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Gold is off its lows of the day…as of 9:05 am Pacific, the yellow metal is down $18 an ounce at $1,725…it dipped as low as $1,704 overnight…Silver is down 90 cents at $34.39, Copper is down a dime to $3.57, Crude Oil is off 93 cents a barrel to $92.39 while the U.S. Dollar Index has rallied a full point to 76.13 as the Japanese intervened to lower the value of the Yen…

The CDNX, which closed at its declining 50-day moving average (SMA) Friday, is down 10 points to 1,620…an area where some solid support could initially occur is around 1575 which is also the current 10-day SMA…something else to keep an eye on is any continued correlation involving the CDNX, Gold and the TSX Gold Index…over the last two-and-a-half months they have been moving pretty much in concert as you can see in the chart below from John…it’s too early to say what this might mean, but it’s a trend that certainly bears watching…

Richmont Mines (RIC, TSX), already in a strong cash position, has completed a private placement at $10.50 a share to raise just over $10 million to finance additional exploration work at Wasamac…RIC is currently off 28 cents at $12.12…RIC’ is expected to report strong third quarter earnings in the near future, perhaps within the next couple of weeks, so any near-term pullback in RIC as a result of any overall market weakness could present an attractive opportunity…

There’s an interesting article this morning from CNBC’s Patrick Allen concerning the euro zone debt crisis and the agreement that was announced last Thursday…Allen quoted the respected Dr. Carl Weinberg, chief economist at High Frequency Economics (http://www.hifreqecon.com/home.html)…with the head of the European Financial Stability Fund (EFSF) touring the world in an attempt to sell the deal to major sovereign wealth funds, Weinberg questioned why anyone would want to buy into what he believes is a “crazy” scheme…“Now they (EU Leaders) are keen to tap into resources that are not their own to fund this crazy scheme of guarantees, leveraged off guarantees to sell bonds and bank shares that no one may want to buy, (in order) to restore value in the banking system destroyed by other bonds that no one wants to own right now…this is a construct of Madoffian proportions,” said Weinberg…China, Japan and the International Monetary Fund have all been discussed as possible sources of funding for the EU scheme, but Weinberg believes emerging nations do not want to start paying for rich countries trying to avert economic decline…“Our view is that unfunded guarantees are worthless…raising resources to fund the EFSF and the associated SIV will require diverting savings – domestic European savings, for the most part, not Chinese savings, and not those kept on reserve at the IMF – from either domestic consumption or investment,” he said…raising that money within the next year from European savers will have a major effect on jobs and incomes as output and demand drop sharply, according to Weinberg, who believes that Europe will be back in crisis sooner rather than later…“We predict a catastrophic contraction of GDP in Euroland in a combined monetary and real-economy event,” he said…”The event we envision is much more akin to the Great Depression of the 1930’s than to any business cycle we have experienced in our lifetimes”…just one economist’s view, and nine others may all give different opinions, but interesting nonetheless…what is certain, however, is that the euro zone debt crisis has not gone away and it will continue to rock the markets around like a boat in stormy seas…

A major problem for bulls right now is not only the resistance the CDNX is up against, but the overall technical condition of the HIX (single leverage) and HXD (double leverage) short ETF’s (TSX).  The 15.4% advance by the TSX off its October 4 low of 10,848 has resulted in nothing more than very normal retracements for the HIX and HXD in the context of an ongoing bull phase for these inverse ETF’s which are now trading at important support as John’s chart shows.  Experienced traders can play the market volatility to make some profits while another strategy of course is to use one or both of these ETF’s as part of a hedging strategy to reduce portfolio risk.  As always, buying into weakness and selling into strength is the winning formula while keeping a close eye on major support/resistance areas.

Below is John’s updated 2.5-year weekly chart for the HIX (the chart for the double-leveraged HXD is almost identical though of course the values are different).  The HIX closed Friday at $10.99 while the HXD finished at $9.41.  Both are trading just above their rising 200-day moving averages (SMA).

TSX Venture Exchange and Gold

It was a strong week for the CDNX and markets in general as investors drew encouragement from better-than-expected economic data out of the United States and apparent progress in tackling the euro zone debt crisis, though the European problem is really far from being solved and can be expected to haunt the markets for many more months.

Before investors get too excited about the CDNX’s 25% jump since the 1306 low October 4, some important points need to be made.  First, the primary trend continues to be down given declining major moving averages (50, 100, 200-day SMA’s) that are not about to reverse to the upside anytime soon.  In fact, it’s hard to imagine the important 300-day SMA not reversing to the downside by year-end which would be a very negative development.  As John’s updated 2.5-year weekly CDNX chart shows below, this Index has a lot of heavy lifting to do and it’s currently trading within a strong resistance band between 1600 and 1700.

For the week the CDNX gained 97 points or 6.3% to close Friday at 1630, exactly at its declining 50-day SMA.  Short-term (14-day) technical indicators such as Stochastics and the Chaikin Money Flow (CMF) are showing overbought conditions similar to the July and April rally highs, and volume during this 324-point advance has been unimpressive.  That’s not a good sign as it shows a lack of conviction in the market that this move can be sustained or that it marks the beginning of a new bull phase.

It’s also important to stress that unlike the true market reversals following the 2008 Crash and in the summer of last year, the CDNX did not lead the major indexes higher this time around. The CDNX was the first market to break down prior to the ’08 Crash, it was the first market to break out after the Crash and it also led the markets out of the 2010 correction into a major bull phase that finally ended in the spring of this year.  It is an extremely reliable leading indicator.  The CDNX topped out in early March, a couple of months ahead of the Dow and even the Nasdaq.  The CDNX has made it very clear in recent months that we’re now in a bear market but most investors haven’t recognized or accepted that yet.  The Dow led the markets out of the October 4 lows and the CDNX followed along for the ride.

Bottom line: Odds are heavily stacked against investors making money by buying into this rally.  Experienced traders, in fact, should be giving serious consideration to short TSX ETF’s such as the HIX (single leverage) and HXD (double leverage).  We’ll be posting a chart on the HIX later today as it has touched important support.

Below is John’s updated CDNX chart.

Gold

Gold enjoyed a strong week and finally blasted through resistance around $1,685.  The yellow metal closed Friday at $1,743, a gain of $101 for the week.  Below is John’s updated Gold chart which shows some consolidation is now likely prior to any push through resistance around $1,750.  The overall trend remains very bullish.

For the week, Silver jumped $3.89 to $35.29, Copper climbed 44 cents to $3.67, Crude Oil shot $5.92 higher to $93.32 while the U.S. Dollar Index fell over a point to 75.09.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, is having a huge impact on Gold.

The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, 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.

What’s also driving Gold is the weakness of the United States, brought on in no small part by one of the most ineffectual Presidents the nation has ever been saddled with.  America has lost its way and the recent S&P downgrade is both a real and a symbolic reflection of that.  Since the summer of 2009, the U.S. economy has produced a net total of just two million jobs while federal spending has gone through the roof.  Throughout its incredible history, the United States has demonstrated an amazing resiliency and the ability to bounce back from major economic, social and political troubles.  It will do so again but this will take time and a real Commander-in-Chief in the White House by November, 2012.  By then Gold will have climbed another 50% or more.

Gold has traded between $1,732 and $1,749 so far today…as of 8:45 am Pacific, the yellow metal is down $9 an ounce at $1,737…Silver is flat at $34.97…Copper has lost a nickel to $3.67…Crude Oil is 52 cents lower at $93.44 while the U.S. Dollar Index is up slightly at 75.03…

Markets are up slightly this morning after posting big gains yesterday with the Dow on track for its best monthly performance in nearly four decades…the CDNX is in a major zone of resistance between 1600 and 1700 with very overbought Stochastics(14) at the moment, so this is not the time to be chasing anything including volume leader CB Gold Inc. (CBJ, TSX-V)…however, there are select situations to keep an eye on, particularly those companies with significant resources in the ground that could be potential takeover targets…one such example is Gold Canyon Resources (GCU, TSX-V), a company we have mentioned quite frequently since the early spring…GCU is expected to release an updated 43-101 resource for its Springpole Project in Ontario by year-end…Springpole is shaping up to be a 5 million+ ounce deposit and the latest drill results included 106 metres grading 3.36 g/t Au in hole SP11-077 (including 28 metres of 10.10 g/t Au)…below is John’s updated chart on GCU which is trading at $2.95 at the moment…GCU is approaching resistance as John’s chart shows but the likelihood of a breakout at some point over the short to medium term appears quite likely…GCU should be watched closely in the days ahead as any weakness in an overall market pullback would provide a better entry (or re-entry) point for investors…juniors like GCU that are proving up significant resources are the safest plays in the current market environment…we don’t see a return of a rip-roaring bull phase for the CDNX anytime soon…

As of 8:50 am Pacific, the CDNX is up 2 points at 1617…U.S. consumer sentiment improved in October for the second month in a row as consumers felt more upbeat about the economy’s prospects, a survey released on Friday showed…the Thomson Reuters/University of Michigan’s final reading on consumer sentiment overcame the weakness reported in the preliminary survey at the beginning of the month, although consumers’ personal finance expectations remained gloomy…the sentiment index picked up to 60.9 from 59.4 the month before, topping expectations for 58.0 among economists polled by Reuters…the preliminary October survey had seen a decline to 57.5…the survey’s gauge of consumer expectations also improved from the more than 30-year lows registered in the preliminary reading…the index rose to 51.8 from 49.4 in September…

John is working on charts for Gold and the CDNX which we’ll be posting over the weekend…Gold is finding resistance around $1,750 as expected, so some profit taking is likely…

Gold has traded between $1,705 and $1,734 so far today…as of 8:00 am Pacific, the yellow metal is up $4 an ounce at $1,729…Silver is $1.03 higher at $34.41…Copper is up 16 cents at $3.66…Crude Oil has jumped nearly $3 a barrel to $92.84 while the U.S. Dollar Index is down more than a full point at 75.16…

Investors are celebrating the fact that European leaders were able to agree on a plan, announced early this morning, aimed at rescuing the region from the sovereign-debt crisis that has been dragging on for well over a year…how this all plays out in the coming weeks and months remains to be seen as the problems have not been solved overnight and big questions remain…the three main pieces of the package would beef up the euro zone’s bailout fund, force the region’s banks to shore up their capital to the tune of 106 billion euros, and see the private holders of Greek debt voluntarily take a 50% hit, with the euro zone kicking in $30 billion euros to help out…

Markets have also been helped today by more encouraging U.S. economic signs…GDP increased at its fastest in a year in the third quarter (2.5%) as consumers and businesses set aside fears about the recovery and stepped up spending, creating momentum that could carry into the final three months of the year…at the same time, slightly fewer people sought unemployment benefits last week, though the level remains elevated above 400,000…

The Dow is up over 200 points, stretching this month’s gains to a whopping 11%, while the TSX has also climbed more than 200 points for a more modest but nonetheless impressive 7% increase for the month…the CDNX, meanwhile, has gained 27 points to 1598 but faces a major band of resistance between 1600 and 1700 that is unlikely to be overcome anytime soon…so there is no need in our view to be chasing any stocks on the fear of “missing out” on a major upside move…

Adventure Gold (AGE, TSX-V) came out with positive news yesterday regarding its Pascalis-Colombiere Gold Property near Val d’Or…the discovery of significant Gold-Copper-Silver showings 1.2 km northwest of the former L.C. Beliveau Gold mine shaft, and 120 to 150 metres northwest of the previously discovered Highway showing, underscores the potential of a much broader mineralized system than what Cambior originally mined between 1989 and 1993 (167,000 ounces)…given the drill results to date, plus this new information, AGE is well on its way to outlining a deposit at Pascalis that could be big enough (several hundred thousand ounces or more) to attract the attention of a company like Richmont Mines (RIC, TSX) whose operating Beaufor Mine is immediately adjacent to the Pascalis Property…we’ll have more on this in the coming days…in the meantime, John updates the AGE chart which is hinting of some potential bullishness…

Gold finally broke through resistance around $1,685 yesterday and the yellow metal is up another $7 an ounce as of 8:00 am Pacific to $1,712…it got as high as $1,724 this morning…the next major area of resistance, according to John’s charts, is around $1,750…Silver is off 10 cents to $33.17…Copper has made aother impressive move – it’s up 13 cents at $3.54…Crude Oil has slipped nearly $1 a barrel to $92.34 while the U.S. Dollar Index has gained over one-third of a point to 76.65…

The CDNX is down 3 points at 1563 after climbing as high as 1577 in early trading…the Index has jumped 20% from its October 4 low of 1306…unfortunately, there’s a huge barrier facing the CDNX at the moment and that’s a very strong resistance band between 1600 and 1700…the current move cannot be sustained without a massive increase in volume given the overhead resistance…

The TSX Gold Index, however, is looking more promising which suggests to us that producers will continue to outperform the speculative juniors…below is an updated chart on the Gold Index which is currently down 3 points at 396 after climbing as high as 404 this morning…

The recent trend of improving economic data coming out of the U.S. continues…demand for a range of long-lasting U.S. manufactured goods rose more than expected in September to post the largest increase in six months, cementing views of a step-up in economic growth in the third quarter, even though new orders for transportation equipment fell…the Commerce Department said this morning that durable goods orders excluding transportation rose 1.7% after falling 0.4% in August…the rise beat economists’ expectations for a 0.4% increase…sales of new homes in the U.S. rose in September after four straight monthly declines, though this was largely due to builders cutting their prices…U.S. corporate earnings remain strong which is helping to underpin the Dow in the face of continued uncertainty regarding the euro zone…U.S. GDP for the third quarter comes out tomorrow and some economists are expecting a surprisingly strong number of around 2.5%…

Currie Rose Resources (CUI, TSX-V) reported disappointing drill results from its Mabale Hills Project yesterday with the stock dropping to a new 52-week low of 6.5 cents…Jon spoke briefly with CUI President and CEO Harold Smith following the news, and Smith was shocked the results were so poor from Sisu River and Dhahabu…this only goes to show that visuals can be very misleading…Sekenke, however, is still Currie Rose’s key asset in Tanzania and Smith remains very excited with that project’s potential…Sekenke, of course, surrounds and runs in between two past producing high-grade Gold mines…CUI drilled a small portion of Sekenke for the first time ever over the summer and assay results are pending…

Adventure Gold (AGE, TSX-V) has reported some good news this morning from Pascalis…more on that tomorrow…

Gold is shooting higher this morning…after dropping as low as $1,647, it suddenly reversed and as of 8:30 am Pacific the yellow metal is up $34 an ounce at $1,687…Silver is 51 cents higher at $32.25…Copper is off 6 cents at $3.40…Crude Oil hit a three-month high this morning…it’s currently up $2.17 a barrel to $93.44 while the U.S. Dollar Index is up one-fifth of a point at 76.31…

Gold started to surge after news that a meeting of 27 EU finance ministers scheduled for tomorrow has been cancelled, though the EU summit at this point is still going ahead as planned…meanwhile, the Financial Times is reporting that the Italian government is on the brink of collapse…the situation doesn’t look good in the euro zone and it appears unlikely that tomorrow’s summit in Brussels will meet or exceed the market’s expectations…Gold looks ready to bust through resistance around $1,685…

U.S. consumer confidence unexpectedly dropped in October to its lowest level in two-and-a-half years as consumers fretted about job and income prospects, according to a private sector report released this morning…the Conference Board, an industry group, said its index of consumer attitudes fell to 39.8 from a upwardly revised 46.4 the month before…it was the lowest level since March 2009…economists had expected the index to rise to 46.0, according to a Reuters poll…the present situation index slipped to 26.3 from 33.3, while the expectations index declined to 48.7 from 55.1…the expectations gauge was also at its lowest since March 2009…”Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased,” Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement…

The Bank of Canada held its benchmark interest rate at 1% today while also chopping its domestic growth forecast for 2011 and 2012 amid a host of threats including a “brief” recession in the euro zone…Governor Carney’s statement included the following comments…

“The combination of ongoing delveraging by banks and households, increased fiscal austerity and declining business and consumer confidence is expected to restrain growth across the advanced economies”…

“The Bank of Canada now expects that the euro area – where these dynamics are most acute – will experience a brief recession”…

“The Bank’s base-case scenario assumes that the euro-area crisis will be contained, although this assumption is clearly subject to downside risks”…

“In the United States, diminished household confidence, tighter financial conditions and increased fiscal drag are expected to result in weak real GDP growth through the first half of 2012, before growth strengthens gradually thereafter”…

“Growth in China and other emerging-market economies is projected to moderate to a more sustainable pace in response to weaker external demand and the lagged effects of past policy tightening”…

The action in Copper will be important to watch in the coming days and weeks…as John’s chart shows, a key resistance level is $3.50…as mentioned earlier, Copper is currently off slightly at $3.40…

Canaco Resources (CAN, TSX-V) has really taken a beating since hitting an all-time high of $6.45 in February of this year…it topped out just prior to the CDNX topping out in early March at 2465…the company has been delivering consistently good drill results from its Handeni Project in Tanzania which is developing into a world class resource…however, in the current market environment, Canaco continues to struggle…as of 8:30 am Pacific, it’s off 3 pennies at $1.67…John examines the Canaco chart below to put the downtrend in perspective…

The CDNX has gained 6 points to 1566…this is not a market we’re going to chase given that we believe the primary direction is down…there is also a very strong band of resistance between 1600 and 1700…rallies of 20% or 30% can easily occur during a bear market and that’s what is happening now with the CDNX after an October intra-day low of 1306…

Gold is starting the new week on a positive note…as of 8:05 am Pacific, the yellow metal is up $14 an ounce at $1,656…Silver has jumped 45 cents to $31.85…Copper has climbed 18 cents to $3.40 on positive news out of China…Crude Oil is up $1.94 to $89.34 while the U.S. Dollar Index is off one-quarter of a point to 76.24…

The CDNX, which found support at its 20-day moving average (SMA) last week at 1500, is up 20 points at 1553 through the first hour-and-a-half of trading…interestingly, the CDNX has hit RSI(14) resistance at 50 this morning while both the Slow Stochastics and CMF indicators are in overbought territory, at levels where sell-offs previously started…so the CDNX is really at a critical point at the moment where it has to decide if it wants to blast higher, consolidate or head straight down again…we remain very cautious given what we view as a negative primary trend…

Markets this morning have cheered better-than-expected manufacturing data out of China and there’s also cautious optimism among many traders/investors that euro zone leaders at their next meeting on Wednesday will announce some positive developments with regard to that region’s debt crisis, though sharp differences remain over the size of losses private holders of Greek government bonds will have to accept…meanwhile, Italian Prime Minister Silvio Berlusconi has called an emergency cabinet meeting for tonight to consider new economic reform proposals after what the Financial Times said was a “humiliation” for Berlusconi at yesterday’s meetings in Brussels…there’s clearly a lot of “finger pointing” among euro zone leaders and whether that 17-nation group can come together cohesively and effectively at this time of crisis remains to be seen…

China’s vast manufacturing sector picked up moderately in October, snapping a three-month contraction and underscoring the resilience of the world’s second-largest economy and top energy consumer, according to HSBC’s China Flash Purchasing Managers’ Index…the PMI, designed to preview China’s factory output before the release of official data, rose to 51.1 in October from September’s final reading of 49.9, putting it above the 50-point level for the first time since July…the data could further soothe fears of an abrupt slowdown in China…China is by no means immune to weakening demand from the United States and Europe but robust domestic demand and solid export growth to emerging markets have provided some cushion…

The situation is not so good in Europe, however…the flash Markit euro zone composite PMI sank to 47.2 this month from 49.1 – way below the 50 mark that divides growth from contraction…that was below every forecast from 19 economists polled by Reuters, to say nothing of the consensus for 48.8… survey compiler Markit said it was consistent with a 0.5% rate of quarterly decline in gross domestic product…

The Dow’s run this month – a gain of 8.2% entering today – has been quite spectacular from an historical perspective…in fact, the Dow is within striking distance of enjoying its best monthly performance in nearly a decade…in July, 2009, the Dow advanced 8.6%…historically, the average monthly gain for October is 1.4%…trading volumes during this move, however, have been unimpressive…in fact, a disturbing trend over the last few month is that on big upturns, trading volume sags precipitously but when the market tumbles, it’s routinely on big volume…in addition, the Dow’s rally has been fueled significantly by short-covering…

The 33% yearly decline by the CDNX serves as a warning sign that the major markets are likely in trouble over the coming months…the CDNX is always the first to fall and it’s always the first to rebound when markets turn bullish…the CDNX is not giving us any indication that a new bull phase is underway…

John has three charts to share this morning…investors should keep an eye on the HIX (TSX) which is the single-leverage inverse ETF for the 60 largest companies on the TSX as measured by market capitalization…the HIX and the double-leveraged HXD have been profitable plays for savvy traders over the last several months…they have fallen significantly from their October 4 highs but remain in long-term uptrends with the HIX having excellent support between its rising 100 and 200-day moving averages (SMA) that are currently at $11.20 and $10.75, respectively…as of 8:05 am Pacific, the HIX is down 12 cents at $11.39…it appears to be breaking below the upsloping channel that John has highlighted in the chart, so more weakness could be on the way which would open up a good buying opportunity…

Below is a longer-term chart for the HIX…

A non-resource play we have following off-and-on for the last number of months is iSign Media Solutions (ISD, TSX-V)…the company continues to progress with its business plan but of course ISD is still a highly speculation situation where investors could either lose everything or potentially make a fortune…John updates the chart below, showing a resistance band between 37 and 40 cents…ISD is currently off 2 pennies at 35 cents…