BullMarketRun.com

CDNX and Gold

We have generally been extremely accurate in our forecasts here at BMR – just recently, two months ago, we correctly predicted that 1343 was the bottom for the year in the CDNX and that a major new move to the upside was underway.  Now we have another bold prediction which should be music to everyone’s ears:  We are in the midst of a move of historic proportions in the CDNX that could make millionaires out of many.  In the span of just less than a year, from late 2008 through late 2009, the CDNX doubled in value from 700 to over 1400.  The CDNX got as high as nearly 1700 this past spring and then corrected 20% to 1343, the July 6 low.  Given historical patterns and an anticipated move to $1,500 or better in the price of Gold over the next year, another doubling or more in value of the CDNX from the July 6 low is our “big picture” view. That means the Index could ultimately challenge its all-time high of around 3,300 that we saw in 2007.  And it’s quite conceivable we could see the CDNX double from its July low by as early as the spring of next year – anyone who doubts that hasn’t gone back in history and has also forgotten the incredible “dot com” boom from the late 1990’s and how the Nasdaq in 8 months went from a low of just under 2,500 in August, 1999, to a high of 5,100 in March, 2000.  The boom that we believe we are about to see in junior gold stocks may very well mirror the “dot com” craze.  All the ingredients are in place for such a move, and we’ll elaborate more on this in the coming week.  The CDNX jumped another 65 points this past week to 1662, putting it just 29 points shy of its 52-week high of 1691.  BMR’s technical analyst does see a market right now that’s quite frothy and in an area of major resistance, so some consolidation is possible (i.e., a pullback of maybe 5% or so) for the overbought condition to unwind itself somewhat before a major push to a new 52-week high.  John’s updated CDNX chart analysis will be posted later today.  As for Gold, the yellow metal raced to a new all-time high this past week, closing Friday at $1,274 for a $27 weekly gain.  Gold finally blasted through resistance in the $1,260’s and the next stop appears to be $1,300 as John outlined in his excellent article Friday.  And for once we’re in agreement with analyst Clive Maund – he missed what we saw in July, as we use the CDNX as our most important leading indicator, but Clive posted an insightful  free article on the precious metals markets this weekend that we suggest investors check out (www.CliveMaund.com).

Gold hit another record high today of $1,284…it quickly retreated from there and fell back on profit taking to $1,271…as of 9:30 am Pacific, Gold is back up to $1,277 , a gain of $1 for the day…the outlook for the yellow metal continues to be bullish as BMR’s technical analyst pointed out in this morning’s article…copper hit a 4-and-a-half month high today and is currently at $3.50 per pound…as we have stated previously, the CDNX – being an extremely reliable leading indicator – has been telling us since July that Gold and base metals are going higher…the CDNX is up another 14 points this morning to 1664 as it closes is on its 52-week high of 1,691…some initial resistance at that level can be expected…however, what we’re now anticipating is a move by the CDNX over 2,000 by early next year which means there is still plenty of upside remaining and any dips or minor pullbacks should be embraced…this is a market in an extremely powerful uptrend, one of possible historic proportions…Gold Bullion Development (GBB, TSX-V) is off 3 more pennies this morning at 57 cents but we’re not concerned in the least and the current weakness should be viewed in the context of being an opportunity, not a bearish development…too often investors make the mistake of getting bullish on a stock only when it’s going up, rather than getting bullish when it pulls back in the midst of a primary, overall uptrend…the primary trend continues to be up with Gold Bullion, and that’s supported by both the technicals and the fundamentals…GBB has essentially come back to its 50-day rising moving average (56.5 cents) and it’s very strongly supported below that by rising 100 and 200-day moving averages that are in no danger of declining…we’re expecting good drill results in the near future based on Gold Bullion’s recent news releases, so nothing has changed with this story…we remain absolutely convinced that GBB is well on its way to defining a multi-million ounce deposit in the LONG Bars Zone – in fact, we’re more convinced of that than ever given the recent news…some patience is required…Seafield Resources (SFF, TSX-V) is forming a nice base around 25 cents which is a positive technical development…SFF has strong new support in the 23-24 range and the primary trend is definitely pointing up…with its outstanding land package at Quinchia, nearly 70 square kilometres, Seafield is well positioned to be a potential huge winner over the next few months as drill results start coming in and drilling expands beyond Miraflores to Dos Quebradas and then Chuscal…Miraflores and Dos Quebradas are advanced, high quality exploration projects and Miraflores already has a 43-101 inferred resource of 800,000 ounces…Sidon International (SD, TSX-V) is waiting for CDNX approval on its recently closed 10-cent financing…as soon as that is confirmed, we expect Sidon to heat up as it carries out its exploration plans for Morogoro East…Currie Rose (CUI, TSX-V) is another company we like in Tanzania…we suggest investors take a look at Currie Rose and do their due diligence on this one…the company just recently closed a $1 million financing (CDNX approval received) and pulled back yesterday exactly to its rising 20-day moving average of 9.5 cents…its recently overbought condition has cleansed itself and CUI is currently at 10 cents this morning, up half a penny…

John: There was an article yesterday by the Associated Press with the headline:  “Census: 1 in 7 Americans lives in poverty”.

It opened by stating that ranks of the working-age poor has climbed to the highest level since the 1960’s as the recession threw millions of people out of work last year, leaving one in 7 Americans in poverty. Also, the overall poverty rate climbed to 14.3 percent, or 43.6 million people, the Census Bureau said yesterday in its annual report on the economic well-being of U.S. households. The report covers 2009, President Barack Obama’s first year in office.

The poverty rate increased from 13.2 percent, or 39.8 million people, in 2008.

This is referring to the economic state of the richest and most powerful country on the planet. This report should make every investor think twice as to where to place his investments. Remember, the first rule of investing – “Protect your Capital”. It appears more and more investors are choosing Gold to safeguard their futures as we shall see from our analysis of the Gold market.

Yesterday the price of Gold opened at $1,268, drifted to a low of $1,265, rose to a high of $1,278 and then closed at $1,275 – an increase of $7 on the day and $29 on the week so far.   Last week, on Wednesday, we saw Gold fail to get through the previous high resistance at $1,260.  Then for 3 days it consolidated and retraced down to $1,240 before blasting through the resistance on Tuesday this week.  As of 7:30 am Pacific time today, Gold is trading at $1,276, essentially unchanged after hitting a new record high earlier today of $1,284.  Below is the updated Gold chart, followed by my analysis, after yesterday’s trading:

Looking at the 2-year weekly chart we see that Gold is trading in an upsloping channel which started in January, 2009, and is strongly supported by the weekly 50-day moving average (SMA).  Both the weekly SMA (50) and SMA (200) are pointing up in bullish orientation. The top line of the channel (blue) is resistance and the bottom line (green) is support. The dotted blue line is an inside trendline (resistance). Even after this large recent increase there is still a lot of room for the price to go higher before reaching noted resistance.

Looking at the indicators:

We see that the RSI has plenty of space to move up before becoming deeply overbought – bullish.

The Slow Stochastics also has room to move up and can remain in the overbought area for several weeks as the trend strength increases – bullish.

The Bollinger Band Width (BBW)  indicator has just moved up from a relatively low position. This indicator is a measure of the vertical distance between the two bands and when this indicator is low it means the bands are close together which indicates a near-term increase in volatility. Thus, volatility has started to increase and Gold has moved up in price. This indicator can move a long way up before reaching a previous high so we can expect volatility to continue for the near and intermediate term.

The BBW can also be used to confirm Stochastics crossovers. Wherever possible do not rely on just one indicator. I have shown the crossovers with thin vertical blue lines and low BBW values by thin vertical orange lines. The chart shows the crossovers precede the BBW lows, therefore by waiting for the BBW low and reversal the investor can confirm the upward move and may also determine a better entry point.

Outlook: I expect Gold to continue to climb within the channel for a considerable time and reach a minimum of $1,300 in the near future.

Gold has pulled back slightly after hitting a new record high this morning of $1,279…as of 8:35 am Pacific, the yellow metal is up $6 an ounce to $1,274…the CDNX continues to surge which shows that Gold has more punch left in it…the CDNX blew past resistance at 1625 and is now threatening to take a run at its 52-week high of 1691…it’s up 16 more points this morning to 1646…this is an extremely powerful move that isn’t showing any signs of slowing down…Richfield Ventures (RVC, TSX-V), which BMR introduced to its readers at $1.20 last December, hit a new all-time high of $3.05 this morning…it’s currently up 27 cents at $2.85…no doubt they will be quickly closing their nearly $15 million proposed financing at $1.95…despite its $100 million market cap (including the 7.5 shares from the financing), Richfield still has considerable upside potential with what appears to be a multi-million ounce gold deposit in the making at Blackwater (some silver and copper credits as well)…Gold Bullion Development (GBB, TSX-V) is off 2 more pennies to 59 cents…as we mentioned in our article this morning, the fact that GENIVAR is eager to immediately pursue several high priority targets within both the Preliminary Block Model and the Eastern Extension is very telling…the near-surface mineralization described in Hole #86 confirms information in Willoughby’s 1994 report on Granada that the area south and southeast of Pits #2 East and #2 West does hold potential for more mineralization…this means the Preliminary Block Model could easily extend to the south with the Eastern Extension becoming wider and mineralization trending to the east toward LONG Bars Zone 2…this is truly a potential massive volume situation, so the best strategy here is simply drill, drill, drill…GBB has tremendous technical support at its rising 50-day moving average of 56 cents and we have little doubt that as more assays start flowing in, the LONG Bars Zone and Gold Bullion are both going to flex their muscles…there is a serious disconnect right now, in our view, between the current weakness we’re seeing in the stock and what’s actually happening on the ground at Granada as detailed in Gold Bullion’s recent news releases…Sidon International (SD, TSX-V) is unchanged at 14 cents…with the 10 cent private placement closing, it’s likely not long before we get more news regarding Sidon’s exploration plans for Morogoro East…we are very bullish on a lot of plays in Colombia right now, including of course Seafield Resources (SFF, TSX-V) and Colombian Mines (CMJ, TSX-V)…there are other very promising situations in Colombia as well including Bellhaven (BHV, TSX-V) which investors should do some due diligence on…Ventana (VEN, TSX), the leader of the pack, has struggled for a good part of this year but has a chart that is suddenly looking very bullish…

GENIVAR, the geological consultant for Gold Bullion Development (GBB, TSX-V), was probably looking forward to a pause in Phase 2 drilling after more than 120 consecutive days of it (and nearly 19,000 metres) at the Granada Gold Property.  But instead they want to keep charging ahead and immediately go after some “high priority” targets with 5,000 extra metres of drilling before an even larger Phase 3 program begins.  Yesterday’s news from Gold Bullion was indeed significant and very revealing as to what’s likely happening on the ground in the LONG Bars Zone.

The Eastern Extension

Hole #86, the southernmost hole drilled so far in the LONG Bars Zone, was first brought to investors’ attention in last Thursday’s news release – emphasized in a separate paragraph but buried toward the end of a long exploration update.  It was highlighted in the third paragraph of yesterday’s release.  One of GENIVAR’s “immediate priorities” is additional drilling, likely starting by this weekend, around Hole #86 which is 350 metres directly south of Phase 1 discovery hole #17 as well as 180 metres east-southeast of the Preliminary Block Model.

Intense alteration and near-surface mineralization were observed in #86 including visible gold at two different depths – in a brecciated quartz vein and also in porphyry.  This has all the makings of a potentially stellar hole and one possibility is that it could be an extension of the high grade Vein #2 located 250 metres to the west-northwest.  We did some additional research yesterday on this under-explored southern part of Granada, and we’ll be doing more as we’re discovering some interesting new information.

Hole #86 is in what is called the “South Shear Zone” of Granada which was first mapped in 1992, according to Willoughby’s publicly available report that we obtained from the Quebec Ministry of Mines.  Some of the higher grade gold mineralization at Granada appears to be controlled by northeasterly faulting, a feature that also extends through the South Shear (one of several shear systems at Granada).

Willoughby himself took some grab samples in 1992 – one of those samples, approximately 100 to 150 metres west-southwest of Gold Bullion’s Hole #86 (as best we can determine) assayed 10.80 g/t Au (0.381 oz.) from a vein hosted by biotitized conglomerate.    “Drilling from the No. 2 Gold Zone on the Granada Mine Property intersected the South Shear and extensive biotite alteration was encountered,” stated Willoughby (page 99).  “Perhaps this shear is the western extension of the Auk Shear.”

The Auk Shear Zone encompasses the highly prospective LONG Bars Zone 2 area (the former Aukeko Property) that Gold Bullion hopes to start drilling later this year.

If Willoughby is correct, Gold Bullion may have found something of extreme significance with Hole #86 which could explain GENIVAR’s eagerness to immediately drill some more holes in this area.  The evidence – visuals on Hole #86 as well as historical data – is strongly suggesting that the LONG Bars Zone potential going south is greater than originally thought.  From south of the Preliminary Block Model, mineralization appears to extend well to the east. So two things appears to be happening here – a possible extension to the Preliminary Block Model immediately to the south, and an even wider Eastern Extension.

Below is a map from Willoughby’s 1994 report showing all of the area that’s being drilled in Phase 2 plus some more of Granada (we have highlighted in a yellow box the approximate location of Hole #86).  Immediately below #86 is an east-west trending shear and alteration zone that leads out to LONG Bars Zone 2 which is not shown here (note the northeasterly faults as well as the “Domal Feature” that Willoughby has outlined):

This 1994 map represents just a portion of the Granada Property (approximate location of Hole #86 is marked in yellow). Willoughby's 1994 report highlighted the Granada "Domal Feature" on this map: "A large circular feature interpreted from air photos encloses most of the Granada Mine Property and suggests an intrusive stock at depth, perhaps the feeder for the numerous sills and dykes mapped at surface.”

Three Major Areas of Interest Now in the Eastern Extension

The south becomes at least the third major area of interest in the Eastern Extension based on Gold Bullion’s last two news releases.  The area east and southeast of Hole #17 is extremely promising, of course, and so too is the northwestern portion of the Eastern Extension.  To sum it up, Gold Bullion has reported strong and very encouraging visual showings in the far north, the far east and now the far south of the Eastern Extension which is completely outside the potential 2.4 to 2.6 million ounces (non-compliant) in the Preliminary Block Model.   The total drilled Extension surface area is 450 metres north-south and 500 metres east-west.  Assays mean everything, but the strong and encouraging visual reports suggest Gold Bullion has an excellent chance of producing some impressive (in a few cases perhaps even spectacular) breakthrough numbers from the Eastern Extension.  We all wait with great anticipation.

Preliminary Block Model

GENIVAR is keying in at the moment on the northern half of the Preliminary Block Model which, apart from Pit #1 West, has received little historical attention.  One of the major reasons for that is the huge amount of “waste” rock that was literally piled on top of a 34,000 square metre area, preventing any drilling from taking place.  It appears all of this rock was dumped right on top of an orebody.

GENIVAR is drilling in sections from south to north and finding mineralization everywhere.  They are building up and building out the Preliminary Block Model which already contains a potential 2.4 to 2.6 million ounces as outlined by Gold Bullion last April.  A good example of GENIVAR’s success in drilling is the approximate 250 metre section (south to north) that includes holes #12, #53, #33, #47, #117, #102 and #118 (118 is actually just outside the northern boundary of the Preliminary Block Model in the Eastern Extension).  Assays on four of those holes have been reported (#12, #33, #47 and #53) and all four were very good.  Hole #117 featured strong alteration and hit gold immediately below the overburden.  It is being rushed for assaying according to yesterday’s news.

We’d like to see some RC drilling take place within the Block Model for a better test of grade compared to the current NQ (smaller diameter) drilling, and we’d also like to see at least a couple of really deep holes drilled (500 to 1,000 metres vertical) – the Cadillac Trend is such that you never know what you may hit at depths such as that.  Another bulk sample, this time over the northern half of the Preliminary Block Model, may also be helpful.  But all of that takes time and Rome wasn’t built in a day.  Neither was Osisko’s Canadian Malartic Deposit 65 kilometres to the east.

Not everyone fully appreciates this yet but a great geological story is indeed unfolding in the LONG Bars Zone.  The new discovery of near-surface mineralization in the southernmost area drilled so far in the LONG Bars Zone is yet another indication of the amazing blue sky potential of this former producer that was hugely overlooked for so many years.

Gold is holding up well after hitting a new all-time high of $1,276 yesterday…profit taking took it down to a low of $1,265 this morning where there is strong support…as of 8:35 am Pacific, Gold is unchanged at $1,269…bulls are firmly in control of Gold at the moment which remains in a 7-week uptrend on the daily bar chart…$1,300 is the next target for the bulls…$1,240 is an important and major area of technical support…the CDNX is up 3 points to 1625…there is resistance on the CDNX chart around 1625 but other resistance levels have fallen very quickly over the past couple of weeks…Gold Bullion Development (GBB, TSX-V) came out with more encouraging news this morning from Granada…GBB is extending the Phase 2 portion of its drill campaign with the Eastern Extension rig soon moving to the area around hole #86, 180 meters east-southeast of the Preliminary Block Model…all indications are that #86 could be a superb hole…strong visuals continue to come in from different areas…much of the focus within the Block Model at the moment is on the northern half…the Block Model appears to be building out very nicely from the south to the north…if the strong visuals GBB has reported over the past 2 months from both the Eastern Extension and the Preliminary Block Model prove out at the assay labs as expected, then it’s off to the races big-time…the LONG Bars Zone has all the ingredients for developing into a massive multi-million ounce deposit…Gold Bullion is currently off a penny to 60 cents…Seafield Resources (SFF, TSX-V) is up another half penny to 26 cents on strong volume again today…Colombia is definitely heating up once more, and Seafield is a prime player in the Quinchia District next door to Medoro’s (MRS, TSX-V) 10 million ounce Marmato Deposit…we should see initial drill results from Seafield’s Miraflores Property this month…speaking of Colombia, investors should examine  Ventana’s chart (VEN, TSX) which is looking very bullish with turnarounds happening now in the 100 and 200-day moving averages…Sidon International Resources (SD, TSX-V) has closed its $1.2 million financing (fully subscribed) at 10 cents…with that out of the way, Sidon can now concentrate on getting things going at Morogoro East…Tanzania is red hot with Canaco (CAN, TSX-V) leading the way…Sidon is unchanged at 14 cents…

John: Yesterday, Sidon International Resources (SD, TSX-V) opened at 13 cents, its low for the day, then climbed to a high of 15.5 cents and closed at 14 cents – up 1 penny with a whopping 8 million CDNX shares changing hands.  This sudden heightened interest was caused by two factors:  The price of Gold rose to a new high around $1,276 per ounce, and Canaco Resources (CAN, TSX-V) reported significant new exploration developments at the company’s 100-per-cent-owned Handeni Project located approximately 100 kilometres from Sidon’s Morogoro East Property in Tanzania.

Looking at the 6-month daily chart above, we see that over the last 17 trading sessions Sidon has formed a bullish ascending triangle.  The top horizontal line (blue) is resistance at 13.5 cents and the sloping green line is support. Yesterday it broke out and closed above this resistance with the aid of huge volume of nearly 8 million CDNX shares. This must be confirmed by today’s close being higher than 13.5 cents. If this is confirmed, then the 13.5 cent line becomes new support.   The next potential price level is calculated by adding the widest part of the triangle (LH side) to the top line (blue).   That is 13.5 – 9.5 + 13.5 = 17.5 cents (dotted blue line). Also note the previous high was 18 cents, so some strong resistance in this area (17 to 18 cents) can certainly be expected.

The SMA-50 (blue line) is providing very good support and is pointing up – bullish.

Also note that yesterday’s volume is the highest since the end of July.  As a point of interest I have also put mauve circles around 2 black candles. A black candle at the end of a bullish run-up denotes exhaustion. It means that on that day the opening trade gapped up and drifted lower at the close. In otherwords the bears were too strong for the bulls, or the sellers overcame the buying pressure. Usually when a black candle occurs that is the end of the run-up, at least for the near term (which is exactly what we saw with Sidon).  That’s not to say Sidon doesn’t have the potential to take out those previous highs – it certainly does.

Looking at the indicators:

The RSI has formed a rather flat bullish “W” formation above 50% and is pointing up – bullish.

The Slow Stochastics %K (black line) crossed up over the %D (red line) below 20% and now is climbing above 50% – bullish.

The ADX trend indicator has the +DI (green line) pointing up and above the -DI (red line) pointing down, and the ADX (black line) trend strength indicator is low but starting to turn up. This shows the trend is weak at the moment, because the stock has been consolidating, but the trend is strengthening.

Outlook:  With the strength in Gold and investor interest in Canaco (the area leader) remaining high, Sidon could soon test resistance in the 17 to 18 cent range.  The overall technicals are very strong with this stock, showing it has excellent near term and longer term potential.

Gold soared to a new all-time high today, making our technical difficulties at BMR this morning all the more frustrating as we were unable to post our regular Morning Musings…we apologize again for the inconvenience…our back-end system has now been fixed, so we’re doing a Tuesday Review instead with our regular Morning Musings returning tomorrow…Gold made an impressive move today as it finally blasted through resistance and shot up to a new all-time high of $1,276…it finished the day at $1,269, up $24…a sharp drop in the U.S. Dollar was the catalyst for Gold’s performance today…anticipated further bouts of “Quantitative Easing” (QE) by the Fed are helping to drive down the American dollar and inject more fuel into Gold…the CDNX, which has been telegraphing this breakout by Gold for the past couple of months, climbed another 17 points today to 1622…it got as high as 1629…there is resistance on the CDNX around 1625 but it’s really only a matter of time before that’s taken out (maybe Wednesday?!) as this market is in a very powerful uptrend…as we mentioned last weekend, a minor CDNX pullback is possible  – it would also be a healthy technical development – but any pullback is likely going to be limited to about 5% as the technical and fundamental underpinnings are so strong right now…it appears we are in the midst of a move that will ultimately take the CDNX back above 2,000…a huge “FOR SALE” sign is hanging over Gold Bullion Development (GBB, TSX-V), just like it was July 5 – the last time the stock declined for 5 consecutive trading sessions…GBB got as high as 65 cents today but closed down a penny at 61 cents on relatively light CDNX volume of 814,000 shares (605,000 traded through ALPHA)…on July 6, the morning after its last 5-day slide, GBB bottomed out at 43.5 cents and then jumped 82% in just over 2 months…despite this 5-day slump, Gold Bullion’s chart remains very bullish with higher highs and higher lows…all of GBB’s moving averages remain in bullish alignment…the rising 20-day moving average of 60 cents is providing very strong support, and the recent overbought condition has essentially cleansed itself…fundamentally, we know – based on last Thursday’s news release – that good news is coming soon from the LONG Bars Zone…this is another classic opportunity, we believe, with Gold Bullion…Seafield Resources (SFF, TSX-V) had a powerful day today…the stock got through resistance at 23.5 cents and closed at 25.5 cents on CDNX volume of 1.6 million shares…exploration plays in Colombia are heating up again and Seafield is perfectly positioned to ride the wave…Seafield is working on three excellent properties on its Quinchia District land package (Miraflores, Dos Quebradas and Chuscal) with initial drill results expected shortly (within the next 2 weeks) from Miraflores…drilling will start soon at Dos Quebradas…Sidon International (SD, TSX-V) was the 2nd most active stock on the Venture today, climbing a penny to 14 cents on nearly 8 million shares…the volume surge is very bullish for Sidon which has an exceptional looking chart…Canaco (CAN, TSX-V) had a huge day today and that certainly helped Sidon which is up 180% since we introduced it to BMR readers last March…for bottom fishers, nobody loves Noront Resources (NOT, TSX-V) right now which is exactly why astute investors should be keeping an eye on it…Noront closed at $1.10 today, down from a high of $1.38 last week…for patient investors, Noront is a great stock to consider for the long haul as there’s a lot of fundamental value with their McFauld’s projects…it’s out of favor at the moment in part because of current investor focus on gold opportunities…