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Gold is stronger today and hit a fresh four-week high overnight…as of 6:15 am Pacific, the yellow metal is up $13 an ounce at $1,656…physical buying from Asia, in particular China, has reportedly picked up…Silver has gained 51 cents to $30.48…Copper is 6 cents higher at $3.60…Crude Oil is up 53 cents higher at $101.40 while the U.S. Dollar Index is off one-quarter of a point to 80.96 which is helping precious metals this morning…

Dow futures have pulled back after a couple of reports came out at 5:30 am Pacific…U.S. jobless claims rose more than expected, by 24,000 to 399,000, while retail sales were disappointing…they rose at the weakest pace in seven months in December as consumers pulled back late in the holiday shopping season, cutting purchases at department stores and spending less on electronic gadgets…total retail sales increased 0.1% (expectations were for a 0.3% jump) after rising by an upwardly revised 0.4% in November, according to the Commerce Department…

As expected, the European Central Bank has left interest rates on hold, pausing to assess the impact of back-to-back cuts and a slew of other measures it unleashed late last year that are showing some signs of helping fight the euro zone debt crisis…

A stronger than expected auction of Spanish bonds today reduced fears (temporarily at least) about sovereign funding in the euro zone…Spain’s borrowing costs fell at an auction of government bonds that saw solid demand in 2012’s first real test of appetite for debt from the euro zone’s bruised periphery…Italy, meanwhile, paid less than half compared with a month ago to sell one-year bills at its first auction of 2012 today,  highlighting continued support for its short-term debt from cheap funds the European Central Bank injected last month…Italy will launch its 2012 bond issuing campaign tomorrow…

The Bank of England kept its quantitative easing program of asset buying to prop up Britain’s fragile economy at 275 billion pounds on Thursday, opting not to increase it after recent mixed economic data…the BoE’s Monetary Policy Committee also kept interest rates at a record low of 0.5% where they have been since March, 2009…

The TSX Venture Exchange fell for the first time yesterday in 9 sessions, losing 11 points to close at 1531…the rising 20 and 10-day moving averages can be expected to provide support and they currently sit at just above 1480 and nearly 1520, respectively…as we mentioned yesterday, there is significant technical resistance around the 1575 level…

GoldQuest Mining (GCQ, TSX-V) released solid results yesterday from the final 7 holes of a 10-hole drill program at its La Escandalosa Sur Property in the Dominican Republic…hole #71 cut 20 metres grading 4.04 g/t Au very close to surface (20 to 40 metres)…other results included 14 metres grading 5.34 g/t Au (#70), 16 metres grading 3.30 g/t Au (#73), 16.22 metres grading 5.50 g/t Au (#75) and 12 metres grading 6.80 g/t Au (#76)…all 10 holes in the 1,070-metre program intersected near-surface mineralization, and the 3.5 km-long geophysical anomaly has been drilled for less than one-third of its length…the results confirm the potential of Escandalosa Sur but much more drilling will be required…the company also has other assets in the DR that hopefully it can advance this year as well to boost shareholder value…GQC had approximately $1.5 million in working capital as of the end of September, so they will likely need to raise more funds during the first half of this year…at current levels (GQC closed at 10 cents yesterday) the stock certainly offers attractive upside potential for patient, long-term investors…John’s chart below shows an important bottom was likely put in at 6 cents last month…

Note: John, Jon and Terry do not hold positions in GQC.

Buying pressure has been increasing in Gold Bullion Development (GBB, TSX-V) recently, a fact confirmed by the Chaikin Money Flow (CMF) Indicator…yesterday, the stock closed above its 50-day moving average (SMA) for the first time since last summer…it could be a couple of months yet before GBB really starts to kick into gear, or alternatively when the NI-43-101 resource estimate for the LONG Bars Zone comes out, but a turnaround appears to be forming…if there’s a confirmed breakout above 17 cents, the next major resistance area is around 21 cents as John shows in this updated GBB chart…

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

Investors should keep an eye on Spanish Mountain Gold (SPA, TSX-V) which has become quite oversold technically after closing yesterday at 63 cents…the stock has strong support around the 60-cent area where the still-rising 500-day SMA currently sits…below is a long-term monthly SPA chart from John…

Note: Jon, John and Terry do not hold positions in SPA.

Gold got as high as $1,648 overnight but has pulled back…as of 6:20 am Pacific, the yellow metal is up $6 an ounce at $1,638…Silver is 19 cents lower at $29.75…Copper is flat at $3.49…Crude Oil is down 87 cents at $101.37 while the U.S. Dollar Index has gained one-quarter of a point to 81.29…Dow futures are pointing toward a slightly lower open this morning…

$100+ oil is likely here to stay, and one cannot rule out a rather dramatic spike in crude oil prices given fundamental factors (tight demand/supply structure, Iran) and technical considerations as the chart is quite powerful…this has the potential of adding to the volatility in equity markets and making oil a big issue in this Presidential election year…below, John has an interesting 14-year monthly WTIC chart that suggests another move to $150 a barrel cannot be ruled out…

John: The purpose here is to look at past and present trends and extrapolate to produce a probable future price estimate using Andrew’s Pitchfork , 2 Fibonacci Sets and the determination of Elliott waves.

First, the Pitchfork is placed on the chart with Point #1 secured at the 2001 low point and Points #2 and #3 at the high and low of the price range at the time of the crash in 2008/09.   Remarkably the centre line joins the points of the low in 2002, the low in 2007 and the high in 2011.

There is strong support at the $80 level (green line). The position of the seed wave for the FIB Set #1 (mauve lines) starts at the low in 2009 (0%) and spans 13 months which takes it from $33.54 to $80.72(100%). The 161.80% level to find the top of Wave #1 shows $109.87 which is very close to the high of 2011.

FIB Set #2 uses the FIB Set #1 161.80% level as its 100% and the FIB Set #2 extension to 161.80% to find the end of Wave #3 which is at $158.50.  Projected across to the centre line of the Pitchfork, it shows this could be the price of oil in September, 2012.   The SS and CMF indicators also support a future rise in the price of oil.  The bottom line is that the trend is bullish.

The Venture Exchange has now posted gains in 11 out of the past 12 sessions after yesterday’s 15-point jump to 1542…the climb over those 12 sessions has been 7%…a major area of resistance will be an earlier support level of 1575 which is also the current 100-day declining moving average (SMA)…a test of support at 1500 should be expected as the month wears on…daily Stochastics(14) are firmly in overbought territory at the moment (at the November, July and April peaks)…

Cap-Ex Ventures (CEV, TSX-V) is expected to close its $10 million financing by early next week with more news from the company’s iron ore discovery near Schefferville expected in the near future as well…technically, the stock continues to look strong – it has been consolidating in a symmetrical triangle since mid-November – as John’s chart shows below…

Note: Jon continues to hold a position in CEV (John and Terry do not).

Adventure Gold (AGE, TSX-V) continues to be one of our favorite long-term opportunities…it was very encouraging to see the company was able to raise $1.7 million at the end of December on a non-flow-through basis and above the market price…the financing was completed at 45 cents…AGE closed yesterday at 40 cents…the declining 100-day SMA at 44 cents does provide short-term resistance but the best approach with AGE in our view is to simply tuck it away for the long haul…AGE has made great progress over the last year with its Pascalis-Colombiere Gold Property adjacent to Richmont Mines‘ (RIC, TSX) Beaufor Mine,  plus the company has numerous other projects in the pipeline…John’s chart shows a likely continuation of recent trading patterns over the short-term with strong support in the mid-30’s and significant resistance in the mid-40’s…we expect a stronger second half of the year for AGE (and the market as a whole)…

Note: John, Jon and Terry do not currently hold positions in AGE.

Gold pushed through a minor resistance level around $1,620 this morning and is up $26 an ounce as of 6:00 am Pacific to $1,637…Silver is going along for the ride and has jumped $1.11 to $30.16…Copper has gained a dime to $3.49, Crude Oil is $2.04 higher at $103.35 while the U.S. Dollar Index is off slightly at 80.81…

Dow futures are pointing to a strong opening thanks in part to a positive outlook from aluminum giant Alcoa after the bell yesterday, and some optimism surrounding China…although overall Chinese trade data showed exports and imports grew at their slowest pace in more than two years, it also boosted hopes that Beijing would engage in additional monetary easing to contain a slowdown in the world’s second-largest economy…China’s broad M2 money supply is increasing, as we pointed out yesterday, and the  market is also encouraged by a report today of a jump in Chinese copper imports for December which is contributing to a strong performance for the metal today…

John’s chart on Gold we posted Sunday really put things into perspective, so we refer our readers to it again this morning…barring an unlikely intra-day turnaround, the yellow metal has overcome short-term resistance at the 50% Fibonacci level ($1,614) which is easy to see on the chart below…RSI and SS are both looking bullish…there’s a very good chance the bulls and the bears will have a major showdown around the $1,700 level which coincides with Fibonacci resistance and a downsloping trendline (the blue line) that Gold must (sooner or later) push through…

We’re convinced at some point in 2012 Gold will make a new high, but the timing of that is uncertain…a combination of events will bring that about, not the least of which will be when the euro zone debt crisis reaches the boiling point and the ECB is forced to bring out the Big Bazooka and starts printing money faster than rabbits can make bunnies…

As far as the Venture Exchange is concerned, it’s poised to post its 10th winning session out of the last 11 today but the volume during that run has been unimpressive…what we’re looking for is a confirmed break above the down trend line AND the weekly EMA(20) as John showed in Sunday’s chart (re-posted below)…it’s always nice to see the Venture moving higher but one has to ask, is it doing so with conviction and can the move be sustained?…

The TSX Gold Index, which closed yesterday at 377, has staged a nice rebound since late December when it nearly touched its 1,000-day rising  moving average (SMA)…below is an updated Gold Index chart through yesterday’s trading…given the move in Gold today, the TSX Gold Index is likely to push through resistance around 380…there’s a big wall in the low 400’s, however, so chasing producers on a day like today is not necessarily a money-making strategy…as the saying goes, buy on weakness and sell into strength…

A few weeks ago we posted a chart on Armistice Resources (AZ, TSX-V) which is developing its McGarry Project in Virginiatown, Ontario, immediately adjacent to the former Kerr Addison Mine which produced over 11 million ounces of Gold…at the time, AZ was trading at 21 cents…it closed yesterday at 23.5 cents and continues to look interesting…below is an updated AZ chart from John…

Note: John, Jon and Terry do not hold positions in AZ.

Seafield Resources (SFF, TSX-V) came out with positive drill results from its Miraflores Property in Colombia yesterday as the company continues to add ounces in the ground at Quinchia…we’ll have more on Seafield later in the week…it closed yesterday at 16.5 cents…

Gold has traded in a range between $1,607 and $1,625 so far today to begin a new week…as of 6:10 am Pacific, the yellow metal is up $4 an ounce at $1,621…Silver is up 36 cents at $29.11…Copper is 2 cents lower at $3.41…Crude Oil is flat at $101.52 while the surging U.S. Dollar Index has pulled back nearly half a point to 81.01…

Dow futures as of 6:10 am Pacific are pointing to a slightly higher open…

Markets will be focused on U.S. corporate earnings, the euro zone and Iran this week…German Chancelor Angela Merkel and French President Nicolas Sarkozy are meeting in Berlin today to discuss closer fiscal co-ordination and ways to boost growth in the single currency area…there was fresh evidence of continued strain in the euro zone financial markets this morning as the yield on German short-term debt turned negative…the news came after the European Central Bank also revealed a new record in the amount of cash lodged with it by banks overnight (463.565 billion euros), a further sign that financial institutions would rather pay for safety than take the risk of lending to each other…it’s simply a question of when, not if, there’s another flare-up in the euro zone crisis…

Positive News Out Of China

China’s banks ratcheted up lending in the last month of 2011 on the back of stronger money supply, reinforcing perceptions that the central bank is gently easing policy to cushion the impact of the European problem and the global economic slowdown…Chinese banks extended 640.5 billion yuan ($101.51 billion U.S.) in new loans in December, up from 562.2 billion yuan in November, according to data from the People’s Bank of China yesterday as reported by Reuters…annual growth in China’s broad M2 money supply accelerated to 13.6% in December from November’s 12.7%…this is important as Chinese stocks have historically moved with money supply…Beijing appears to be on track to unveil more pro-growth steps as inflation eases which reduces the risk of a hard landing in the world’s second-largest economy…Chinese annual GDP growth in the fourth quarter may have slowed to 8.7% from 9.1%, according to the latest Reuters poll…annual inflation is expected to ease to 4% in December from 4.2% in November…

CDNX Faces Test This Week

The Venture Exchange enjoyed a strong first week of January, climbing 41 points or 2.8% to close Friday at 1526…however, the Index faces several technical hurdles…it is now right up against a declining 50-day moving average (SMA) as well as a down trend line that has been in place since last spring…we’ll see how the Index handles this considerable overhead resistance in the coming days…it’s not encouraging that the daily Slow Stochastics(14) indicator is at its April, July and November peaks which all preceded sell-offs…

Canada Rare Earths (CJC, TSX-V), which was racing like a thoroughbred in November and December, stumbled out of the gate to begin the New Year last week and as a result there has been some chart damage…assay results are expected soon from the company’s promising Goeland Project in Quebec and expectations grew considerably after CJC reported encouraging visuals…whether the assays will confirm the visuals or meet or exceed market expectations is really anyone’s guess, and that’s why these stocks are so speculative…CJC closed Friday at 50 cents, its rising 50-day SMA, and at 46 cents is the rising 300-day SMA…so the stock has support but last week’s pennant breakdown on the chart has John concerned…

Note: John still holds a position in CJC (Jon and Terry do not hold positions)…

A company that readers should put on their “watch list” and perform some due diligence on is Volta Resources Inc. (VTR, TSX) which is developing projects of merit in West Africa…while the stock has declining 100, 200 and 300-day moving averages, it’s a strong candidate for a rebound as John points out in the chart below…VTR closed Friday at 92 cents for a market cap of $143 million…strong technical support exists around the Fibonacci 50% retracement level (85 cents)…any weakness in the overall markets in the near future could open up a particularly interesting trading opportunity in VTR…

Note: John, Jon and Terry do not hold positions in VTR…

TSX Venture Exchange and Gold

Markets enjoyed a positive start to 2012 with the CDNX climbing 41 points or 2.8% to 1526 (the Dow was up 1.2%, the Nasdaq jumped 2.7% while the TSX gained 2%).  The CDNX has some work to do, though, to return to a bullish state as the bear market that began last March continues.  While there are some encouraging signs as John points out in the chart below, several bearish technical factors remain problematic for this Index at the moment.  They include:

• A downward trend line;
• Immediate strong overhead resistance;
• Declining 50, 100, 200 and 300-day moving averages (SMA);
• Daily Slow Stochastics(14) indicator is currently at its April, July and November peaks which preceded sell-offs.

Rather than simply “guess” that the Index is about to take off to the upside (it could just as easily turn in the opposite direction starting tomorrow) based on encouraging signs since December 20, we’d prefer to wait until there is confirmation that something different and positive has truly taken hold.  A confirmed break above the down trend line and the weekly EMA(20) would be necessary (that really doesn’t seem too likely right now, however).

The euro zone, some cracks in emerging markets, Iran, the U.S. political environment, a surging U.S. dollar and the real threat of even higher oil prices are all potential negative factors for equity markets at the moment, in particular the speculative and risk-oriented Venture Exchange. So we may have to wait a while yet before the real turnaround begins and a new bull market takes hold.  In the meantime, there are still trading opportunities and some very attractive long-term possibilities in this market.

Gold

Gold found support just above $1,500 in late December and jumped $52 an ounce in the first week of January to close Friday at $1,617.  The first BIG test for Gold in 2012 will be to move decisively through important resistance at $1,700 –  failure to do so would greatly embolden the bears, at least for the short-term.  Immediate Fibonacci resistance, as John shows below, is between $1,613 and $1,620.  

Silver and Copper closed the week at $28.75 and $3.43, respectively, while Crude Oil finished at $101.56 and the U.S. Dollar Index at 81.26.

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.

John: Jon is under the weather today with the flu, so in lieu of our regular Morning Musings I have three charts of interest to share this morning – Rainbow Resources (RBW, TSX-V), Prodigy Gold (PDG, TSX-V) and Gold Canyon Resources (GCU, TSX-V).

As of 6:00 am Pacific, Gold is flat at $1,622 while Silver is off 16 cents at 29.21.  Dow Futures suggest a positive opening as non-farm payrolls came in better than expected this morning.

The CDNX rebounded late in the session yesterday to close with a small gain at 1517.  The Index has climbed 5 sessions in a row and 8 out of the last 10.  We’ll update the CDNX chart this weekend.

One of our favorite speculative exploration plays at the moment and for 2012 is Rainbow Resources (RBW, TSX-V), a company that was listed on the Venture Exchange just a year ago and has a current market cap of only $4 million.  Volume has picked up considerably in RBW since late November which is a positive sign, and yesterday was particularly interesting as the stock overcame some early weakness to close at its high of the day (16 cents) on its best single-day CDNX volume (375,000 shares) since it started trading in January of last year.  RBW is coming into play and keep in mind the chart for this one looks very powerful and the stock has yet to experience its first major move.  As Jon has indicated, a strong group is behind RBW including prominent Calgary businessman Bob Libin and others. The company has assembled an attractive land package in the West Kootenay region of British Columbia and results from a fourth quarter exploration program are due soon.  We like the near-surface, high-grade nature of mineralization at some of RBW’s properties based on historical work.

Note: Both John and Jon continue to hold positions in RBW (Terry does not).

We’ve written about Prodigy Gold since it was trading in the 40’s.  It continues to perform well and we still like it a lot, thanks to its promising Magino Gold Project in northern Ontario.

Note: John, Jon and Terry do not hold positions in PDG.

Gold Canyon is expected to deliver an updated 43-101 resource estimate for its Springpole Project in Ontario in the near future, likely within a few weeks, and the number should be strong based on last year’s drill results.  The stock has been under pressure recently but the chart is giving some encouraging signs – definitely worth keeping on the “watch list” with good long-term potential.

Note: John, Jon and Terry do not hold positions in GCU.

Gold is trying to hold above $1,600 an ounce despite more strength in the greenback today as the euro dropped to a 15-month low against the American dollar…as of 6:00 am Pacific, the yellow metal is down $9 an ounce at $1,603…Silver is off 22 cents to $28.94…Copper is off a penny at $3.42 a pound…Crude Oil is 21 cents lower at $103.01 while the U.S. Dollar Index has gained two-thirds of a point to 80.77…the next few trading days will be crucial in determining whether the U.S. Dollar breaks out or pulls back…as John’s chart showed yesterday, some consolidation appears to be in order for the Dollar Index which has pushed right up to resistance and is threatening to surge higher…Gold has been benefiting somewhat from heightened tensions between Iran and western countries over its nuclear program…Iran’s sabre-rattling has given a lift to oil prices which unfortunately is a reward for that regime’s bad behavior…the Iranian problem is likely to intensify which means there’s an excellent chance of oil going higher…the problem with that, of course, is the potential impact on global economic growth…equity markets won’t take kindly to a 10% or more jump in crude oil prices from current levels if that were to occur…Gold producers will face pressure as well since oil is such a significant component of their cost structures…

Euro Zone Crisis On Simmer

Of course an even bigger concern for markets right now is the euro zone debt crisis which is on “simmer” at the moment but could start boiling over again at anytime – it is so fluid and unpredictable…this week’s concerns include: the health of the bloc’s financial system as bank borrowing from the European Central Bank stays high and after Italian lender UniCredit had to offer a sharp discount to sell its right issue; the extent of Spanish banks’ bad loans; speculation that Spain could be forced to seek an international bail-out after the regional government of Valencia was late in repaying a 123 million euro debt to Deutsche Bank; and a warning from Greece that it faced the prospect of a disorderly default if negotiations on its second bail-out are not completed by March…ultimately, the European Central Bank will likely have to step in and start printing money faster than Ben Bernanke – a strategy the French are okay with but the Germans fervently oppose…

A French debt auction got decent demand today but yields edged up…markets will be focused like a laser beam on debt sales by Italy and Spain next week…the euro zone has huge refinancing needs during this first quarter…

U.S. Numbers Provide Optimism

U.S. private-sector job creation surged by a stunning 325,000 in December, according to a report this morning which is likely to fuel hopes that the labor market is positioned for a lasting turnaround…the report, from ADP and Macroeconomic Advisors, comes a day ahead of the Labor Department’s monthly report expected to show 150,000 total jobs created in the public and private sectors…in addition, another report this morning showed the number of planned layoffs at U.S. firms declined to its lowest level since June, suggesting ongoing improvement in the labor market although unemployment remains historically high…

Dow futures point to a slightly lower open…the TSX has climbed in 8 out of the last 9 sessions for a total of 686 points or 5.9%…the Venture has posted gains in 7 out of the last 9 sessions for a 109 point advance (7.7%) during that time…a test of the 50-day SMA in the mid-1530’s could occur soon before a slight pullback which would logically likely test the 1500 area, slightly above the current 10-day SMA…

Momentum is a huge factor in day-to-day fluctuations in penny stocks and Canada Rare Earths (CJC, TSX-V) was an excellent example of that yesterday…investors who may have been expecting an immediate jump in CJC to begin the New Year started dumping yesterday when that did not materialize…the short-term simple moving averages (10 and 20-day) have also reversed to the downside which brought in some selling…CJC closed down 9 cents yesterday to 47 cents (its 50-day SMA) after falling a nickel Tuesday to begin 2012…on the positive side, the stock’s 300-day SMA is at 45 cents…both the 300-day and the 50-day SMA’s continue to rise which provides important support…given the technicals and the fundamentals, we continue to see a bullish overall picture with CJC but investor patience is required along with a stomach for volatility…below is an updated chart from John after yesterday’s activity…

Note: John holds a position in CJC (Jon and Terry do not)…

Gold got off to a positive start for 2012 yesterday and is digesting those gains today…as of 6:00 am Pacific, the yellow metal is down $9 an ounce at $1,595…Silver is 64 cents lower at $29.07…Copper has lost 3 pennies at $3.48…Crude Oil, after surging yesterday, has slipped 86 cents to $102.10 while the U.S. Dollar Index is up half a point at 80.18…the Dollar Index faces resistance near current levels, however, with 80.40 a key area…any short-term pullback or consolidation will help support the equity markets including the Venture Exchange which often moves in the opposite direction of the greenback…John updates the U.S. Dollar Index chart below…

Interestingly, the Canadian Dollar closed above its still-declining 100-day moving average (SMA) yesterday for the first time since July…it will meet stiff resistance, however, at $1.01 – the declining 200-day SMA…

Dow futures are pointing to a slightly lower open after yesterday’s strong gains thanks to positive economic data out of the U.S. and China…

The TSX jumped 253 points yesterday to begin 2012 while the CDNX climbed back above the 1500 level for the first time since December 12…for hockey fans, this strong start to the New Year was tempered, of course, by Canada’s 6-5 loss last night to Russia in the Word Junior semi-finals in Calgary…the Canadians stormed back from a 5-goal deficit and nearly tied the game in the dying seconds…that drama was matched on the political front in Iowa where Mitt Romney defeated up-start Rick Santorum, a class act, by a scant 8 votes in the closest Republican primary or caucus vote in history…the Republican nomination is Romney’s to lose but it won’t be a cake-walk…normally, gaining back the White House should be a slam-dunk for the Republicans this year given the current “occupier” but no Republican has yet inspired the broad American electorate…

Greenspan Says U.S. Faces “True Revolution” In Choices

The United States faces a “true revolution” in the choices it will have to make to secure its fiscal future now that the welfare state has run up against a “brick wall of economic reality”, former Federal Reserve Chairman Alan Greenspan wrote in an op-ed piece in today’s Financial Times…”A political tsunami has emerged out of our past in the form of the Tea Party, with its ethos reminiscent of rugged individualism and self-reliance,” Greenspan wrote…”Cutting back on benefits that are ‘entitled’ is going to be a far harder political task than curbing federal discretionary spending…we have created a level of entitlements that will require a greater share of real resources to fulfill than the economy seems likely to be able to supply,” he stated…the same could be said of Canada, we might add, which will have to come to grips with escalating costs in the pension and health care systems…

January As A Market Barometer

Since 1945, a positive January in a U.S. election year has never missed in predicting a full-year gain for the Standard & Poor’s 500, going 8-for-8 and posting an average gain of 16%, well above its normal average, according to Sam Stovall, chief equity strategist at S&P…a negative first month, meanwhile, has predicted a full-year loss 56% of the time, with an average 3.9% decline…

Risks in China

China has uncovered 530 billion yuan (approximately $84 billion U.S.) worth of irregularities with local government debt, the National Audit Office said today…a report, published on China’s central government web site, reveals some of the problems investment analysts had believed to lay beneath the U.S. $1.7 trillion mountain of debt that local governments had amassed by the end of 2010…Chinese local government debt has come under scrutiny of late after some governments invested in questionable construction and industry projects…also, local governments are prohibited from directly borrowing funds, so many set up companies – so-called local government “financing vehicles” – to raise funds instead…the actions have ignited concern that these borrowings could lead to a wave of bad debt in the Chinese banking system…local government debt, weaker export growth brought about by a worsening external environment, and slowing investment growth caused by property market curbs, constitute the most significant risks to the Chinese economy this year according to the Bank of China…

Adventure Gold, Canada Rare Earths

Adventure Gold (AGE, TSX-V) announced the closing of a $1.75 million non-flow-through financing yesterday above the market price…the company issued 3,888,946 units at 45 cents per unit for gross proceeds of $1,750,026…each unit consisted of one common share and one-half of a common share purchase warrant (each full warrant entitles the holder to purchase one common share of AGE at 65 cents for a period of 24 months)…despite the financing, Adventure Gold closed down 2.5 cents yesterday at 40.5 cents…with its promising Pascalis-Colombiere Gold Property, which has a good chance of attracting interest from other companies including Richmont Mines (RIC, TSX), our outlook for AGE remains bullish…

We continue to keep a close eye on Canada Rare Earths (CJC, TSX-V) which fell a nickel yesterday to 56 cents…watch for RSI to hit support at 50…the overall chart pattern remains bullish, however, as John shows below…

Note: John holds a position in CJC (Jon and Terry do not)…

We’re in the process of finalizing a “strong play” short list as well as a “watch list” for the first quarter of 2012 and beyond, and we expect to reveal that by next Monday…