfolio of projects.

Disclaimer:

BullMarketRun.com is completely independent from any companies we cover. We accept no compensation of any kind from any groups, individuals or corporations mentioned on our site. Our stock coverage is for informational purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. No investment opinion or other advice is being rendered on any stock or company. We strongly recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research before making any investment decisions. The stocks we cover, by definition, are highly speculative and potentially very volatile. Investors are cautioned that they may lose all or a portion of their investment if they make a purchase or short sale in these speculative stocks. We are not Registered Securities Advisors. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.  It should be assumed that BullMarketRun.com writers and their associates may hold or dispose of or trade in positions in any securities mentioned herein at any time.

CDNX And Overall Markets

The Venture Exchange declined for the second straight week but outperformed the major markets, declining only 2.7%. The TSX was off 2.9% while the DJIA was down 4.1% (the TSX Gold Index dropped 4.5% this past week and fell below its 200-day moving average for the first time since last October, just before a major move to the upside).

Over the past 34 trading sessions the CDNX is up 86 points or nearly 6%. During the same period, gold is off $135 or 11% while the TSX Gold Index has plummeted a whopping 19% and is clearly in oversold territory. This strong divergence between the CDNX, gold and the TSX Gold Index is, in our view, very significant (it is the opposite of the divergence we saw in July, 2008, before commodities crashed). Given the consistent reliability of the CDNX in predicting major moves in gold and commodities in general, we can only conclude that now is the time to be scooping up good quality juniors that may have pulled back in recent days as a major move to the upside in gold appears imminent. That’s not to say gold won’t test strong support just above $1,000 in the near future, but a monster run to the upside appears to be in the works. Any downside move in gold from this point should be considered a head fake and an incredible buying opportunity.

The CDNX remains in a firm uptrend (a parabolic one at that). We liked the action we saw Friday when the Index fell below its 20-day moving average to 1534, and then reversed course to the upside (going in the opposite direction of the major markets) to finish at 1,550. The CDNX fell slightly below its 20-day moving average in both December and October, so this fact is not something that really concerns us. We would only be alarmed if the CDNX’s 20-day moving average began to decline – it has remained in an uptrend since July of last year. For that trend to continue, we’d have to see the CDNX get back to the 1,600 level or new highs by the first week of February – and we have every reason to believe that’s exactly what’s going to happen.

In terms of the major markets, we wouldn’t be surprised to see a Monday morning sell-off followed by an intra-day reversal which would signal the end of this current correction.

BullMarketRun.com Portfolio – We Survived The Week!

Gold Bullion Development (GBB, TSX-V)

Gold Bullion Development backed off slightly this week. It found strong support at .095 and closed at .105, down one-and-a-half cents on the week (up 40% from when we initiated coverage). Initial assay results from last month’s drill program at the Granada Gold Property near Rouyn, Quebec, are expected soon – we were disappointed they weren’t ready for the Vancouver Resource Investment Conference but that’s the nature of the business. We remain extremely bullish on the prospects for Gold Bullion. Some further consolidation can be expected before the next leg up.

Seafield Resources (SFF, TSX-V)

Seafield continues to perform as expected and is finding strong support around previous resistance at 24 cents. We’re still waiting for the announcement regarding Seafield’s Colombian gold property acquisitions through Caribbean Copper and Gold Corporation – we understand this process is in its final stages. Seafield closed down three cents on the week at 24 cents but it still up 300% from when we first introduced it (six cents) last summer.

Kent Exploration (KEX, TSX-V)

Kent had a volatile week with a range of .165 to .23. The action we saw Friday was technically bullish as the stock dropped as low as .165 (just half a cent above its 100-day moving average) before rebounding to close at the high of the day, .195. With a market cap of just $6.6 million, and an impressive portfolio that includes three flagship properties, we consider this well-managed company to be an exceptional value at current levels. Drill results from Flagstaff Mountain are overdue and could surprise the market in a big way.

Greencastle Resources (VGN, TSX-V)

Greencastle had a fairly quiet week, trading just 250,000 and closing at .165 (down half a cent from the previous week). With a market cap of just over $7 million Greencastle is trading only marginally above its cash value. The company started drilling some test wells at Boggy Lake-Cabri in southwestern Saskatchewan a couple of weeks ago, so news on that should be forthcoming fairly soon. This company has things we really like – cash, oil and gold. This is a great little stock to just sit on and wait for an explosion to the upside – the downside risk at current levels is minimal, and the company has regular monthly cash flow of about $150,000. Their new oil properties in Saskatchewan hold considerable promise.

Richfield Ventures (RVC, TSX-V)

Richfield was unchanged on the week at $1.12. The market is still absorbing a bunch of cheap private placement stock from last fall, and this may continue for a while yet. As a result we wouldn’t be surprised to see Richfield test support at .90 cents before firming up again. Having said that, this company appears to be sitting on a very substantial bulk tonnage gold deposit in the interior of British Colombia. Once this cheap stock is eaten up and drilling resumes this spring at Blackwater, we expect Richfield to be a star performer.

Colombian Gold Mines (CMJ, TSX-V)

Colombian was off 11 cents for the week at .89 but is still ahead 48% from when we first initiated coverage early last month. CMJ has an impressive and large portfolio of grass roots exploration properties in Colombia, and will soon be drilling its Yarumalito Property.

It’s probably a good contrarian sign that some analysts have turned very bearish on the markets. Clive Maund, who we follow closely and have deep respect for, actually put out an article today raising the possibility of a “Black Monday” tomorrow and a severe market meltdown right across the board.

In the article we posted yesterday, we examined how the action in the CDNX does not support such a bearish view – in fact, quite the contrary. We have consistently used the Venture Exchange as our #1 and most reliable tool to guage the markets overall and therefore achieve superior returns. What the CDNX is telling us right now is that the primary trend in precious metals and commodities is up, and this is a time to be buying into weakness. It is truly remarkable that while gold is down 11% over the past six weeks, the Venture Exchange is actually up 84 points or nearly 6%. This divergence is extremely bullish.

Let’s go back to July of 2008 to demonstrate just how reliable the CDNX tool is and how it actually predicted the horrendous crash that begin that summer.

We saw another divergence in July, 2008, but this divergence was a very bearish one. While gold was going up over the first half of July (from $930 to $985, and while oil was hitting new highs), the Venture Exchange was going in the opposite direction and actually fell 12.5% in the first 10 trading sessions of July. This was a very bearish negative divergence. As the month progressed, the Venture fell below key support around 2,300 and it was game over from there – the CDNX was saying that the commodities run was finished and that there was major trouble ahead. For the month of July, 2008, the CDNX was down 16%. The TSX was off just 6% for the month while the Dow Jones Industrial Average was actually unchanged. Gold finished July at $930 and of course plummeted in August.

And just in case you think the TSX Gold Index is a reliable indicator, it too surged higher with gold prices through the middle of July, 2008. The CDNX was going down and the TSX Gold Index was going up. Those investors who read the signs the CDNX was giving saved themselves a lot of money. Currently we’re seeing the opposite situation – the TSX Gold Index has been going down while the CDNX has been surging (or significantly out-performing). Our money is on the CDNX. This is the time to be a buyer, not a seller.

As we stated in yesterday’s article, the CDNX is always ahead of the curve. Given the out-performance of the CDNX vs. the major market Indexes in addition to gold and oil recently, we can only conclude that we are not about to witness a crash. In fact, we’re anticipating just the opposite – significantly higher commodities prices and a move in the CDNX to between 1,950 and 2,350.

The CDNX remains firmly in a parabolic uptrend and we are buyers into weakness until we see clear signs of technical deterioration – the first indication of which would be a declining 20-day moving average.

We’ve written about this before on this site – there is one indicator of future overall market direction that in our view is more reliable and accurate than any other indicator out there, and that’s the Venture Exchange. We challenge anyone to try and prove us wrong on that statement.

The CDNX, as everyone knows, is the Wild West of the markets. It is highly speculative and can be extremely volatile. It is made up mostly of resource issues.

Over the last three trading sessions, including today, the Dow Jones Industrial Average has dropped 552 points or 5%. The TSX is off 3.7%. The CDNX, however, is down only 2.7%, and interestingly moved in the opposite direction of the major markets this morning. After an early drop of 25 points to 1,534, the CDNX rallied back to 1,560 – erasing all of those losses – before settling at 1,550, down just 9 points on the day vs. the 217 drop on the Dow and the 126 point TSX loss.

The fact the CDNX has outperformed the major markets in this three-day slide suggests to us one thing: We’re seeing a normal pullback, which may now have run its course, and an overall market crash is simply not in the cards. We say that because if a “crash” were imminent, stocks in this market (which was up 91% in 2009) would be dumped first and the hardest. Even a sharp pullback in both gold and oil was not able to knock this market to its knees this week.

So while many people will fret and worry over the weekend about the “coming market crash”, we’re going to relax and enjoy a couple of wonderful days knowing full well that the sky is not about to fall. The CDNX has spoken and has told us so.

The action we’re seeing right now in the markets reminds us a lot of last October when many analysts were also warning of an imminent crash. At that time, the TSX fell slightly below its 100-day moving average, which it has now; the CDNX fell slightly below its 20-day moving average, which it has now; and the TSX Gold Index fell slightly below its 200-day moving average, which it has now. Then the markets snapped back with a vengeance.

The primary trend is still up, folks, given the parabolic uptrend the CDNX is still in, and so far we have not seen the technical deterioration necessary to change that view.

As far as gold is concerned, there are two scenarios: Gold is either bottoming out at current levels with a successful re-test of the December lows ($1,075), or it will fall to an area of huge support around $1,025. In both scenarios we see gold eventually taking off on another monster run all the way to at least $1,350 and perhaps $1,500 this year.

The fact that gold is currently hovering around its December lows, and the CDNX is substantially above where it was at any point last month, is further evidence that gold’s next huge move is going to be to the upside (yes, we could see a head fake to $1,025 first, but we’re not counting on it).

With U.S. Congressional elections coming up in November, we believe the Obama administration will do everything in its power, rightly or wrongly, to stimulate the economy (Recovery Plan #2 coming up) and keep interest rates low which will maintain the commodities carry trade. Robust growth in China continues which is hugely important to commodities.

We hope you enjoy a great weekend. We have several articles in the works for next week on specific companies that we believe you’ll find most interesting, and of course on Sunday we’ll be posting our regular Week In Review And A Look Ahead feature.

The markets have bounced back from earlier losses today…as of 8:45 am Pacific time gold is up $3.00 ounce at $1,096…it dropped as low as $1,080 this morning, just slightly above its December low…the CDNX fell through its 20-day moving average for the first time since December but is now on the march back up, currently off just seven points at 1,552 – just a few points below its 20-day MA…Kent Exploration (KEX, TSX-V), which Clive Maund successfully knocked down with his “take profits” recommendation, nearly hit its 100-day moving average this morning when it traded as low as .165…clearly, Kent is an aggressive buy at these levels…we believe there are two scenarios for gold…either we will bottom out around current levels with a successful re-test of the December lows, or gold will drop further to just above the $1,000 level where there is huge support and where a major new upleg could begin…the idea of a major market crash (all markets), which Clive is sounding the alarms on this morning, seems unlikely to us at this point – it’s simply the wrong time of the year for an event like that, and the action in the CDNX contradicts, in our view, the imminent all-market crash theory…a correction in the CDNX to 1,475 (the 50-day MA) or even 1,400 (the 100-day MA) is certainly within the realm of possibility but that would merely be a 10 to 15 per cent correction within the context of a continuing bull market, given the fact the major moving averages would still remain firmly in bullish alignment…it’s also quite possible we may have hit bottom in the current correction this morning…the action we’re seeing right now does look strikingly similar to what we witnessed back in October…we suggest investors do some due diligence on Stans Energy Corp (RUU, TSX-V) which we first started research on at the end of December when it announced it had picked up a substantial REE deposit in Kyrgyzstan…RUU is trading at 35 cents this morning…