Gold has traded between $1,125 and $1,137 so far today…as of 10:15 am Pacific, bullion is flat at $1,134…Silver has added 7 cents to $14.66…Copper has slipped a penny to $2.33…Crude Oil, after a powerful rebound last week, is up another $2.67 a barrel to $47.89 while the U.S. Dollar Index is flat at 96.00 (resistance)…

Funds backed by Gold saw the biggest inflows of assets in 7 months last week…

Barclays says weakness in the currencies of many key Gold-producing nations, such as Canada, Australia and South Africa, lessens the likelihood of cuts in Gold production over the next 12 months…however, according to Metals Focus, Gold output will start declining as soon as next year and production will plunge 18% by the end of the decade…global mine output surged 24% in a decade to a record 3,114 metric tons in 2014, as companies dug more to exploit a 12-year bull market in prices…

Oil Prices Reverse Higher This Morning

Oil prices began the day lower, retreating modestly from last week’s sharp gains, but reversed higher on a couple of developments this morning as data showed lower U.S. Crude output while OPEC finally signaled concern about falling prices…the U.S. Energy Information Administration reported monthly production data showing a fall in production to 9.296 million barrels per day (bpd) in June from 9.4 million bpd in May and a peak of 9.6 million bpd in April…meanwhile, in an OPEC publication issued this morning, the group said it’s “concerned” by the drop in Oil prices and ready to talk to other producers…

Wishful Thinking?  Fed Keeps Saying Inflation Will “Move Higher”

“There is good reason to believe that inflation will move higher as the forces holding inflation down – Oil prices and import prices, particularly, dissipate further,” Fed Vice Chairman Stanley Fischer commented Saturday in a speech at the annual Jackson Hole Conference in Wyoming…the only way the downward pressure on import prices will dissipate (over time given the “lag” effect), however, is if the U.S. dollar weakens substantially over the coming months…Fischer also stated, “We should not wait until inflation is back to 2% to begin tightening”…however, that was in the context of the Fed having confidence that inflation is indeed trending higher…evidence for that is weak at the moment…

Wall Street Journal ace reporter Jon Hilsenrath observed in an article last night (“Fed Appears To Hold Line On Rate Plan“), “Inside the Fed, advocates for holding off a rate boost beyond this year aren’t getting much traction. In Jackson Hole, Minneapolis Fed President Narayana Kocherlakota was an isolated voice among officials for sustaining near-zero interest rates. He has lost his share of battles over policy, including the decision last October to end the Fed’s bond-buying program. ‘I’ve won some and lost some. I wish I had done a better job. I think we’d be better positioned policy-wise if I had done a better job of being persuasive,'” he said in an interview.

Goldman Sachs Slashes Growth Estimates For China

Goldman Sachs has slashed its forecasts for China’s growth over the next 3 years amid broadening pessimism over the health of the world’s 2nd-largest economy…the bank today marked down its 2016, 2017 and 2018 projections to 6.4%,  6.1% and 5.8%, respectively from 6.7%, 6.5%, and 6.2%, previously…the government is targeting growth of around 7% this year…the more gloomy assessment by Goldman is the latest setback for China which has had a tumultuous few weeks…

China’s Dangerous Plan “B”

What is really going on in China, and do authorities there know how to effectively handle structural issues with their economy and financial markets?…the Financial Times reported today that the communist government will “abandon its intervention” in its stock market, as officials acknowledged the efforts were not working as planned…so what’s Plan B?…even worse…apparently Beijing may now switch its focus from intervention to stopping those it believes are “destabilizing the market”, the FT report said…suspected state firm buying propped up the market last week, resulting in 2 straight days of 5% rallies…at a time when China wants to enhance its influence and prestige on the global financial stage, this regime is taking actions that run counter to that goal…

Massive Natural Gas Discovery

Italian Oil and gas company Eni SpA said yesterday that it has made a massive natural gas discovery off the coast of Egypt which it’s calling the largest-ever find in the Mediterranean Sea…the gas, estimated at about 30 trillion cubic feet or 5.5 billion barrels of Oil equivalent, is in a field about 80 miles off the Egyptian coast, and is enough to supply the North African country for decades…most of the gas will be used by Egypt, with any excess exported, perhaps using a liquefied natural gas plant that Eni has not far from the field..

Today’s Equity Markets

Asia

The Shanghai Composite pared losses overnight to finish down 25 points or less than 1% at 3207…the index tumbled 12.5% for the month and has now had 3 straight monthly declines…meanwhile, the Nikkei recorded its worst monthly performance since January 2014….Asian currencies remain near multi-year lows, with the yuan having fallen more than 2.5% in August against the U.S. dollar…

Europe

European markets were down modestly this morning…meanwhile, inflation in the euro zone remains muted…consumer prices in the currency bloc were 0.2% higher in August than a year earlier, according to a flash estimate from the EU’s statistics agency today…the rate of inflation was unchanged from June and July…

North America

Volatility continues…the Dow was sank as much as 200 points in early trading but is now off just 51 points as of 10:15 am Pacific…after last week’s big swings across global markets, the Dow finished up 1.1% for the week but is still headed for its worst monthly fall since May 2012 on a percentage basis…the NASDAQ ended up 2.6% last week, recovering from Monday’s plunge, in its biggest intra-week reversal on record…the index is the only major average positive for the year so far…

U.S. economic data this week includes the ISM Manufacturing Index tomorrow, while the last labor market report before the September FOMC meeting will be released on Friday…

Volatility Index (VIX) Updated Chart

What to watch for this week is a potential decline in the VIX below the key 25 level as equity markets face increased risks with the VIX above that point…it closed at 26.41 last Friday…the recent parabolic move in the VIX was either an unusual “one-off” event or the beginning of an extended period of heightened volatility in the markets…

In Toronto, the TSX is off 69 points as of 10:15 am Pacific while the Venture, looking technically healthier than it has in several months, has added 2 points to 558…

Prospectors and Developers Association of Canada (PDAC) head Rod Thomas says that between December 2012 and the end of June this year, there were 155 fewer mining companies listed on the Venture Exchange (too bad there weren’t 500 less)…there have been 93 delistings so far in 2015…

Biroem Inc. (BRM, TSX-V) and Lingo Media (LM, TSX-V) continue to push higher after very positive Q2 financials, showing earnings momentum, last week…

Equitas Resources Corp. (EQT, TSX-V) Update

Volume continues to accelerate in Equitas Resources (EQT, TSX-V) which is up another penny at 13 cents as of 10:15 am Pacific…given the nature of the recent trading, and the growing interest in the upcoming drill program at the Garland Property near the Voisey’s Bay mine, it’s reasonable to speculate that EQT will soon close its recently announced financing and that it could be over-subscribed…

Technically, below is an update of John’s short-term EQT chart last week – the “Perfect Pennant”…this is a classic formation, and what certainly appears to be developing is a breakout above that pennant…

Garibaldi Resources Corp. (GGI, TSX-V) Update

The technicals and fundamentals are coming together at the same time for Garibaldi Resources (GGI, TSX-V) as crews are on the ground at the Grizzly Project in the Sheslay district, finalizing drill targets, while news is also pending from the company’s work in Mexico…

Significantly, this 2.5-year weekly chart shows confirmed breakouts above price and RSI(14) downtrend lines after extreme oversold conditions emerged in July…buy pressure (CMF) has also replaced sell pressure that had been dominant since late April…

This chart is as clear a sign as ever that GGI has turned the corner and could be poised for something big in September and October, particularly as the Grizzly and the Sheslay district grab the spotlight…

GGI is off half a penny at 7.5 cents as of 10:15 am Pacific…

Integra Gold Corp. (ICG, TSX-V) Update

Speaking about “grabbing the spotlight”, that’s exactly what Integra Gold (ICG, TSX-V) will be doing in northwest Quebec through the balance of the year as the company gets really aggressive at its Lamaque Project near Val d’Or, thanks to a recently announced financing with Eldorado Gold (ELD, TSX)…ELD’s $14.6 million investment in ICQ represents a major endorsement of the Lamaque Project and the team behind it…5 rigs are expected to be in operation shortly as the company’s 2015 drill program has been expanded to 90,000 meters…

ICG has been a strong Venture out-performer this year, and that trend should continue based on this 2+ year weekly chart…note the bullish DI cross – the last time this occurred was in late 2014 when ICG started a surge from the mid-teens to a 52-week high of 35.5 cents before retracing (quite normally) to Fib. support over the summer…

ICG is down half a penny at 26.5 cents as of 10:15 am Pacific…

New Gold Inc. (NGD, TSX) Update

Further to our posting last night, we see multiple opportunities among high-quality beaten-down Gold stocks, from explorers to producers…and the long-term trend of Gold stock under-performance vs. bullion is clearly changing…

New Gold (NGD, TSX) has really been clobbered since the beginning of 2012 but has consistently been an attractive trading opportunity, at least, whenever it touches the bottom of the downsloping channel it has been trading in for more than 3 years…likewise, resistance has been at the top of that channel…

Once again, NGD is giving signs of an impending rally after holding important support…it’s up a couple of pennies at $3.02 as of 10:15 am Pacific…

Silver Short-Term Chart

Bears put the bulls on the defensive last week, knocking the metal down to a new multi-year low after it had just posted 4 straight weekly gains…bargain-hunters jumped in at $14…the band of Fib. resistance between $15.30 and $16.60 has proven to be very strong as demonstrated during the latest rally…this helps underscore how the narrative of a slowing global economy has created some significant headwinds for Silver, whereas Gold is faring better at the moment…

The divergence between Silver’s RSI(14) and price on this 9-month daily chart is encouraging, however, so the bears could be put into hibernation over the winter…

Silver Long-Term Chart

An explosive push higher (eventually) – is this actually a scenario that could unfold in Silver over the next couple of years?…quite possibly, given the look of this 34-year monthly chart, though at the moment it’s hard to understand all the factors that could come into play to generate the kind of “Wave 5” move that could develop…

Have we seen the  bottom of “Wave 4”?…that’s quite possible, but still too early to tell…encouragingly, RSI(14) has so far managed to hold support which goes back to 2001…

Sell pressure continues to remain very strong, however, as shown by the CMF – amazingly, at levels not seen in nearly 25 years since the low of $3.51…this intense sell pressure at the moment, which started modestly in early 2013, could continue for a while yet…this should be viewed in a larger context as a bullish contrarian indicator given historical patterns…it doesn’t necessarily mean, however, that Silver has found a bottom just yet…

Note:  John and Jon both hold share positions in EQT and GGI.

The long-term trend of Gold stock under-performance vs. the price of Gold is changing, and that’s an important theme investors need to keep in mind to maximize opportunities over the coming months.

Fundamentally, the weakness in Oil prices is a benefit that goes right to the bottom line of producers whose overall cost structures are much more in line now with reality.  Canadian-only producers have also been given a huge boost from the rapid decline in the loonie as Gold in Canadian dollars is up almost 15% since late last year.

Below is a fascinating chart from John that examines the relative performance between the TSX Gold Index (SPTGD) and the price of Gold (in U.S. dollars).

Key takeaways from this 15-year chart:

1.  There has never been a bigger gap in the relative performance of the Gold Index vs. bullion over the last 15 years – the collapse in the stocks since late 2011 in particular has been profound;

2.  The ratio (illustrated in the downtrend channel) between the Gold Index and bullion started to go into decline in 2007 and accelerated to the downside in 2011.  The ratio has now stabilized, setting the stage for a turnaround;

3.  Note how the TSX Gold Index RSI(14) on this monthly chart has been climbing a trendline since 2013 while the Index itself recently (July 24) hit a 14-year low – that’s a bullish divergence;

4.  Note also how there has been a recent sharp increase in the correlation between the Venture and the Gold Index.

The TSX Gold Index lost three-quarters of its value from the late summer of 2011 to last month’s low.

An extensive survey would probably reveal that the average person on the street would want nothing to do with Gold stocks right now.  All the more reason to be paying really close attention to this sector at the moment, and the best companies within it.

TSX Venture Exchange and Gold

The roller coaster ride in the markets this past week was even more wild than Vancouver’s infamous roller coaster at the annual PNE currently in progress.  As we stated last Sunday, “the best scenario in our view for the coming week would be an immediate further sharp sell-off in this index (specific reference to S&P 500 chart) and other equity markets for ‘cleansing’ purposes, and that could create some interesting opportunities.  The action in the VIX (Volatility Index) suggests something dramatic is building, so hang on to your hats as the ride could be wild.”

Equity markets went into panic mode Monday morning with a “flash crash” following technical breakdowns the previous week, and the Venture followed the pack with a gap down and an intra-day all-time low of 509 before a hammer reversal kicked in.  By week’s end, the Venture was up 9% from its low with the strongest close above its EMA(8) in 4 months. 

For the week, the Venture was up 3.3%, even beating the Dow, the TSX and Gold, as it finished at 556.

Clearly, a pattern change has occurred here which is also consistent with the Venture’s cycle chart (scroll down further for that fascinating updated piece).

Here are the key takeaways from John’s 4-month Venture “awareness” chart:

1.  A confirmed breakout has occurred above the EMA(8) which has also reversed to the upside;

2.  Next key resistance is the EMA(20), currently 562.  A confirmed breakout above the EMA(20), and its reversal to the upside, would give the Index some fresh momentum – this would also help verify that a new uptrend is underway and gaining traction;

3.  RSI(14) has climbed out of oversold conditions which it had been trapped in since the beginning of July;

4.  Sell pressure (CMF) peaked in late July and has been declining steadily since;

5.  The recent bearish trend (ADX indicator) weakened dramatically this past week;

6.  Fib. support at 515 held – on a monthly basis, Fib. support around 560 may also hold.

These are all highly encouraging signs, though history has taught us that it’s too early at this point to declare an end to the Venture bear market (Crude Oil is just 1 of several significant challenges still facing the Index).  However, what certainly could be unfolding here is a very strong rally, the likes of which we haven’t seen since the end of 2013/early 2014.

If an important discovery is made somewhere, watch out.

Venture 39 Cycle Chart

It’s fun to at least imagine.  Look at the chart below and compare the end of the current Venture 39-week segment with the end of the 39-week period following the 2008 Crash (plus compare the ADX indicators).  A remarkable similarity.

Again, it’s premature at this point to suggest the Venture is about to enter a new bull phase, especially considering that the outlook for Crude Oil is simply not favorable (unless a major Middle East conflict suddenly erupts).  However, July and August for the Venture were very different than those same months last year, and it’s reasonable to believe – based on all the technical evidence at least – that the September-December period coming up for the Venture will also be much different than that same 4-month period last year when the Index took a beating.

The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks

There’s no better cure for low prices than low prices. The great benefit of the collapse in Gold prices in 2013, and recent weakness with the drop below $1,100, is that it has forced producers to become much more lean in terms of their cost structures. Producers, big and small, continue to make hard decisions in terms of costs, projects, and rationalizing their overall operations. Exploration budgets among both producers and juniors have also been cut sharply. In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to carry out exploration or put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe). Ultimately, all of these factors are going to eventually create a supply problem and therefore great opportunities in Gold and quality Gold stocks.  Think about it, where are the next major Gold deposits going to come from?  On top of that, grades have fallen significantly just over the past decade.

U.S. Dollar Index Update

Our contention for the last several months is that the Dollar Index put in its high for the year during March-April based on what has proven to be, so far at least, a very reliable 9-month daily chart.  Fundamentally, a runaway dollar would not be healthy for the U.S. or global economies, so one can be certain the Fed is keeping a close eye on movements in the greenback (the Chinese appear to be, as well, and recently of course fired some critical shots in the latest currency war).

Dollar bulls were encouraged by the greenback’s climb out of temporarily oversold conditions last week.  Support was strong around the 93 level as expected.  However, the Dollar Index faces serious technical challenges in terms of moving higher, or significantly higher, from here (note the arrow in the chart pointing to resistance around the former uptrend line).

Ultimately, what we perceive as a growing possibility (albeit not a certainty) over the remainder of the year for the Dollar Index is a test of base support at 88.  That’s definitely not a mainstream view but the chart supports that kind of consolidation potential following the record advance that started during the summer of last year.  Such a drop in the greenback would be supportive of commodities and the Venture, the reverse of what occurred over the final 4 months of last year.

Gold

Gold disappointed some investors last week by not reacting more vigorously to the extreme volatility in the equity markets.  However, the more than $40 pullback during the week and then the recovery back above the $1,130 support area by the end of Friday’s session can be interpreted as healthy trading action.  Gold was down $26 for the week, closing at $1,134.  August should end a 2-month slide.

Fundamentally, it wouldn’t be surprising if China were to announce another update shortly (for August) regarding its Gold reserves.  Their pace of accumulation may have picked up even more from July and the period previously.

Below is a monthly chart for Gold going back 6 years, providing a broader perspective on what’s happening at the moment.  Again, note the very strong support at the bottom of the downsloping channel or flag, and the bullish engulfing reversal pattern in late July at approximately $1,070.

RSI(14) is gradually moving up from support at 30%, and it appears a bullish cross is forming in the SS.

It’s reasonable to expect Gold to push above its still-declining MA(10) on this monthly chart, currently $1,180, as we’ve seen on several other occasions since the beginning of 2014.  We’ll see what happens from there – $1,200 will be a very important test.

If RSI(14) can overcome critical resistance at the 50% level, then Gold could gain some serious traction.  The RSI/price divergence is bullish – RSI(14) appeared to bottom in the spring of 2013 when Gold collapsed to $1,180, and has stayed above that level over the last 2+ years despite last month’s new low in Gold.  Something quite significant could be developing here, though it’s still a little early to tell.

Silver had a rough week after posting 4 consecutive weekly advances.  The metal plunged to a new 6-year low before bouncing back to close Friday at $14.59.  That was still a drop of 76 cents or 5% for the week.  Crude Oil snapped an 8-week slide by jumping $5 a barrel to $45.33.  Copper added 4 more cents to $2.33 while the U.S. Dollar Index gained more than a full point to 96.15.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been 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, has had a huge impact on bullion and will continue to support prices.   Despite Gold’s largest annual drop in 3 decades in 2013, and fresh weakness now, the fundamental long-term case for the metal remains solidly intact based on the following factors (not necessarily in order of importance).

FREE BMR eALERTS

To receive up to 2 free BMR eAlerts per month – timely information pieces delivered to you directly by email – simply fill out your first name and email address in the form below and click “send”.  Confirmation will be emailed to you within 24 hours.

In each eAlert we send, there is an unsubscribe link included. Click that link and the rest is history. You can also email info@bullmarketrun.com, subject “unsubscribe”, to opt out of our free eAlerts at any time.

BMR is committed to your privacy and will not share any personal information, including your email address, with any third party at any time, unless required by law.

Any content on the BMR site or in our eAlerts is not an offer to buy or sell or a solicitation of an offer to buy any securities. You should independently investigate and fully understand all risks before investing. Prior to investing in any securities, you should consult with your financial adviser and a registered broker-dealer.

We suggest you add “bullmarketrun@hotmail.com” to your email contact list.

 

 

Gold has traded between $1,123 and $1,142 so far today…as of 10:15 am Pacific, bullion is up $9 an ounce at $1,135, reclaiming the $1,130 support area we referred to earlier in the week…Silver is a nickel higher at $14.57…Copper is up a penny at $2.34…Crude Oil, after its biggest single-day run in 6 years yesterday, is up another $2.79 a barrel at $45.35 (a resistance level) while the U.S. Dollar Index has climbed a quarter of a point to 96.05…

Gold is finishing the week on a positive note with bargain hunters stepping in after the metal retraced by more than $40 in recent days following last Friday’s $1,160 close…bullion is still on track to post its 1st monthly advance since May despite its biggest weekly drop since late July…traders/investors will be closely monitoring comments on policy normalization from Fed officials attending the Jackson Hole Economic Symposium which wraps up tomorrow…2 top Fed officials who have pressed for interest rate increases said yesterday that a spate of violent swings in financial markets won’t knock the U.S. economy off its feet…

Meanwhile, Fed Vice Chair Stanley Fisher told CNBC  this morning that it’s still too early to tell if recent market and international turmoil has made a September rate hike more or less compelling…Fisher delivers a speech on inflation tomorrow at Jackson Hole…

Lots of chatter regarding news yesterday that activist billionaire investor Carl Ichan has taken a big position in Freeport McMoran Inc. (FCX, NYSE), the world’s largest publicly traded Copper company…he disclosed an 8.5% stake in the company (worth roughly $900 million, and enough to make him one of the company’s biggest shareholders) in a filing with the U.S. Securities and Exchange Commission…the filing said he would potentially seek board representation and wants the company to cut spending levels and executive compensation…this was followed by a statement from Freeport that included the sentence, “FCX maintains an open dialogue with our shareholders and welcomes constructive input toward our common goal of enhancing shareholder value.”

Check out the excellent piece by Kip Kean this morning at Mineweb.com  regarding Ichan’s interesting move and the timing of it…

Today’s Equity Markets

Asia

China’s Shanghai Composite rallied again overnight (the government “rescue team” jumped in again very late in the trading session to produce another 5% gain) but resistance will be strong at the previous critical 3400 support level that collapsed on Monday…the communist government is doing all it can to prop up this market which doesn’t give us a lot of confidence…China’s Vice Minister of Human Resources and Social Security announced today that Chinese pension funds will invest $313 billion in stocks and other assets as soon as possible…

Europe

European markets finished mixed today…the latest reading of the U.K.’s Q2 GDP came in at 0.7% quarter-on-quarter, as expected…a monthly European Commission survey released today showed that businesses and households across the euro zone were more upbeat…as a heavy Oil importer, the region has certainly been benefiting from weak Crude prices…

North America

After 7 consecutive triple digit daily moves, the Dow is more subdued today…it’s off 42 points as of 10:15 am Pacific…in Toronto, the TSX has added 60 points while the Venture has gained another 7 points to 552 as of 10:15 am Pacific…

Volatility Index (VIX) Update

The VIX has settled down considerably (closed yesterday at 25.70) after spiking to a multi-year intra-day high of 53 during Monday’s wild trading session in New York…going forward, the key will be whether the VIX remains above 25 or sinks below that key level – and for how long…

Venture 4-Month Daily Chart

Technically, this is really the best the Venture has looked in quite a while with a move above the EMA(8), declining sell pressure, and RSI(14) finally emerging out of oversold conditions on this 4-month daily chart…

An indication that this market has regained some serious traction will come when the Index pushes above its EMA(20) which has provided stiff resistance since May…

Pure Energy Minerals (PE, TSX-V) Update

Pure Energy (PE, TSX-V) has been pure power this year with the company moving aggressively on the exploration and development sides of its Clayton Valley South Lithium Brine Project in Nevada…since releasing an inferred resource July 28, and some updates since, PE has nearly doubled in price and has pushed above key Fib. resistance at 47 cents today…

John’s latest 2.5-year weekly chart shows increasing RSI(14) up momentum leading into September, so technical and fundamental factors both continue to be in PE’s favor as they have been since the summer of last year…

PE is up 4 cents at 52 cents as of 10:15 am Pacific…

Simba Energy Inc. (SMB, TSX-V)

One of our readers brought this situation up yesterday after Simba Energy (SMB, TSX-V) was halted and then announced it has received formal approval from the government of Kenya for its farm-in agreement with Essel Group, as reported June 8…the market responded enthusiastically to the news after SMB resumed trading very late in yesterday’s session…

Under the terms of the deal, Essel Group Middle East (Dubai) will earn a 60% participating interest in Simba’s African portfolio, including block 2A in Kenya, in exchange for providing Simba a full carry through financing of all required exploration, as governed by each concession’s respective production sharing contract/agreement…as a result of government approval in Kenya, Essel has confirmed its commitment to invest over $100-million (U.S.) in Simba’s portfolio over the next 12 to 18 months, including Kenya…

The 2 companies have commenced the planning and scheduling of the next 2-D seismic work in support of finalizing locations to drill initial exploration wells at block 2A next year…

This 5-year weekly chart from John does a strong overall bullish trend and an important breakout in June above a downsloping flag…Fib. resistance at 9 cents while the rising 50-day moving average (SMA) is currently 7 cents…a lot of shares outstanding (nearly 300 million, which also provides liquidity) but the investment by Essel is key…as always, perform your own due diligence…

SMB traded as high as 10.5 cents this morning and is up half a penny at 8.5 cents as of 10:15 am Pacific…

Biorem Inc. (BRM, TSX-V) Update

There’s nothing like old-fashioned earnings momentum to drive a stock…on the Venture, of course, that’s rarely seen…

Yesterday, Biorem (BRM, TSX-V) reported its Q2 financial results, showing net earnings for the quarter of $718,000 or 5 cents per share (undiluted)…this brings net earnings for the 1st half of the fiscal year (January 1 to June 30) to $1.25 million or 9 cents per share (vs. a net loss of $1.36 million for the 1st 6 months of 2014)…

Biorem’s revenues for Q2 were $4.7 million, a 91% increase over the $2.2 million in revenue recorded during the same period last year and consistent with the $4.7 million recorded in Q1…year-to-date revenue has totaled $9.4 million, a $5 million or 112% jump in revenue over the 1st half of 2014…the revenue increase came from each of the geographic markets in which Biorem operates (the U.S. represents its largest single market)…the value of the company’s order backlog as of June 30 was $14.4 million…management estimates that more than 50% of the order backlog will be converted into revenue by year-end (MD&A)…

We initially introduced to our readers to Biorem a few months ago when it trading around 30 cents…with only 13 million shares currently outstanding, BRM is an environmental biotechnology company that designs, manufactures and distributes a comprehensive line of high-efficiency air emissions control systems used to eliminate odors, volatile organic compounds and hazardous air pollutants…

Technically, what we like here is the strong probability of a confirmed breakout above a long-term downtrend line…

BRM is up a nickel at 40 cents as of 10:15 am Pacific…

Lingo Media Corp. (LM, TSX-V) Update

Another Venture company with strong earnings momentum is Lingo Media Corp. (LM, TSX-V), which brands itself as a leader in changing the way the world learns English…Lingo reported very encouraging Q2 results yesterday with net earnings of nearly $1 million or 4 cents per share (vs. net earnings of $225,000 in Q1)…the stock responded on record high volume and really took off this morning…

“This performance is attributable to an increase in revenue from digital learning which increased approximately 776% year over year,” stated Michael Kraft, President & CEO.  “In the quarter, digital revenue as a percentage of total revenue was greater than print-based revenue for the first time in our operating history. This is a direct result of our enhanced sales and marketing effort which led to securing new sales contracts in Colombia, Mexico, Peru and other Latin American markets. The EdTech market for English language learning continues to present us with favourable sales growth opportunities in Latin America and globally.

“During the second half of 2015, we expect our revenue growth and profitability to trend in a similar fashion as to the first half of 2015. We look forward to providing our shareholders with updates as we continue to achieve sales and earnings milestones.”

Lingo broke out above a long-term downtrend line earlier this year (same thing is just happening with Biorem) and shot up as high as 60 cents in early trading today, before backing off, and after closing up 6.5 cents at 34.5 cents yesterday…weak buy pressure has replaced sell pressure which has been dominant since late 2011…

Keep in mind that 5 million Lingo shares from a private placement at 10 cents became free trading in mid-August (5 million warrants exercisable at 12.5 cents until April 16, 2016)…

LM is up a nickel at 40.5 cents as of 10:15 am Pacific…

Note:  Jon holds a share position in PE.

6:00 am Pacific

A week that began with a sharp gap down on the Venture during an extremely volatile Monday is ending on an encouraging note for the Index which has posted 3 consecutive winning sessions after declines in 23 out of the previous 28 trading days that wiped 21% in value off an already beaten-down market.

John’s reliable 39-week Venture cycle chart suggested a turnaround may occur around the end of August/early September, consistent with decisive market moves near the end of all previous 39-week periods, and indeed that’s what appears to be unfolding again.  The Venture closed above its EMA(8) yesterday for the 1st time since the July-August rout began.  Confirmation of that breakout is required today with the EMA(20), currently declining at 563, the next important resistance that must be overcome.

Before we examine 2 important charts, a few individual situations that should be watched closely leading into September:

Pure Energy Minerals (PE, TSX-V) hit a new multi-year high yesterday and closed at 48 cents, a penny above Fib. resistance.  Pure Energy continues to make progress with its Clayton Valley South Lithium Brine Project in Nevada, and a confirmed breakout above the high 40’s resistance could really energize the bulls.  You know that Pure Energy is onto something when the likes of Ashburton Ventures (ABR, TSX-V) announce, as it did pre-market today, that it’s “in the process of evaluating prospective lithium claims in the state of Nevada.”

Two Venture companies that reported profitable 2nd quarters yesterday made impressive moves.  Both are looking strong fundamentally and technically, and are certainly worthy of our readers’ due diligence – Biorem Inc. (BRM, TSX-V), which has earned 9 cents per share through the 1st 6 months of 2015, and Lingo Media Corp. (LM, TSX-V) which enjoyed its highest volume day ever yesterday, closing up 6.5 cents at 34.5 cents, after announcing earnings of 4 cents per share for Q2.

Equitas Resources (EQT, TSX-V) continues to push closer toward drilling at its Garland Nickel Project in Labrador and will be a fascinating situation to watch next month with the potential for a grassroots discovery near Voisey’s Bay.

Speaking of possible discoveries, Garibaldi Resources‘ (GGI, TSX-V) crews are on the ground at the Grizzly in the prolific Sheslay district of northwest B.C., nailing down final drill targets in another key Canadian exploration region that could help rejuvenate the market.  GGI continues to trade above its 50-day moving average (SMA) for the 1st time in 5 months – that SMA is also flattening out and threatening to reverse to the upside within days.  Given the events in this district over the last few months, September/October could be dramatic for both Garibaldi and Doubleview Resources (DBV, TSX-V).

Interesting technical breakout in Simba Energy Inc. (SMB, TSX-V) after news late in the session yesterday (it closed at 8 cents) – we’ll have a chart in today’s Morning Musings.

Venture “Awareness” Chart

Several encouraging factors here:

1.       RSI(14) has finally pushed above resistance at 30% after being stuck in oversold territory for 2 months;

2.      Importantly, the Venture has also finally clawed above its EMA(8) – requires confirmation today.  The EMA(8) is also now reversing to the upside;

3.       Sell pressure (CMF) has consistently been declining since late July;

4.       Bearish trend (ADX indicator) peaked on Monday;

5.        Fib. support at 515 held – Monday’s trading activity was really encouraging, indicating a rally in the works.

Venture 39-Week Cycle Chart

Strangely enough, over the last 15 years, there has been a consistent pattern of trend reversals (in price and RSI) around the end of each 39-week period on the Venture – you can see it quite clearly on the fresh version below, through yesterday, which is important to look at and understand.

What this chart has been suggesting is that the Venture would stabilize by around the end of this month or early September which could mark the beginning of a significant rally/turnaround.  That’s when the current 39-week period expires.

Keep in mind, also, that the Venture just experienced its 2nd-worst July on record.  What we may have just witnessed is another important (or potentially final) low, especially considering that 85% has already been wiped off the value of this market since its all-time high of nearly 3400 in May 2007.

The vertical blue lines separate each 39-week period on the Venture.

Note:  John and Jon both hold share positions in EQT, GGI and DBV.  Jon also holds a share position in PE.

Gold has traded between $1,117 and $1,130 so far today…as of 9:15 am Pacific, bullion is down $2 an ounce at $1,123…Silver has added 35 cents to $14.46…Copper has surged 9 cents to $2.33…Crude Oil has jumped $3.15 a barrel to $41.75 after a fall in U.S. Crude inventories, while the U.S. Dollar Index has gained another three-quarters of a point to 95.89 after yesterday’s sharp climb…

Gold is still up 3% for August, set for its 1st monthly advance since May…holdings in bullion-backed exchange-traded funds have climbed slightly to 1,527.63 tons as of yesterday, according to data compiled by Bloomberg…could China give Gold a further boost in the near future by reporting another increase in its reserves?…they provided updates for the end of June and July after going 6 years without reporting…July’s numbers showed a significant pick-up in the monthly rate of accumulation by China’s central bank…

A rare 1794 U.S. Silver dollar will be placed on the bidding block next month and is expected to sell for between $3 million and $5 million…there are only 150 of the coins known to exist, and this is one of the 3 best preserved…the coin (pictured to the left) will be up for auction in New York City on September 30…CNN  reported that John Kraljevich, a consultant for the auction house Stack’s Bowers that’s handling the sale, said the coin’s historical significance has collectors craving it…

“The whole idea for the dollar begins with this coin,” Kraljevich said in a report from CNN.  “It’s foundational for…the U.S.’s place in world commerce.”

U.S. Q2 Growth Revised Higher

The U.S. economy expanded at a faster pace than initially thought in the 2nd quarter as businesses ramped up investment…however, they also built up inventories, offering mixed signals for growth prospects the rest of the year…

GDP, the broadest measure of goods and services produced across the economy, expanded at a 3.7% seasonally adjusted annual rate in Q2, the Commerce Department reported this morning, up sharply from the initial estimate of 2.3% growth…economists surveyed by The Wall Street Journal  had forecast a 3.3% rate…

Given developments in China and turbulent global equity markets, investors will be keeping a close eye on meeting of central bankers that has started today at Jackson Hole…the annual Economic Policy Symposium in Wyoming brings together academics, financial market participants and many of the world’s leading central bankers…Fed Vice Chair Stanley Fischer is scheduled to speak on Saturday with a focus on inflation (or lack thereof)…

Obama To Deny Keystone XL Permit Next Week

This comes as no surprise, but the Financial Post  is reporting this morning that President Obama is expected to finally deny a permit to the Keystone XL pipeline.  “The latest in the United States capital is that an announcement will be made next Thursday or Friday,” wrote Claudia Cattaneo, “when many are out of town, reducing potential for blowback, said a well-connected source.”

Today’s Equity Markets

Asia

China’s Shanghai Composite rallied 5.4% overnight, climbing back above the 3000 level…as pointed out yesterday, however, the Shanghai has suffered significant technical deterioration and this week’s lows are likely to be tested and breached looking out over the balance of the year…

Europe

European markets were up sharply today after a rebound across Asia and yesterday’s strong close and this morning’s continued climb in New York…

North America

The Dow has shot up another 302 points as of 9:15 am Pacific…in Toronto, the TSX is up 367 points while the Venture continues to gain steam, adding 14 points to 543 as the Index approaches its 10-day moving average (SMA) which has provided stiff resistance since the beginning of May…keep in mind, the Venture is nearing the end of another 39-week “cycle” – a period that historically has consistently marked a shift in the market…

Pure Energy Minerals (PE, TSX-V) is up 2 cents at 44 cents as of 9:15 am Pacific as it once again tries to challenge Fib. resistance at 47 cents…

Biorem (BRM, TSX-V), which we’ve been mentioning recently, is up a nickel this morning to 35 cents following the release of very strong Q2 financials…this is a company with only 13 million shares outstanding which has net earnings now of 9 cents per share for the 1st half of 2015 on total revenue of $9.4 million (see story and chart below)…

Another Venture company that reported interesting earnings this morning was Lingo Media Corp. (LM, TSX-V) which has jumped 6.5 cents to 35.5 cents on its best single day volume ever – more than 1 million shares…worthy of our readers’ due diligence…

Dow 6-Month Daily Chart

The very extreme Volatilty Index (VIX) readings Monday and Tuesday were indicative of at least a temporary bottom in the Dow as it touched an intra-day low of 15370 Monday, a drop of 2200 points or 12.5% in just 5 trading sessions…

This 6-month daily chart helps explains the sudden collapse as the Dow closed below the critical 17250 level last Thursday with confirmation Friday of a breakdown below a descending triangle in place since the beginning of May…the immediate challenge for the Dow will be to reclaim that area above 17250 which won’t be easy…the declining 50-day SMA is currently at 17586 while the 200-day, which is beginning to roll over, provides resistance just below 17800…

Dow Long-Term Chart

This fascinating long-term monthly chart for the Dow shows a plunge in the RSI(14) this week to nearly the 45% critical support…there have been 5 other similar steep plunges in the RSI(14) that found support at the 45% level going back to 1984, with the Dow then recovering strongly to new highs over time…those corrections from the market highs to the RSI(14) 45% lows ranged from as little as 17% to as much as 41%…this drop from the high of 18351 was 16.2%…

The only major crashes that have occurred in the Dow have come when the RSI(14) on this monthly chart has fallen below 45%, so that’s a key level to watch…

Volatility Index (VIX) Short-Term Chart

The VIX spiked as high as 53.29 intra-day Monday (it closed at 41) and has since retreated significantly…RSI(14) on the VIX 10-year daily chart below even exceeded the high during the 2008 Crash…that kind of panic has always resulted in buying opportunities as we mentioned earlier this week…

Historically, there have only been 6 occasions in which the VIX closed higher than 45…

• September 1998: Russian default
• October 1998: Long Term Capital Management (LTCM) implosion
• August 2002: WorldCom collapse
• September 2008: Lehman Bros. bankruptcy/Panic of ’08
• May 2010: ‘Flash crash’
• August 2011: S&P downgrades U.S. Treasury Debt

Biorem Inc. (BRM, TSX-V) Update

Is there value on the Venture right now?…absolutely, though follow the 80/20 rule – only 20% of the companies are really worth considering, the other 80% are junk…within that 20%, you can narrow things down even more to the very best opportunities…

Our last update on Biorem was August 7 when it was trading around 30 cents…this morning the company reported its Q2 financial results, showing net earnings for the quarter of $718,000 or 5 per share (undiluted)…this brings net earnings for the 1st half of the fiscal year (January 1 to June 30) to $1.25 million or 9 cents per share (vs. a net loss of $1.36 million for the 1st 6 months of 2014)…

Biorem’s revenues for Q2 were $4.7 million, a 91% increase over the $2.2 million in revenue recorded during the same period last year and consistent with the $4.7 million recorded in Q1…year-to-date revenue has totaled $9.4 million, a $5 million or 112% jump in revenue over the 1st half of 2014…the revenue increase came from each of the geographic markets in which Biorem operates…

Biorem, which has only 13 million shares outstanding, is an environmental biotechnology company that designs, manufactures and distributes a comprehensive line of high-efficiency air emissions control systems used to eliminate odors, volatile organic compounds and hazardous air pollutants…

“The company is well positioned to deliver consistent results for the second half of the year,” said Derek S. Webb, President and CEO.  “Overall booking activity in the near term is expected to be consistent with the previous two quarters. We expect continued growth in our overseas markets as new regulatory structures are implemented to curb the release of greenhouse gas emissions and communities demand a higher quality of life free of nuisance conditions.”

Technically, what’s interesting about BRM is the fact that it’s very close to confirming a breakout above a downtrend line that has been in place for several years as shown in this 10-year monthly chart…all aspects of this chart are encouraging…this company is making money, and that’s a rarity on the Venture…

Kiska Metals Corp. (KSK, TSX-V) Update

It’s during times like now, when junior exploration and mining companies are so much out of favor, that the greatest opportunities emerge for 10-baggers, 20-baggers and even 50-baggers…

Patient investors in our view have a chance to cash in handsomely, at some point down the road, near-term or longer-term, on Kiska Metals (KSK, TSX-V) which is trading at an all-time low of 1.5 cents…Kiska will survive even a greater storm than the one the junior resource sector has been through over the last 4+ years given their working capital position, their model, and their prudence…they’ve had repeat business relationships with Barrick, Newmont, AngloGold, Xstrata, Teck and most recently First Quantum…

One of the reasons for the decline in Kiska’s share price this year has been selling from Sprott Securities  – check the Sedar filings on that…Sprott’s  funds of course have indiscriminately unloaded dozens of juniors this year as part of a diversification strategy…

Kiska features:

• Quality assets from grassroots to advanced stage projects
• Royalty portfolio with potential for cash generation
• Current and past partnerships with top tier mining companies
• New and innovative project generation ideas
• Proprietary databases and exploration technologies

Near-term, what excites us the most about Kiska is its Kliyul Project in central B.C. (bordered actually by Garibaldi Resources’ Red Lion Project, but that’s not why we like it)…geologists at Teck Resources Ltd. (TCK.B, TSX) are very excited about the potential of Kliyul, and so they should be given the area and historical drill results from this property showing significant Cu-Au grades in outcropping breccia, tested to date only by shallow holes which are open to depth…this is an exceptionally promising system which Teck began drilling last month…

We’ll have more on Kliyul in the coming days…

Just recently, Kiska announced a deal with Brazil Resources (BRI, TSX-V), a company we also encourage readers to check out, whereby KSK will receive 3.5 million shares of Brazil over the next 20 months for the sale of the Whistler Gold-Copper Project and certain related assets in south-central Alaska to BRI…

We’re not usually enamored by prospect-generator type companies, but at a penny-and-a-half (market cap of $1.7 million which essentially matches KSK’s working capital position as per its March 31 financials – not including the BRI transaction), this one is too good to pass up, even it means waiting for another year or more to cash in big…

Below is a graphic from KSK’s website showing the current stage of its projects…as always, perform your own due diligence…

Note:  John and Jon both hold share positions in GGI.  Jon holds a share position in KSK.

Gold has traded between $1,117 and $1,141 so far today…as of 10:30 am Pacific, bullion is down $15 an ounce at $1,125, falling – at least temporarily – below the $1,130 support that bulls are hoping to be able to defend…we’re dealing with volatile markets at the moment, and the key will be where Gold settles for the week…Silver has hit a 6-year low, dropping 63 cents to $14.07…Copper is down 6 cents at $2.24…Crude Oil is off 28 cents a barrel to $39.03 while the U.S. Dollar Index responded favorably to U.S. durable goods numbers this morning (Gold the opposite) and has jumped more than a full point to 94.95…

China’s Gold demand might be slightly below the last 2 years but nevertheless remains around historically elevated levels, UBS has pointed out.  “Looking at monthly average shipments of Gold into China from Hong Kong and Switzerland over the past 5 years reveals that current volumes are actually reasonably robust – certainly not as impressive in terms of magnitude and consistency as what was seen in 2013, but not too shabby either. Combined inflows from HK and Switzerland to July are only down by a modest 3% versus the same period last year. This suggests that underlying demand fundamentals are broadly intact, which supports our view that seasonal demand should pick up in Q4.”

Dudley Throws Cold Water On Fed Rate Hike Next Month

A September rate hike is looking less compelling, according to William Dudley, president of the New York Federal Reserve…a voting member of the FOMC, Dudley addressed the Fed’s potential tightening – especially considering the recent plunge in U.S. equities and international financial turmoil – in a press briefing this morning…

“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” he said…as for inflation, Dudley said the headline rate remains low because of the drop in Oil prices, and the core rate remains flat…but weak Oil and a strong dollar will not last “indefinitely”, so the he said he expects inflation to rise (the Fed has kept saying inflation will rise but that just hasn’t been happening as deflationary forces appear to be in control)…

Jackson Hole Conference Beings Tomorrow

Given recent events in China and global market volatility not seen in years, the start of tomorrow’s Jackson Hole Conference in Wyoming takes on greater significance even though neither Fed Chair Janet Yellen or ECB President Mario Draghi will be in attendance…however, Fed Vice Chairman Stanley Fischer is scheduled to deliver remarks Saturday on inflation (that should prove interesting)…financial markets will be closely examining Fischer’s comments for any hints about whether the Fed is still likely to boost interest rates at its Sept. 16–17 meeting…among other issues, including China’s devaluation of its currency, the Fed has to be increasingly worried about the weakness and direction of Oil prices…markets may have overlooked the fact that in the minutes from the FOMC’s July meeting released last week, officials removed the Oil-stability paragraph from their statement…

Emerging markets will be a hot topic of conversation at Jackson Hole…another problem on the Fed’s radar screen in that regard is the fact that total corporate bonds outstanding in emerging markets have almost doubled since 2008 to $6.8 trillion, according to Institute of International Finance estimates…the share of this debt issued in U.S. dollars rose from less than 15% in 2008 to more than 40% in the first 5 months of 2015…the debts become harder to pay off as the dollar appreciates…

Updated Gold Chart

A retracement by Gold to its 50-day moving average (SMA) at $1,133 was not surprising, but this morning’s drop below that level is disappointing as it threatens to take away some of the bulls’ recent momentum and reinforces the chart resistance at $1,150…however, we’ll see how Gold closes today, tomorrow and Friday – the weekly close in particular is critical, and we’re dealing with very volatile conditions across all markets…

Overall, Gold continues to look positive at the moment as it works its way back up (2 steps forward, 1 step back) within a long-term downsloping channel with well-defined support and resistance…the RSI(14) 50% level must be overcome on this 2.5-year weekly chart in order for the metal to gain traction above $1,150 and take a run at the next major target area which is $1,200…

Major rallies have followed the 3 previous occasions since late 2013 when the Gold price touched the bottom of the downsloping channel on this chart…

Euro 1.5-Year Weekly Chart

Traders who went long on the greenback and/or short against the euro in March and April bought high and sold low – they got caught up in the hoopla surrounding the dollar which likely peaked for the year in March after a record run…

The euro was as deeply oversold in the early spring as the greenback was overbought – ideal conditions for a change in dynamics which are increasingly more obvious to investors today…

The euro now has momentum (this is supportive of Gold as well) and has broken out above both its 200-day SMA and Fib. resistance just below 113…it closed at 115 yesterday…it has backed off a point to 114 this morning…Fib. resistance exists at 115 and 117…wouldn’t be surprising if the euro were to take a run at chart resistance at 125 before the year is out, and that’s bad news for the many dollar bulls who are still out there (remains a crowded trade)…

Note the RSI(14) trendline and the move above the important 50% level…

Today’s Equity Markets

Asia

Along with shorting curbs now in place, China will also now restrict trading in stock index futures, a statement from the China Financial Futures Exchange said, as regulators step up their efforts on curbing “speculation”…of course they had no problem with the kind of speculation that drove the market up to 5000 earlier this year…how can investors have confidence in a system like this?…

Europe

European markets were down more than 1% today on fresh concerns regarding China…

North America

The roller coaster ride continues for U.S. stocks…the Dow and S&P 500 both closed about 1.3% lower yesterday after rallying nearly 3% earlier, their biggest reversal to the downside since October 29, 2008…that created the Dow’s worst 3-point decline in history…this morning, markets gapped up strongly but have swung wildly in both directions…as of 10:30 am Pacific, the Dow is ahead 287 points…

Orders for durable goods for July rose 2.2%, above the expected 0.1% increase, but down from the 3.4% gain last month…

In Toronto, the TSX is 26 points higher as of 10:30 am Pacific…the Canadian dollar is trading just slightly above 75 cents after ending the day yesterday below that level for the 1st time since 2004…the Venture is flat at 527 as of 10:30 am Pacific…

Equitas Resources Corp. (EQT, TSX-V) Update

A pennant formation on this 2-month daily chart for Equitas Resources (EQT, TSX-V)…pennant formations are typically bullish…given the strong underlying support in EQT, and the upcoming drill program, the odds of a breakout here have to be considered unusually good…

EQT is unchanged at 12 cents as of 10:30 am Pacific…

Pure Energy Minerals (PE, TSX-V) Update

It’s hard not to be excited about the prospects for Pure Energy Minerals (PE, TSX-V) as it continues with exploration and development of its Clayton Valley South Lithium Brine Project in Nevada…there’s also a tech angle to this – Tenova Bateman Technologies’ Lithium extraction technology which gives this project the potential to be a low-cost producer of battery-grade Lithium materials…

The recent breakout above the ascending triangle was a bullish chart development and allowed PE to reach Fib. resistance bang-on at 47 cents…a gap was also filled with a retrace to support in the mid-30‘s as expected, followed by another test of the high 40’s…

PE is trading at a nearly 4-year high in a challenging overall market – that speaks volumes for the potential here…if buy pressure picks up, and PE can overcome the Fib. resistance, it could accelerate again very rapidly…as always, perform your own due diligence…

PE is up 3 cents at 42 cents as of 10:30 am Pacific…

Kirkland Lake Gold Corp. (KGI, TSX) Update

Kirkland Lake Gold (KGI, TSX) has been on a steady rebound since late 2013 and any dips below the rising 200 moving average (SMA), currently $5.00, have proven to be good accumulation opportunities…

A prudent approach, aided by a weak loonie, has allowed Kirkland Lake to remain profitable and generate free cash flow over the past 12 months…next full financials will be released September 14…the company operates Canada’s highest-grade Gold mine and expects production to ramp up to 160,000 to 180,000 ounces per year…

Technically, strong support was demonstrated last month at the $4.50 Fib. level…

After touching an intra-day high of $5.99 last Thursday, KGI has retreated just below $5 today…expect very strong support between $4.50 and this morning’s low of $4.90…

KGI is off 16 cents at $4.91 through the 1st 4 hours of trading today…

KGI 9-Month Daily Chart

Note:  John and Jon both hold share positions in EQT.