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So far, so good.  A genuine reversal appears to be unfolding in the CDNX as we recently suggested was probable based on a series of technical indicators.  The Index was up 22 points today to close at its session high of 2049.

And could history be repeating itself?  Back in 2005, from March into May, the CDNX corrected 21% over 50 trading sessions.  The market then climbed above its 10-day moving average (SMA) and never looked back the rest of the year – it rose steadily and gained 40% from the May low within seven months.  This year, from March 7 through May 17, the Index fell 20.6% over 51 sessions.  It has now climbed above its 10-day SMA, though we’re still waiting for that moving average to reverse to the upside – that could happen as early as tomorrow.

The bullish action in certain individual stocks – Canaco Resources Inc. (CAN, TSX-V) for example – is additional evidence that a powerful run could be underway in the CDNX.  The big early movers (within the resource sphere) are likely going to be the more established exploration plays and we’ll be reviewing some of those in our morning update which we’ll be posting at approximately 7:45 am Pacific.

John provides two chart updates tonight – the CDNX and the CRB Index which often move in tandem – we need to watch the CRB closely in order to gauge the potential strength of any upside move in the CDNX.

TSX VENTURE EXCHANGE (CDNX)

CRB INDEX

Gold has traded between $1,520 and $1,529.60 so far today…as of 8:15 am Pacific, the yellow metal is up $3 an ounce at $1,529…its recent strength in the face of a higher U.S. Dollar has to be particularly encouraging for Gold bulls…Gold is going up no matter what…there are so many fundamental factors for that, not the least of which is that nasty four-letter word – “debt”…lingering and even worsening sovereign debt problems in the euro zone are creating even more demand for Gold, and of course the U.S. has its own debt issues to sort out – not just at the federal level but also at the state and local levels…federally, the U.S. is spending $4 billion a day more than it’s taking in, putting the country on an unsustainable fiscal path perpetuated by both Democrats and Republicans…the nation has hit its $14.3 billion debt ceiling and the wrangling continues in Congress over that issue and where and how deep to cut spending…we have little faith in government which makes us even more bullish regarding Gold…Silver has broken through some resistance at $37 and is currently 89 cents higher at $37.52…crude oil is off slightly at $99.54…Goldman Sachs has turned bullish on crude again after a bearish call last month…the U.S. Dollar Index is flat at 75.91…at BMR, we focus almost exclusively on the speculative juniors exploring for Gold deposits…many of these companies trade below 50 cents a share but have excellent prospects and could be the stars of tomorrow…but we also see great opportunities in some much higher-priced producers, one of which is Richmont Mines (RIC, TSX) which we’ve mentioned here many times in recent months because of our interest in the growing Wasamac deposit just west of Rouyn-Noranda…Richmont has been one of the best performing Gold stocks on the TSX this year but has yet to garner a wide following – we believe that will change as more investors and institutions take notice of the incredibly strong fundamentals with this situation…earnings drive share prices and Richmont, which expects to produce at least 80,000 ounces of Gold this year and more than 100,000 ounces in 2012 with its Francoeur Mine kicking into gear, is rapidly becoming an earnings machine…Richmont reported earnings of 28 cents per share for the first quarter, though about 10 cents of that can be attributed to the sale of a property…still, 18 cents per share from its mining operations is an impressive number and the company’s Island Gold Mine was a big driver of that with lower costs and higher grades…Richmont sold 19,234 ounces of Gold in Q1 at an average price of $1,389 per ounce…they will fetch more than that per ounce in Q2…conservatively, one would have to think this company is on pace to make at least 20 cents per share in Q2…it’s not hard to see that this is going to be a stellar year for Richmont and the stock right now could be trading at just 10 times the company’s potential earnings for this year…Richmont was sitting on nearly $50 million in cash at the end of the first quarter with no debt and no hedging contracts…the company continues to aggressively drill its Wasamac Property where a 43-101 all-category resource of 1.4 million ounces has been outlined – expect that figure to grow…Wasamac is a future 100,000 ounce per-year producer…Richmont has laid out a strategy to eventually produce 200,000+ ounces per year, with at least a 30% increase in production next year…it’s hard not to love this story, and the chart is phenomenal as John outlines below…

John’s Fibonacci target for Richmont, by the way, is $12.62 per share (that’s not a BMR price target, just a theoretical Fibionacci target level based on technical analysis)…even at $12 a share, though, Richmont would be trading at maybe only 15 to 20 times its projected 2011 earnings…as of 8:15 am Pacific, RIC is up another 28 cents per share at $8.09…the TSX Venture Exchange is up 9 points at 2036 as it continues to show signs of a major reversal…the strength in Canaco (CAN, TSX-V) the last few days is another clue, in our view, that this market is about to head higher and that 1957 last week was the bottom of a 20.6% correction that lasted 51 trading days…Canaco, which dropped as low as $3.25 May 17 when the Index touched 1957, is up another 31 cents this morning to $4.45…we’re looking at numerous other situations at the moment which we’ll be reporting on once we’re more comfortable the reversal in the CDNX we speculated about last weekend is indeed underway as it appears to be…

At BMR, our specialty is the Gold market and uncovering opportunities among the many junior exploration companies and small producers within that sphere that trade on the highly speculative TSX Venture Exchange (CDNX).    Of course we also track very closely the overall technical health of the CDNX, the direction of which is critical to those who visit our site and invest in this market.

Occasionally, situations arise outside the Gold space that are difficult to ignore.  A case in point is iSign Media Solutions Inc. (ISD, TSX-V) which we first mentioned last week when it was trading around 50 cents.  An incredible 140+ million shares have traded in ISD on both the CDNX and Alpha markets over the last 24 trading sessions with the stock jumping 122% during that time.  It closed today at 50 cents, staging a powerful rally on strong volume after trading as low as 41 cents.

iSign Media has developed interactive mobile advertising/marketing solutions with patent-pending technology and seems to have captured the imagination of many investors.  We caution the stock has been volatile and of course the play is highly speculative but the company is beginning to show evidence of significant revenue potential.  Quite often in situations like this, the stock price will get far ahead of what’s actually happening on the ground at the moment (markets always look to the future).  With a current market cap of $24 million, that probably hasn’t happened yet with ISD.  Expect this stock to trade a lot based on technicals, “blue sky” potential and momentum.  We love entrepreneurial success stories, so we do hope ISD hits it big and investors make a fortune (of course many investors could also lose a fortune, so be careful).

For those who are curious about ISD, John has prepared another chart.  From a purely technical standpoint, the ISD chart is certainly intriguing and has formed what appears to be a bullish symmetrical triangle.  As always, perform your own due diligence.

Note: Both John and Jon hold positions in ISD (Terry does not).

Gold continues to look strong…as of 8:35 am Pacific, the yellow metal is up $8 an ounce at $1,525…there is solid technical resistance just below $1,530 (Gold got as high as $1,529 so far this morning), so a decisive move through that area would certainly be another bullish development…Silver has gained $1.14 to $36.21…after a rough day yesterday, crude oil is up $2.12 to $99.82…the U.S. Dollar Index is weaker today, off nearly half a point to 75.86…U.S. and Asian markets were sharply lower yesterday on worries over euro zone debt troubles and signs of a slowing economy in Europe and Asia…Canadian markets were closed due to the Victoria Day holiday and have re-opened on the flat side this morning…we’re keeping a close eye on the TSX Venture Exchange which, as we explained in a couple of articles over the weekend, could be in the early stages of a major reversal but confirmation is required…from the March 7 high of 2465 to the May 17 low of 1957, a total of 51 trading sessions, the CDNX fell 20.6% which is certainly in line with historical corrections…that drop (“Wave 4”) was a 38.2% Fibonacci retracement of Wave 3, the same as Wave 2 was of Wave 1…this sets up a powerful potential Wave 5 scenario which would catch some investors by surprise…there are other technical arguments in favor of a reversal which were outlined in both articles over the weekend…as well, and very interestingly, the March-May correction in the CDNX was almost identical in terms of duration and depth to the 2005 correction during the same period…the reversal in 2005 started in earnest after the Index first moved above its 10-day moving average (SMA)…the CDNX is currently up 1 point at 2032 which puts it slightly above its 10-day SMA for the first time this month but we need to be patient to see how this market closes over the next couple of days at least… there is also encouragement with regard to the CRB Index which has retraced 50% of its run-up from November through March…John’s updated CRB chart shows this important Index appears to have found strong support and could be ready to march higher…

Canaco Resources (CAN, TSX-V) came out with more impressive drill results from Magambazi in Tanzania this morning, adding strike to the recently discovered western lode…results included 17 metres grading 23.96 g/t Au…Canaco is showing renewed technical strength which is also a positive sign for the overall market (Canaco led this market higher last summer)…it’s currently up 29 cents at $4.13…Canaco fell as low as $3.25 last week…it’s one of those stocks that will help power the CDNX higher…Currie Rose Resources (CUI, TSX-V) will soon be drilling its very promising Sekenke Project in the prolific Lake Victoria Greenstone Belt of northwest Tanzania…a turnaround in CUI’s 50-day moving average (SMA) appears to be close at hand and that could be the trigger for a breakout in conjunction with the launch of its Phase 1 spring drill program which is expected to include 5,000 metres at Sekenke…CUI is up half a penny at 17 cents on light volume so far today…Visible Gold Mines (VGD, TSX-V) has declined for seven straight weeks for no fundamental reason – it has simply drifted lower due to overall market weakness and should be poised for a rebound…the company is cash-rich and exploring aggressively in the Rouyn-Noranda region of northwestern Quebec…we’re particularly looking forward to the start of drilling at VGD’s Joutel Property which is a joint venture with Agnico-Eagle Mines (AEM, TSX)…VGD is the operator…Joutel is a significant former producer of Gold and Silver – in fact, this property gave birth to Agnico-Eagle some 40 years ago…we view Joutel as another “Granada” scenario – a former producer with a great story and plenty of untapped geological potential…VGD is up a penny at 27 cents…Seafield Resources (SFF, TSX-V) is powering higher today on strong volume…it’s currently up 4.5 cents at 25.5 cents…with new management at the helm, we’re expecting good things from Seafield as our faith in its Quinchia land package in Colombia has never wavered over the last year-and-a-half…Gold Canyon Resources (GCU, TSX-V) has the potential to rocket much higher if indeed there’s a major reversal in the CDNX…GCU continues to drill its very promising Springpole Project in Ontario which Fraser Mackenzie’s mining analyst states likely contains at least 5.5 million ounces…GCU, which recently completed a $10 million financing, is currently a penny higher at $3.18…

The CDNX is at a potentially pivotal juncture and in the midst of a lot of doom and gloom at the moment (this market is currently down 9.8% for the month and dropped as much as 20.6% over 51 trading sessions March 7 to May 17, a major correction by CDNX historical standards), we’re seeing strong signs that a bottom was put in at 1957 last week and that we’re in the very early stages of a reversal.  That’s one interpretation.  It’s based on quite powerful technical evidence but we caution it will require confirmation in the days ahead including a move by the CDNX above its 10-day moving average and a reversal to the upside in that SMA.  The purpose of this posting is to alert our readers of the possibility of this important reversal in order to prepare for it.  We’re working on a list of individual stocks that could be early movers which we’ll post if and when there is confirmation of this new uptrend.

We suggest reading John’s analysis in conjunction with our Saturday article (Week In Review Part 1) for the full context of the current situation.

John: Skeptics of technical analysis (TA) love to portray the TA analyst as a modern day Merlin, complete with white beard and waving a magic wand looking for future stock prices or Index levels. I agree some of us are getting on in years and may have white beards but there are no magic wands. The big mistake TA skeptics make is that they believe TA is for looking into the future. They are wrong because the primary use of TA is to find out what is happening NOW.

Yes, from the results of TA analysis projections are made based on repetitive chart patterns, Elliott wave theories and Fibonacci sets but these are only projected target probabilities and not definitive values. The TA analyst pours over well known chart patterns and indicators that occur time and time again with probable predictable outcomes. They look at the particular history of a certain stock or Index simply to compare what is happening now with historical similar situations to have an “awareness” of the probable result of a particular pattern or situation.

Today we analyze the history of the CDNX with a view to determining what is happening NOW, after the last 3 days’ trading has indicated the possibility of a reversal to the upside. We will consider 2 CDNX charts. Chart #1 is a 10-year monthly chart while Chart #2 is a 3-year weekly chart.

Chart #1: Looking at the 10-year monthly chart, we see that starting in 2002 the CDNX rose from around 900 to approximately 2000 in 2005 in a 5-wave “Motive Phase”. This was followed by a “Corrective Phase” which brought the Index down to the 1600 level.

CDNX Chart #1

Starting in 2005, another 5-wave Motive Phase pushed the Index level to a high of nearly 3400 in 2007. Now consider the RSI(14) indicator. I have shown 2 mauve circles which identify when the RSI fell to the previous support level (orange horizontal line). Each of these points identifies a reversal point. The first one (orange vertical line) shows the reversal from Wave #2 to Wave #3 of the first Motive Phase and the second one identifies the reversal from the Corrective Phase to the start of Wave #1 of the second Motive Phase.

Since the bottom of the 2008 crash the CDNX has moved up in a series of 4 waves of a 3rd Motive Phase. Note that the present monthly RSI value is very close to the RSI(14) historical support level and the daily chart (not presented here) shows the last 3 days’ trading has been to the upside. This alone gives a probable indication that a reversal is taking place.

Chart #2: On Chart #2 we see that the Wave #4 is a 38.2% retracement of Wave #3, the same as Wave #2 is of Wave #1. If this is indeed a reversal, the expectations for the length of Wave #5 is that according to Elliott wave theories Wave #5 is expected to equal Wave #1.

CDNX Chart #2

Looking at the chart we see that Wave #1 is equal to a high of 1691 minus the low of 679 which gives a result of 1012. The expected target for Wave #5 is Wave #4 (low) plus 1012  =  1957 + 1012  =  2969. This is quite close to the Fibonacci target of 3042.

The RSI(14) shows that the present level is at the same level when Wave #2 reversed to begin Wave #3.

Conclusion: The above analysis concludes that this is probably the beginning of a reversal from Wave #4 to Wave #5 of the 3rd Motive phase.

Visible Gold Mines (VGD, TSX-V)

Visible Gold Mines (VGD, TSX-V) dropped half a penny last week on continued light volume…the stock, which closed Friday at 26 cents, has – amazingly – fallen for seven consecutive weeks but we suspect the bloodletting has finally stopped…VGD hit a low of 23 cents Tuesday before buyers quickly stepped up to the plate…this is an aggressive company with about 18 cents per share in working capital at the end of the first quarter and two drill programs in progress…exploration is also expected to begin soon at what we consider to be VGD’s flagship property, Joutel, which is a joint venture with Agnico-Eagle Mines (AEM, TSX)…Visible Gold Mines is the operator…BMR was the first to discover Gold Bullion Development (GBB, TSX-V), which led to massive profits for some of our readers, and we’re confident history could repeat itself with Visible Gold Mines as we are on this story before anyone else through careful research and due diligence…VGD is blessed with strong management and one of the best geologists in the country in Robert Sansfacon who was instrumental in the discovery of Osisko’s (OSK, TSX) Canadian Malartic Deposit…VGD is certainly emerging as an exploration leader in northwest Quebec, specifically in the Rouyn-Noranda region…Joutel is a significant former Gold-Silver producer that gave birth to Agnico-Eagle in the 1970′s…Sansfacon believes a lot has yet to be discovered at Joutel which is why he’s so eager to tackle that project…at the moment VGD is running two drill programs with one rig at the Silidor Gold Property, also a former producer, and another rig at its Kanasuta claims (Cadillac Break Project) very close to Vantex Resources‘ (VAX, TSX-V) Moriss Zone discovery at its Galloway Project…following completion of four holes at Kanasuta, the drill rig is expected to move east to the area near Richmont Mines‘ (RIC, TSX) growing Wasamac deposit…initial drill results from VGD’s Silidor Property were released April 20…each of the first 10 holes at Silidor intersected mineralization and Hole #8 is of particular interest as four sections of Gold were hit between depths of 70.85 metres and 130.5 metres including 2.70 metres grading 5.45 g/t Au and 1.5 metres grading 5.70 g/t Au…this area has never been drilled before and it’s 700 metres southwest of the former Silidor mine…a total of 23 holes were completed by April 20 (assays pending for 13 of them) and drilling continues in a northeasterly direction toward the former mine…things could get extremely interesting in a real hurry at Silidor with geologists of the opinion they could be closing in on a series of ore shoots…Silidor is just one of four major projects Visible Gold Mines is currently advancing…besides Joutel and Cadillac Break, VGD holds the Stadacona-East Property at Rouyn-Noranda which has an inferred resource of 164,000 ounces with potential for significant expansion with additional drilling…the President and CEO of Visible Gold Mines is Martin Dallaire, a very successful entrepreneur in Rouyn-Noranda with an engineering degree who understands the mining industry and what an exploration company needs to do to succeed and build shareholder value…Dallaire is fluently bilingual, presents himself extremely well and knows how to run a business and make money…he thinks big but is focused…he has also recruited some key people including Sansfacon, a highly respected geologist who honed his skills for many years with Lac Minerals…in short, Dallaire has put something together you don’t often see in the junior speculative market – a powerful dynamic of business, geological and marketing expertise with a strategic plan to rapidly build value…the company’s niche and sole geological focus is northwestern Quebec where it has acquired several promising land packages, mostly west and north of Rouyn-Noranda…Dallaire is taking an aggressive approach to exploration and he’s targeting under-explored areas and past producing mines where major new extensions are possible…

GoldQuest Mining (GQX, TSX-V)

GoldQuest fell a nickel last week to 18.5 cents but on low volume…the stock is now slightly below its 300 and 500-day moving averages but that doesn’t concern us as these long-term SMA’s continue to rise and are in no danger of rolling over anytime soon…technically and fundamentally, the downside risk from current levels is very limited in our view…the stock became extremely oversold recently based on a range of indicators…the 200-day SMA at 29 cents continues to rise and that’s where major resistance can be expected for now on the upside…the substantial drop in the share price from a high of 48.5 cents in early February was due to general market weakness and selling from speculators whose expectations may have been too high regarding initial drill results from the company’s La Escandalosa Project in the Dominican Republic…the results were decent though far from spectacular…the final set of assays for 7 holes came out last Monday…the best intersection from Escandalosa Sur, where an initial 43-101 inferred resource of 400,000 ounces was outlined last fall, was 20 meters grading 1.32 g/t Au…results from this area overall (21 holes) were somewhat disappointing though more drilling is required and will take place later this year…however, the company drilled three holes at the Hondo Valle target 1.6 kilometres to the north (outside the resource area) and all three intersected significant mineralization including 29 metres grading 2.18 g/t Au in hole #65…that’s the thickest and highest grade mineralized section drilled to date at Hondo Valle…the theory is that mineralization trends north from Escandalosa Sur to Hondo Valle…GoldQuest is carrying out a 16-square kilometre IP survey and magnetic ground geophysical survey from 2 kilometres north of Hondo Valle to 2.2 kilometres south of Escandalosa Sur…this will be completed by the end of July and GQC will use the data to pinpoint key targets for an additional 3,000 metres of drilling…GoldQuest also has other promising projects in the DR it’s working on in addition to its lead-zinc-silver deposit in Spain…GoldQuest’s potential has not diminished whatsoever yet the share price has dropped by more than half from its early February high…the company released a 43-101 resource estimate March 2 on its Toral zinc-lead-Silver deposit in Spain…it showed slightly lower grades but much higher overall tonnage than the previous historical non-compliant estimate…as a result, total resources came out 15% higher…resources in the indicated category are 4.04 million tonnes grading 11.8% lead and zinc (5.3% lead, 6.5% zinc) as well as 41 g/t Ag and 0.11% Cu… inferred resources are 4.67 million tonnes grading 9.8% lead and zinc (4.44% lead, 5.4% zinc), 32 g/t Ag and 0.14 Cu…Toral has significant exploration and development upside as a majority of the historical drilling (40,000+ metres) was conducted over one relatively small part of the property…the zone of sulphide mineralization is open along strike to the northwest toward a known lead deposit as well as along strike to the southeast and downdip…the project is also an ideal candidate for a fast-track to production…the deposit is close to a power line, highway and rail line…a large smelter is located just 300 kilometers away by rail…

Greencastle Resources (VGN, TSX-V)

All remains quiet with Greencastle which was off half a penny last week at 17.5 cents…the fact Tony Roodenburg is no longer at the helm of Seafield Resources (SFF, TSX-V) is a positive development in our view for Greencastle…Roodenburg had been trying to ease his way out of Seafield since 2009 without much success until earlier this month…he’ll now be able to focus almost exclusively on Greencastle which has been a favorite project of his for many years…we suspect he’s going to take a serious look at spinning out the oil assets or the Gold assets into a separate company…Greencastle’s market cap is just $8 million which means the stock is trading at cash value…history shows that whenever this occurs in VGN, a terrific buying opportunity has opened up though investors must be patient…it’s interesting to note that the stock’s rising 500-day moving average (SMA) and its 1000-day SMA, which has flattened out, have converged at 17 cents…VGN’s strong underlying fundamental value is clearly shown in the latest financials which were released March 24…as of December 31, Greencastle held $5.1 million in cash and $2.6 million in marketable securities…some of those securities are likely shares in Seafield Resources (SFF, TSX-V) while the company disclosed it held 1,148,000 shares of Evrim Resources Corp. (EVM, TSX-V), formerly Avaranta, which started trading on the Venture Exchange January 25…current oil prices should maintain Greencastle’s monthly cash flow of approximately $130,000 as it receives royalties from heavy crude production at Primate in Saskatchewan…Greencastle tripled in value over a six-week period from late October to early December…since the beginning of January, though, the stock has struggled due mostly to impatient investors frustrated with the lack of news…patience is required here…over the years the successful strategy with Greencastle has been to accumulate on weakness when the stock is near cash value and then sell into strength when something develops…with $8 million in working capital, three Gold properties (including land near Richfield’s Blackwater Project) and monthly cash flow from an oil royalty, it doesn’t take a rocket scientist to figure out that Greencastle offers excellent value at current levels…the long-term chart remains very encouraging with rising 200 and 300-day SMA’s that are in no danger of reversing at the moment…it’s also important to note that Roodenburg, a large shareholder in VGN, refrained from selling any of his holdings during the late 2010 run-up in the share price…this is different from past bullish in the stock and adds further credence to our view that we haven’t seen the highs in this cycle yet from Greencastle – it’s poised for what we believe could be a massive breakout sometime this year…Pinetree Capital has also accumulated more shares in Greencastle, so there’s every reason to be very optimistic regarding this company’s prospects…Greencastle is up 20% since we added it back in to the BMR model portfolio last October…

Adventure Gold (AGE, TSX-V)

We recently warned about some potential weakness in Adventure Gold based on technical factors, and indeed that’s what has occurred…the stock found support as predicted at the 200-day moving average (SMA) in the mid-40’s last week (it fell as low as 45 cents Wednesday and then rebounded on strong volume)…AGE closed Friday at 51 cents, a loss of 4 pennies for the week…the declining 10-day SMA, currently at 54 cents, and the declining 20-day SMA, currently at 58 cents, are areas of resistance for now on the upside and no doubt they will be tested soon…overall, the long-term technical picture remains very encouraging…Agnico-Eagle Mines (AEM, TSX) has started a 4,000-metre drill program at AGE’s Dubuisson Property near Val d’or…Dubuisson is contiguous to the Goldex mine property and also straddles a 5-kilometre segment of the prolific Cadillac-Larder Lake Gold break…the company released good results from two more holes April 7 from its recently completed Phase 1 drill program at the Pascalis Colombiere Gold Property near Val d’Or…hole #17 intersected four separate zones of mineralization at depths ranging from 6 metres to 187 metres (5.7 g/t Au over 4.3 metres, 4.6 g/t Au over 5.7 metres, 12.9 g/t Au over 8 metres, and 5 g/t Au over 6.1 metres)…hole #16 intersected 5.5 g/t Au over 5.9 metres…results from five more holes are pending…follow-up drilling will commence once all assays have been received and reviewed…a NI-43-101 resource calculation is planned for later this year…AGE’s latest financials, released April 1, show the company with $3 million in working capital at the end of January…AGE runs an efficient operation and knows where to direct its energies…we first mentioned Adventure Gold to our readers in an article September 29, just a couple of days following the company’s announcement that it had acquired land at Granada, when the stock was trading in the low 20′s…we officially added AGE to the BMR model portfolio at just 34 cents October 28…Adventure Gold has been around only since late 2007 and we are impressed by the company’s solid portfolio of properties (19 in six strategic areas in Quebec and Ontario)…also of immediate interest is AGE’s partnership with Lake Shore Gold (LSG, TSX) on the Meunier 144 Property where deep drilling is still testing the down-plunge extension of Gold zones located at the Timmins and Thunder Creek deposits…the current initial deep drill hole onto the Meunier JV property is continuing and is on track to reach the 2,400 metre target level by the end of this month…if a discovery is made, AGE will instantly explode higher…

Sidon International (SD, TSX-V)

Nothing new to report here…Sidon fell as low as 4 cents last week and closed Friday 4.5 cents for a weekly loss of half a penny…there has been no news from the company since March 14 when it announced a proposed private placement at 8 cents and an option to acquire an 80% interest in a 50-square kilometre property adjacent to Canaco’s (CAN, TSX-V) Handeni discovery in Tanzania…Sidon has yet to recover from a sharp drop in early March following disappointing assay results from its Morogoro East Gold Property…the six shallow holes drilled in December at Morogoro East did not produce significant results, the best hole showing 3 metres grading 1.7 g/t Au…the company has drilled four deeper holes with results for those still pending…what the initial six holes have given Sidon, however, is a better understanding of the Morogoro geological structure which will aid in any future drilling…exploration, especially at such an early stage, is never easy and disappointing early results don’t necessarily mean a property doesn’t hold excellent potential…the company is also trying to develop a placer operation at Morogoro…there is certainly hope here for better days ahead for Sidon…from a technical standpoint, previous support between 9 and 10 cents will now provide resistance…the turnaround in the stock price will start once the 50-day SMA has reversed to the upside…Sidon is now unchanged since we introduced it to BMR readers a year ago at a nickel…the company currently has approximately 140 million shares outstanding for a market cap of $6.3  million…

Seafield Resources (SFF, TSX-V)

Seafield appeared to have some momentum going entering last week, following some major news, but the stock reversed course again and closed at its weekly low of 21 cents for a loss of 3.5 pennies for the week…SFF is now just 3 pennies above its rising 1000-day moving average (SMA), so it’s obviously in strong buy territory…there was big news out of Seafield May 9 with a change in management which has to be considered a bullish development…Cesar Lopez, who has a strong background in South American exploration management and development, is the company’s new Chief Executive Officer…he replaces Tony Roodenburg who will remain as a director…Tom Henricksen, meanwhile, takes over as Vice-President, Exploration, from James Pirie who also remains as a director…Henricksen has over 35 years of mineral exploration experience and has spent the last 15 years on projects in South America…Seafield exploded from the low 20′s to an all-time high of 77 cents in just one day last December but has since given up all of those gains…the company’s Quinchia land package in Colombia has a great deal of untapped potential and Seafield is also sitting on approximately $15 million in cash…the new management group is conducting a private placement for 10 million units at 30 cents which will raise another $3 million…the company announced April 5 that drilling has commenced at Santa Sofia, about 1 kilometre north of Dos Quebradas where drilling continues…Seafield geologists have identified a promising porphyry target measuring 1,050 metres in length and 850 metres in width at Santa Sofia with soil values up to 2.3 g/t Au…on March 7, assays were reported from the first three holes completed at Dos Quebradas with hole #2 intersecting a whopping 511 metres grading 0.58 g/t Au…the hole ended in mineralization…hole #1 delivered 269 metres grading 0.37 g/t Au while hole #3 was drilled to define the eastern limit of mineralization and returned no significant results…a total of 10 holes were completed at Dos Quebradas as of early this month…significant intercepts well outside areas of historical drilling would start to get the market excited…the geological case for Seafield’s Quinchia land package is compelling and we’re looking forward to more results from Dos Quebradas as well as initial assays from Santa Sofia…the company has already outlined a NI-43-101 inferred resource of nearly 800,000 ounces at its Miraflores Property, a number that’s expected to increase following the 12-hole, 4,000 metre program completed late last year…patient investors have an opportunity to do extremely well with this play given the geological merits of Quinchia and the real potential for 5 million+ ounces from several potential deposits…we have confidence the new management group will unlock value by bringing fresh insight and new energy to this play along with a more aggressive exploration approach…Seafield has gained 250% since we made it the first company in the BMR model portfolio in the summer of 2009…its current market cap of $32 million is very modest given its cash position and resource potential…

Gold Bullion Development (GBB, TSX-V)

Gold Bullion once again successfully tested support at its March low of 35 cents last week and closed Friday at 40 cents for a weekly gain of 3.5 cents…it seems GBB has found a bottom in the mid-30’s and could be in the very early stages of a major reversal, which is supported by our updated outlook for the CDNX…GBB’s 50-day moving average (SMA) has flattened out after being in sharp decline since the stock fell out of bed one morning in mid-February…falling out of bed is better than falling off a cliff, however, as it’s easier to recover from the former…fundamentals are clearly supporting Gold Bullion at the moment…the initial 43-101 resource estimate for the LONG Bars Zone of the Granada Gold Property is expected sometime during the third quarter…anticipation will start to kick in prior to its release…the company’s current market cap of $63 million puts a value of just $20 an ounce on Gold in the ground at Granada if one were to assume the 43-101 will outline approximately 3 million ounces in the measured, indicated and inferred categories…that’s just a hypothetical number on our part at the moment but whatever number GENIVAR comes up with, we believe it should exceed the 2.4 to 2.6 million ounce conceptual figure that Gold Bullion gave in April of last year…based on all the drill results to date, this appears to be shaping up as a half-gram deposit with a higher grade starter pit and massive volume…it’s all about volume at Granada which is why the drills have to keep turning and why it’s disappointing the number of rigs in the LONG Bars Zone (2) hasn’t increased in a year…the first sign of a sustained recovery in the stock will come when the still-declining 50-day SMA, which is currently providing resistance in the low-to-mid-40′s, reverses to the upside…Gold Bullion released fresh drill results from Granada May 12 which were consistent with previous numbers…hole #173 was the star of the batch of 25 holes…it provided additional evidence that the north and northeastern parts of the Eastern Extension are highly intriguing…#173 cut 80 metres grading 1.36 g/t Au within a total intersection of 363 metres of 0.35 g/t Au…a 1-metre section of high-grade (89.83 g/t Au) was hit near the bottom of the hole below 300 metres…#173 was collared approximately 115 metres northeast of #55 and 100 metres east-northeast of #108, two stellar holes released last fall…this is critical – assays are still pending on 9 holes (165, 168, 178, 183, 241, 243, 246, 254, and 257) north of #55 drilled over an east-west distance of about 250 metres and a north-south distance of 200 metres…results from those nine holes will go a long way toward confirming just how prospective these parts of the Eastern Extension are…#241 is the most northerly of those holes…meanwhile, hole #200 in the southeast portion of the Eastern Extension (northeast of discovery hole #86) returned an impressive interval of 48.50 metres grading 1.68 g/t Au within a total intersection of 210.5 metres of 0.44 g/t Au…results from the second most northerly hole drilled north of the Preliminary Block Model suggest more drilling is definitely required in that area…hole #31 hit a modest 18.5 meters grading 0.64 g/t Au close to surface (36 to 54.15 metres) and another 28 metres grading 0.59 g/t Au between a depth of 125 to 153 metres…where’s there’s smoke, there’s fire, and our theory is that there could be a significant trail of mineralization running north of the Preliminary Block Model and connecting with what has been discovered over the northern part of the Eastern Extension…six more holes (213, 214, 215, 217, 221 and 224 and 224) from the southwest portion of the Preliminary Block Model returned mixed results – we were hoping to see a couple of exciting holes from that area but that hasn’t materialized yet…overall, Gold Bullion continues to hit long intersections of lower grade mineralization over a wide area at Granada…this is a massive project with much more drilling required but the multi-million ounce model that Frank Basa has in mind remains intact…the 43-101 resource estimate should reassure investors and give this play more focus and a big lift…drilling is also underway now in LONG Bars Zone 2 near the old Aukeko Property (2 kilometres east of Phase 1 discovery hole #17) and if Gold Bullion is able to connect these two zones, look out…GENIVAR’s Nicole Rioux, the head geologist for Granada, is genuinely excited about the Aukeko area and she is normally quite conservative in sizing things up…a couple of excellent results from this area could really ignite this play and based on all the historical information we have reviewed from “LONG Bars Zone 2″, the chances of a “hit” in this area have to be considered very good…

Cadillac Mining (CQX, TSX-V)

We are extremely frustrated at the moment with Cadillac, so we’re wondering if it’s best to be patient and ride this one out or if indeed it’s time to cut our losses short…for the moment we’ve decided on the former strategy…we are going to be patient because the possibilities with CQX are still incredible especially considering the current market cap which is just $2.5 million…our frustration is justified…not often does a company get the kind of opportunity that Cadillac was handed (and still has)…CQX holds a 100% interest in a very strategic piece of property that adjoins Richmont Mines‘ (RIC, TSX) Wasamac deposit, 15 kilometres west of Rouyn-Noranda…the principal Gold structure hosting mineralization at Wasamac dips northerly onto the seven claims held by Cadillac…Richmont started drilling Wasamac in the spring of last year and steadily ramped up its drilling due to excellent results…in February of this year, Richmont reported a nearly five-fold increase in resources (from 285,000 to 1.4 million ounces) at Wasamac…as a result RIC has been one of the best performing Gold stocks on the TSX this year…throughout the past year since Richmont started drilling Wasamac, and in particular over the last five months, Cadillac management has completely failed its shareholders by doing essentially nothing (or the wrong things) to take advantage of Richmont’s success at Wasamac…BMR brought the Wasamac situation to the attention of its readers in December…investors got excited about the story and the potential of Cadillac’s “Wasa” claims…the stock ran to 50 cents by early January and the market was clearly eager to see Cadillac pursue this project as quickly and vigorously as possible…in this business, it’s critical to “seize the moment” and take immediate advantage of opportunities like this when they present themselves…the company easily could have leveraged the Wasamac situation into a major financing anywhere between 25 to 40 cents (they began the year with only about $200,000 in the bank)…in order to take advantage of any opportunity, a company must be well-financed and Cadillac management absolutely dropped the ball during the first quarter of this year when they did have a chance to raise at least $1 million and failed to do so…we give the company credit for securing an excellent project (Goldstrike) in Utah on fabulous terms but several million dollars is going to be required to tackle Goldstrike in the right way…Cadillac has fallen from a high of 50 cents in early January to a yearly low of 10 cents last week…there is no excuse for that and management has only itself to blame…after talking about getting a drilling program going at Wasamac “in the near future” shortly after their mid-February AGM, Cadillac has reversed course and stated in a news release last Monday that it needs more information from Richmont’s work before drilling for down-plunge extensions of the Wasamac main, #1 and #2 zones…President and CEO Victor Erickson’s heart is with the Utah project, not with Wasamac…in retrospect, that has been demonstrated in many ways over the last six months…Erickson would have to admit that himself…the only solution, then, in our view, is for Cadillac to cut a deal with another company for exploration at Wasamac and the natural partner for that is Visible Gold Mines (VGD, TSX-V) which last December entered into a JV with CQX on its other Rouyn-Noranda area properties…VGD has all the money and expertise necessary to unlock the value of Cadillac’s Wasa claims…Cadillac could let others do the heavy lifting at Wasa and then focus its energies on developing the Goldstrike Project…

Abcourt Mines (ABI, TSX-V)

Abcourt closed up a penny last week to close at 13 cents…the stock, which now has 149 million shares outstanding for a market cap of $19.4 million, has fallen in half over the past two months…the decline has coincided with the closing of a financing (35 million units at 18 cents), a sharp drop in Silver, and overall CDNX weakness…strong technical support exists at 11 cents…a declining 50-day moving average (SMA) has been putting some pressure on the stock which still has rising 100, 200 and 300-day SMA’s above the current share price…the 100-day, however, is in imminent danger of reversing to the downside after advancing for more than eight months…ABI released more drill results April 26 from its Abcourt-Barvue Silver-Zinc Property near Val d’Or…the results from five additional holes suggest growing open pit reserves and resources…two zones continue to produce significant grades including 9.1 metres of 171.73 g/t Ag and 3.48% Zn in hole #20 (zone 1) and 7.3 metres grading 196.32 g/t Ag and 3.73% Zn in hole #19 (zone 1)…the 10,000 metre drill program continues…the last set of results from the company’s Elder-Tagami Gold Property near Rouyn-Noranda came out March 3…mineralization continues to expand to the west of the former underground Elder Mine which is now being dewatered as announced by the company last week…the Tagami area to the north, meanwhile, has untapped potential including some higher grades…the latest NI-43-101 resource estimate of 216,000 ounces was released in the summer of 2009…the possibility of Abcourt expanding that resource beyond 500,000 ounces certainly exists given the encouraging results to date (look what Richmont has done at Wasamac)…the heavy accumulation that began in Abcourt in December was no fluke in our view…this is a company with significant assets that could justify a substantially higher valuation…nearly 60 million shares of ABI changed hands on the CDNX in December and January – record volume for this stock, accompanied by a price jump from 14.5 cents…we’ve seen these type of volume surges before and they are always a very positive sign…Abcourt has been under significant accumulation and our best guess is that some savvy players like the assets in the ground…continued drilling success and higher prices for Gold, Silver and zinc would be exciting developments for this stock which has a history of major moves…from mid-2005 to early 2006, Abcourt rocketed from 15 cents to nearly $1.40…

Currie Rose Resources (CUI, TSX-V)

Currie Rose has held up extremely well over the past month given overall CDNX weakness…the stock was off half a penny last week at 16.5 cents but volume was light…the 50-day moving average (SMA) has flattened out and what we’re anticipating is a reversal to the upside in the 50-day in the very near future, quite possibly next week…the stock appears to be ready for a breakout but just needs some good news to trigger that…we are particularly excited about Currie Rose’s Sekenke Project in northwest Tanzania which we regard as the company’s #1 play as it holds major blue sky potential…Sekenke covers a lot of promising ground and runs in between and surrounds two former high grade Gold mines including Tanzania’s original producer…as often is the case, chances are that much was overlooked at and around the former mines which were in operation during the first half of the 20th century…Sekenke will likely be the first target of CUI’s upcoming drill program…while its Tanzanian properties are the market’s major focus, Currie Rose could also benefit over the coming weeks and months from continued good exploration news from Trueclaim Exploration (TRM, TSX-V) which is currently conducting an 8,000 metre drill program at the Scadding Gold Property near Sudbury…Trueclaim, which continues to release encouraging assay results, has earned a 51% interest in Scadding and can acquire a full 100% interest by completing a feasibility study, paying $2 million to Currie Rose, and giving Currie Rose a 3% net smelter royalty…CUI announced a joint-venture deal January 25 with Australian-based Liontown Resources for Currie’s Jubilee Reef Gold Project in Tanzania…CUI’s focus is on the Sekenke and Mabale Hills Projects, so finding a partner for Jubilee Reef made sense…the deal commits Liontown to at least 5,000 metres of drilling at the property this year which will give Currie Rose a minimum of 23,000 metres of drilling at all of its properties in 2011…while Currie Rose has had its market cap shaved considerably, from a high of nearly $40 million late last year to the current $15 million, what hasn’t changed is the quality of this company’s project portfolio which remains as high as it ever was in our view…Currie Rose has all the cash it needs ($2 million) to complete an initial major round of drilling (10,000 metres) this spring and summer in Tanzania, so there will not be any dilution of the stock at current levels as confirmed by President and CEO Harold Smith…

Richfield Ventures (RVC, TSX-V)

Richfield, moving of course in step with New Gold Inc. (NGD, TSX), was up 12 cents last week to close at $8.38, just a couple pennies below its rising 50-day moving average (SMA) which has provided  consistent support throughout RVC’s incredible bull run since last summer…on May 10, Richfield announced more positive drill results from its Blackwater Project in central British Columbia including 378 metres grading 1.09 g/t Au over the northern section which Silver Quest Resources (SQI, TSX-V) holds a 25% interest in…of course at the beginning of April, Richfield announced a plan of arrangement with New Gold for a takeover of Richfield (in NGD stock) valued at that point at $10.38 per RVC share or $550 million…the drop in New Gold’s share price has been a reflection of overall market weakness and the market responding to the upcoming share dilution required for the deal…there are, however,  enormous benefits down the road for NGD once Blackwater gets into production…we had been speculating on a potential buyout of Richfield for some time…the proposed deal is certainly a very positive fit for New Gold whose New Afton Project in the interior of British Columbia, not far from Blackwater, is on target to start production by the middle of next year…New Gold sees some obvious synergies between the two deposits…Richfield recently outlined approximately 4 million ounces of Gold in the indicated and inferred categories at Blackwater in a NI-43-101 resource estimate released March 2…the New Gold deal is expected to close next month (no competing offers for Richfield have yet been made)…New Gold recently released its first quarter results which showed continued solid growth, lower costs and earnings of six cents per share…the company expects to double its cash flow when production begins at New Afton next year…Richfield is up 598% since we introduced it to BMR readers in December, 2009, at $1.20…the Blackwater Gold District is still full of opportunity for investors and we encourage readers to check out the web site, www.BlackwaterGoldDistrict.com…

TSX Venture Exchange and Gold

The CDNX fell to a nearly six-month low Tuesday when it plunged to 1957 but the Index rebounded from there through the rest of the week, albeit on low volume, to close Friday at 2031.  The Index was off just 7 points for the week but for the month it’s down a whopping 9.8%.

We may find out this coming week (trading resumes Tuesday after the Victoria Day holiday) if the 63-point gain Wednesday through Friday was just a bounce within a continuing decline, the start of a significant rally or indeed the beginning of a major reversal as witnessed during similar trading patterns in 2005.  We’re at a critical juncture with the CDNX and there’s a very good probability in our view that this correction has run its course and that a powerful “Wave 5” move to the upside is just beginning.   We don’t make that statement lightly. We’ll explain the intriguing technical situation in detail in a very important chart analysis from John by Sunday night or Monday morning. In addition, we’re preparing a list of individual stocks that could be early movers which we’ll post if and when there is confirmation of this potential new uptrend.

The drop from the March high of 2465 to last Tuesday’s low was 508 points or 20.6% over 51 trading sessions.  Interestingly, that’s almost an exact repeat of what occurred between March and May, 2005.

Historical CDNX corrections:

2004  – 19% drop over 31 trading sessions from early April to mid-May (1890 to 1530)

2005  – 21% drop over 50 trading sessions from March to May (2025 to 1590)

2006  – 29%  drop over 22 trading sessions in May (3300 to 2350)

2007  – 29% drop over 17 trading sessions in August (3320 to 2350)

2008  – 18% drop over 12 trading sessions in January (2875 to 2350)

2010  – 21% drop over 45 trading sessions from May to July (1688 to 1343)

If you were a buyer toward the end of the six major corrections cited above, you likely made A LOT of money.  The CDNX rebounded sharply after each of those corrections.  Excluding the extraordinary fall of 75% over the last half of 2008, which we’ve left out as it was an anomaly, the average percentage decline in the six major corrections cited above between 2004 and 2010 was 22.75% over an average duration of 29.5 trading sessions.

After the CDNX bottomed in May, 2005, it climbed 40% over the final seven months of the year with a mild correction in October.  The reversal that year began as soon as the Index moved above its 10-day moving average (SMA) which quickly turned to the upside after a lengthy decline.

Interestingly, the CDNX Friday closed just a few points below its currently declining 10-day SMA.  It’s critical to pay attention to this next week – if the Index climbs above its 10-day SMA, and if that SMA then reverses to the upside, watch out – the “buy signal” lights will be flashing like crazy and this market could take off in a hurry.

On the other hand, there is a chance – for which we’re assessing a lower probability – that what we could be seeing now is a “dead cat” bounce that ends at the 10-day SMA where there has been resistance for the past month.  The very poor performance of the Venture Exchange in relation to the broader markets and Gold since the beginning of March is clearly a matter of concern given the fact the CDNX has proven to be such a reliable leading indicator.  However, it could be argued the CDNX simply needed a “cool down” period and a significant correction after more than tripling in value between late 2008 and March of this year.

The performance of the CDNX this year, while out of line with the Dow, the Nasdaq, the TSX and Gold, is comparable to stock markets in some of the emerging economies.  India, for example, is down 11% for the year vs. 11.2% for the CDNX.  Brazil is off 7% while Russia has fallen 15% over the last month-and-a-half.  China is flat for the year.  Inflation in the emerging markets has been a key concern for many months now but some economists are speculating that for now at least it may have peaked or will soon start to level off, allowing for a loosening of monetary policy beginning in the second half of this year.  That would likely give equities a boost in the emerging markets which may also be very positive for the CDNX.

Gold

Despite strength in the U.S. Dollar, Gold rallied strongly on Friday as it gained $20 an ounce after being in negative territory for part of the day.  It closed at $1,513.50 for a weekly gain of $18.50.  For the past couple of months Gold has found consistent support at its rising 30-day SMA, and it seems to have gotten quite comfortable around the $1,500 level which is important.

Volatility continues in Silver but for the week it was down just 14 cents $35.06.

The U.S. Dollar Index was up over half a point Friday but still closed the week down very slightly (less than one-tenth of a point) at 75.66.

Gold demand continues to be strong.  First quarter world Gold demand grew 11% from the same period a year ago to 981.3 metric tons, according to the World Gold Council (WGC) in its quarterly supply/demand trends report released a few days ago.  Much of the increase was due to investment demand with a 52% jump in purchases of bars and coins more than offsetting a decline in holdings of exchange-traded funds.  Jewelry interest also rose with China and India collectively accounting for nearly two-thirds of the global jewelry demand.

The WGC issued a included a separate section on China in the quarterly supply/demand trends report (data was compiled by the consultancy GFMS).  In the spring of last year the WGC issued a report stating it expected Chinese Gold demand could double over the next decade.  “With the sustained momentum in Chinese Gold demand, this target will probably be achieved in a shorter time scale,” according to Eily Ong, investment research manager with the WGC.  Gold demand grew by a whopping 32% in China last year despite a concurrent 25% rise in the average local currency Gold price.

Demand for Gold in China was so strong during the first quarter that for the first time the country outpaced the combined total of the developed West. If you lump together the Gold demand of the U.S., France, Germany, Italy, Switzerland, the U.K. and other European countries (despite large  increases in demand from France, Germany and Switzerland), the sum of these countries is still outpaced by China.

A slight pullback in prices during the middle of the first quarter and “persistent high inflation levels” pushed China into the position as the world’s largest market for Gold investment. Chinese citizens devoured nearly 91 tons of Gold bars and coins, more than double the amount of a year ago.

This isn’t exactly a new phenomenon in China. From 2007 to 2010, investment demand grew at a compounded annual growth rate of 68 percent, according to the CPM Group. The firm forecasted Chinese investment demand to increase 34.7 percent during 2011 but based on this new data, it may need to adjust its forecast.

Song Qing, director of Shanghai-based Lion Fund Management, told Bloomberg news that, “Gold has taken on a new role in China amid concern about inflation.  Just imagine the total wealth in China and even a small percentage of that choosing to buy Gold. This demand is going to be enormous.”

The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, an environment of historically low interest rates and negative real interest rates (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on.  It’s hard to imagine Gold not performing well in this environment.  The Middle East is being turned on its head and that could ultimately have major positive consequences for Gold.