We have little confidence in communist or socialist regimes, which is one reason – along with some very obvious technical signals – that we grew very nervous about the parabolic move in China’s Shanghai Composite that peaked in June just above the 5000 level.  John’s charts were screaming that it was time for a correction in the Shanghai while millions of unsophisticated Chinese investors, encouraged by their government, were jumping on the bandwagon and borrowing heavily to grab shares of already overbought equities.  If there’s any lesson to be learned from that, pay attention to what the crowd is ignoring or hates (that’s why we see some historic opportunities at the moment among select high-quality junior exploration companies and certain producers who have good control over their cost structures).  Billionaire Carl Icahn certainly understands that concept which is why he recently became a major shareholder of Freeport-McMoRan Inc. (FCX, NYSE), one of the world’s largest producers of Copper and Gold.

Despite its many flaws, China is still the “800-pound gorilla” as far as commodities are concerned with a population of nearly 1.4 billion.  It’s important to note that China’s economy, while certainly in need of further structural reforms, is still growing at an impressive clip, though obviously not at the accelerated rate it was earlier.  Resource companies around the world will need to find new mineral deposits and put them into production in the years ahead just to serve China’s growing needs.

Getting back to the Shanghai, which historically has been very speculative and often disconnected from trends in the economy, John’s long-term chart gives us a very good idea of the “range” this market is currently in.

You’ll notice the extreme overbought RSI(14) conditions that emerged late last year and continued for about 6 months.  This occurred as the index hit resistance at the top of a channel in June, just above 5000, while the +DI indicator also touched a previous high.  This was a really dangerous time to be chasing this market.

At the moment, strong resistance exists around the 3400 level, just below the 200-day SMA shown on this chart (currently 3686 and likely to reverse to the downside soon), while support is at the bottom of the “pitchfork tine” at 2650.

Over the weekend, People’s Bank of China Governor Zhou Xiaochuan (a puppet of the state) said at the G-20 meeting in Turkey that China’s stock market has almost completed its correction after a bubble formed in the first half of the year.  He’s actually probably not that far off in his prediction given how the RSI(14) has unwound to 53%, nearing support, while the bottom of the channel is 430 points or 14% below today’s close on the Shanghai of 3080 (a 2.6% decline after the 4-day holiday).

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TSX Venture Exchange and Gold

The Venture got off to a rocky start last Monday with an 11-point loss, but a temporary minor pullback was normal and healthy given the sudden 9% advance out of the previous week’s intra-day August 24 low (509).  Furthermore, John’s chart last Monday demonstrated a clear trend change in the Chaikin Oscillator with cash flowing into the Venture after this indicator hit an extreme, historical low near the end of July.

Notably, the Index held up extremely well Friday in the face of weakness across the broader equity markets and commodities as well.  This shows some new internal strength in the Venture which is refreshing to see.  For the week, it was off 3 points, closing at 553 – just below key resistance at the EMA(20) and SMA(20).

Venture 4-Month Daily Chart

Below are 7 key takeaways from John’s updated 4-month Venture “awareness” chart:

1.  A confirmed breakout has occurred above the EMA(8) which has also reversed to the upside and is now providing new support;

2.  Next key resistance is the EMA(20), currently 558.  A confirmed breakout above the EMA(20), followed by its reversal to the upside, would give the Index fresh momentum – this would also verify that the Venture is in the midst of a significant rally;

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 – the trend suggests a near-term switch to buy pressure;

5.  The recent bearish trend (ADX indicator) has weakened dramatically since the August 24 low;

6.  Fib. support at 515 has held – on a monthly basis, Fib. support around 560 also held in August;

7.  Fib. resistance above the EMA(20) starts at 586.

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, despite its recent advance, is just one 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.  A lot of answers should come over the next couple of weeks, especially after the Fed meeting.

If an important discovery is made somewhere – possibilities range from Labrador to the Sheslay district and some places in between – watch out.  The Venture would rapidly gain momentum as investors are starving for something big.

Venture 39-Week Cycle Chart

John’s 39-week cycle chart going back 15 years has been a very useful guide that prevented us and many of our readers from pushing the “panic button” while the market was taking a beating in July and August.  This chart gave us confidence that relief was on the way around the end of August – perhaps even a final capitulation, or at least a stabilization or the beginning of a strong rally.

Consistently over the last 15 years, a Venture pattern change (short-term or longer-term) has occurred around the end of each 39-week period.  Why that is, we can only speculate.  However, facts are facts.  The last 5 cycle periods, including this one (each cycle period is indicated by a vertical blue line), have also ended with RSI(14) lows or highs.

It’s premature at this point to suggest the Venture is about to enter a new bull phase, especially considering that uncertain outlook for Crude Oil and commodities in general.  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 September through December for the Venture will also be much different than that same 4-month period last year when the Index got hammered.

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

A key metric to watch over the next couple of weeks will be the U.S. Dollar Index (the Venture typically has an inverse relationship with the greenback).  Will the dollar regain strength or will this crowded trade start to really unwind based on market perceptions and Fed actions or inactions (how the Fed and other central banks have increasingly distorted markets is incredible, but they’ve been filling a fiscal policy vacuum that exists in many major economies).

The consistent position we’ve maintained over the last several months is that the Dollar Index hit its 2015 high during March-April based on what has proven to be, so far at least, a very reliable 9-month daily chart (see below).  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 Index support has been strong around the 93 level as expected.  However, the Index faces serious technical challenges in terms of moving higher, or significantly higher, from its close just above 96 Friday.

Watch The Resistance Area

Note how the first uptrend line, in place since the summer of 2014, became resistance after the Index broke below that uptrend in late April.  A second uptrend line formed from the May low in the Index.  That uptrend was broken in late August and became fresh resistance which the Dollar Index is now once again testing.  If this resistance is overcome, the Index could take another run into the high 90’s but that’s going to ring alarm bells across the globe.

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

September is traditionally Gold’s best month of the year, but the yellow metal is off $11 an ounce through the first 4 trading sessions this month after closing Friday at $1,123.  How the rest of this September unfolds will hinge largely on what the Fed does and says after its policy meeting September 16–17 (this meeting will include a Janet Yellen news conference following a fresh statement from the Fed).

Below is John’s updated 2.5-year weekly chart.  It doesn’t give many clues regarding what next week may bring (of course it’s a shortened trading week with the Monday holiday), but the broad aspects of this chart are generally positive at the moment.  Over the last 2+ years, each time Gold has touched the bottom of its downsloping channel, it has eventually rallied back to the top of that channel.  This has happened on 3 occasions going back to 2013.  There’s a good chance this trend will continue.  At the moment, SS is showing strong up momentum while a bullish DI cross could be in the works as well (+DI and -DI are now virtually equal).

Any signs of increased demand from China and India this month could give Gold a boost or some much-needed support in the event of any further weakness.

Silver closed unchanged last week at $14.59.  Copper added a penny to $2.33.  Crude Oil gained 44 cents to $45.77 while U.S. Dollar Index was relatively unchanged at 96.22.

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).

Gold has traded between $1,116 and $1,133 on this “jobs report Friday”…as of 9:30 am Pacific, bullion is down $4 an ounce at $1,121…Silver has retreated 15 cents to $14.57…Copper has fallen 7 cents to $2.31…Crude Oil is off 61 cents at $46.14 while the U.S. Dollar Index has declined one-tenth of a point to 96.24…

Particularly encouraging today is the behavior of the Venture and how well it has held up with triple digit losses on the Dow and TSX, while commodities have come under some pressure as well…that’s yet another sign the Venture may have put in an important low at 509 intra-day August 24…the key for the Venture in the days ahead is to push above resistance at its 20-day moving average (SMA)…

The big news impacting markets today is this morning’s final U.S. jobs report prior to a crucial Fed meeting later this month…the Labor Department’s numbers potentially muddied the waters instead of providing clarity…non-farm payrolls rose a seasonally adjusted 173,000, well short of the 220,000 predicted by economists surveyed by The Wall Street Journal…but the unemployment rate fell to 5.1% from 5.3%, and some of the other underlying numbers (such as wages) picked up…

Traditionally, for some strange reason, the August non-farm payrolls have been the quirkiest of the year…August reports have been clunkers in that 11 of the past 12 years the report has come in weaker than expected after the first go around – revisions later, however, have generally been the largest of the year…so there’s a good chance today’s number will be revised up, but not until after the Fed meeting…

Meanwhile, the labor force participation rate edged lower to 10.3% but remains mired near its lowest level since the late 1970’s at 62.6%…

Former Fed Chairman Alan Greenspan made a lot of sense this morning during an interview on CNBC…he said if countries don’t tackle fiscal problems, monetary policy will “become utterly irrelevant”…gridlock by Democrats and Republican on solving the problems posed by the spiraling costs of entitlements, namely Social Security and Medicare, has created a situation the Fed can’t solve, Greenspan said.  “Both (parties) have been afraid to touch the third rail of politics.”

Greenspan added that he’s “baffled” that a 25 basis point hike by the Fed would have a major impact on economic conditions around the world…

Schiff On Fed

Well-known dollar bear and Gold bull Peter Schiff has a different take on Fed matters than Greenspan, not surprisingly…in an interview with Kitco News, Schiff said he doesn’t think the central bank wants to raise interest rates, as markets perceive.   “I don’t think they’re really considering it,” he stated.  “I think they know that if they raise rates, everything is going to collapse and they’re going to have to cut rates back to zero and look like complete fools.”

Schiff also stated that the Fed’s best course of action is to simply let markets take their course and face the crisis the Fed “interrupted” a few years back with its easing measures. “They never actually committed to (raising rates), it’s just the markets that have made that assumption,” he said.  “The Fed has not gone out of its way to correct that assumption, but I think that’s by design.”

U.S. Dollar Index Updated Chart

The U.S. Dollar Index is at a key point and needs to be watched closely…an important move, one way or the other, seems likely this month… our consistent position for the past several months – based on chart patterns and global events that may curtail the Fed’s desire to initiate a rate hike until sometime next year – is that the greenback peaked for 2015 in the March-April period, and that the final quarter of this year could be much different for the dollar than Q4 2014…that would also have implications for the Venture and commodities…

For now, the immediate challenge for the Dollar Index is to overcome resistance around the 96 level…RSI(14) has been showing decreasing momentum since the spring but has so far managed to hold support at the 50% level…the crowded dollar trade has the potential to correct quite a bit more to the downside (below support at 93) before the year is out if the right dynamics emerge…

Oil Update

OPEC finally expressed concern earlier this week about low Oil prices, and that could be a signal their “line in the sand”, so to speak, has been drawn around the recent low at $37.75…that’s one factor that has allowed WTIC to push above $45, though a strong band of resistance exists between $45 and $55 which is where the downtrend line currently intersects on this 2-year weekly chart…

A modest firming up or even a stabilization in Oil prices can only be beneficial for the Venture given the high correlation between the two markets…

Copper Long-Term Chart Update

In the face of continuing strong sell pressure, Copper is desperately trying to hold critical support at its long-term uptrend line which also currently intersects through the bottom of a downsloping channel which has been in place since 2011…

Meanwhile, RSI(14) is approaching “decision time” by the end of this year – it will either break above its downtrend line, which would be very encouraging, or it will fall below long-term support at the 30% level…

Today’s Equity Markets

Asia

Japan’s Nikkei tumbled 390 points or 2% overnight to close at 17792…China’s Shanghai Composite resumes trading Monday following a 4-day weekend to commemorate the anniversary of the end of World War II in Asia-Pacific…

Europe

European markets were down significantly today, generally near 3%, extending losses after the U.S. jobs report came out…

North America

Volatility continues to reign supreme in New York…the Dow has posted triple digit losses or gains in 10 out of the last 12 sessions…as of 9:30 am Pacific, the Dow is down 293 points…

The best environment for stocks is when the VIX (Volatility Index) is below 25…it’s currently well off its recent multi-year high of 53, reached intra-day during the “flash crash” August 24, but it’s stubbornly remaining just above 25 on a closing basis…it’s possible that the VIX may not settle down until after the Fed meeting is out of the way mid-month – or perhaps there will be an extended period of volatility (the “new norm” for a while)…

In Toronto, the TSX has lost 150 points while the Venture is down just 1 point at 553 as of 9:30 am Pacific…

The Canadian economy gained 12,000 jobs in August (vs. expectations of a loss of 4,000), bolstered by a gain in full-time employment, but more people were looking for work and the unemployment rate ticked higher for the first time in months, Stats Canada reported this morning…the unemployment rate increased to 7% per cent for the month, up 0.2 from 6.8%, where it had held steady for 6 consecutive months…

Pure Energy (PE, TSX-V) Update

Pure Energy (PE, TSX-V) has displayed pure power in the market over the last couple of months in particular with its moves continuing to correspond with important Fib. levels on John’s 2.5-year weekly chart…very predictable technical patterns here, supported by increasingly encouraging fundamentals including the company’s initial NI-43–101 inferred resource estimate for its Clayton Valley South Lithium Brine Project in Nevada…the Lithium space is attractive to a lot of investors at the moment, and of course there’s also a tech angle to Pure Energy – Tenova Bateman Technologies’ Lithium extraction technology which gives this project the potential to be a low-cost producer of battery-grade Lithium materials…

The August 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 then filled with a retrace to support in the mid-30‘s as expected, followed by another test of the high 40’s, a breakout above that key area, and now perhaps a test of the next Fib. resistance…

PE is up a nickel at 64 cents as of 9:30 am Pacific after reaching another multi-year high this morning of 67 cents…

Amarc Resources Ltd. (AHR, TSX-V) Update

The deal announced yesterday between Amarc Resources (AHR, TSX-V) and Thompson Creek Metals (TMC, TSX) regarding AHR’s IKE Project in south central British Columbia is clearly favorable for Amarc’s prospects in our view, especially if drilling begins shortly at IKE as suggested in yesterday’s news…

Under the terms of the agreement, Thompson Creek can earn a 30% interest in the project under a stage 1 option by financing $15 million of expenditures on the property before December 31, 2019, of which $3 million is committed for 2015…

As AHR Chairman Robert Dickinson stated in yesterday’s news release, “Amarc currently holds a permit issued by the B.C. government for a 50-hole drill program at IKE. Crews are to be mobilized to the field for the 2015 exploration season in the near term. Drill activities will focus on the IKE porphyry system to determine the known deposit’s full resource potential as defined by Amarc’s 2014 drill results and postdrilling geological, geochemical and geophysical surveys.”

Technically, Amarc is showing some fresh strength…key resistance is 10 cents where it’s trading at this morning…this is not a high-volume play at the moment like Equitas Resources (EQT, TSX-V), but AHR could nonetheless enjoy a strong finish to the year if they’re able to drill dozens of more holes into IKE…worth keeping a close eye on given the quality of the project, the people, and now some serious money to prove up a discovery…

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

Gold has traded between $1,121 and $1,135 so far today…as of 8:15 am Pacific, bullion is down $10 an ounce at $1,124…Silver is relatively flat at $14.66…Copper has climbed 6 cents to $2.38…Crude Oil has jumped $1.61 a barrel to $47.86 while the U.S. Dollar Index has shot up two-thirds of a point to 96.58 thanks to weakness in the euro following today’s ECB meeting…

It might just be time to take a contrarian approach with commodities, says one UK-based research firm, especially because concerns over China’s economy may be “overdone“, they say.   “Some improvement in confidence was already seen towards the end of last month, with Oil prices in particular snapping back. Better news from China should therefore allow the prices of key industrials to recover further over the rest of the year,” said analysts from Capital Economics in a research note yesterday.  “As prospects are surely not that bad, this may be a good time to take a contrarian view, especially as investor sentiment towards commodities has deteriorated even further,” they added.

Interesting comments this morning from ace mining sector writer Kip Kean in an article (“The Ichan Bottom“) regarding Carl Ichan’s move last week to acquire a significant stake in Freeport-McMoran Inc. (FCX, NYSE) which has surged 25% since then…

“Carl Icahn’s move into Freeport-McMoRan puts the shine on the mining sector as a bottom-fishing opportunity. It’s a theme that’s done the Internet and media rounds. Indeed, it’s hard not to cast the impending activism on Freeport as such a sign. That is, a sign of a savvy investor locating prey in a suffering sector.”

Check out the rest of Kip’s article at Mineweb.com…

Ichan is among a growing number of opportunistic individuals and companies who are acquiring, or attempting to acquire, beaten-down assets in the mining sector…the Financial Post highlighted this morning how First Mining Finance (FF, TSX-V) CEO Keith Neumeyer continues to snap up promising assets after this week’s announcement of a 3-way deal wherein it will buy Gold Canyon Resources (GCU, TSX-V) and PC Gold (PKL, TSX-V) for a total of about $66 million in stock…First Mining only went public in April, but it sees this as the ideal time to buy junior mining assets on the cheap…FF president Pat Donnelly stated, “We don’t want the market to turn around soon, because we really want to load up on assets. And so the longer this bear market continues, the better for us.”

IMF On Global Growth Risks

The International Monetary Fund said yesterday that the moderate global growth in the 1st half of the year is reflective of two elements – a slowdown in emerging economies, and weak recovery in advanced ones.  “In an environment of rising financial market volatility, declining commodity prices, weaker capital inflows and depreciating emerging market currencies, downside risks to the outlook have risen, particularly for emerging markets and developing economies,” the IMF stated in its report…

37 B.C. First Nations Miss Deadline To File Financial Statements

The Vancouver Sun reports that 37 First Nations in B.C. could lose a portion of their federal funding after they missed the deadline to file financial statements, according to Aboriginal Affairs Canada…many of them said yesterday they were scrambling to gather all their financial data and had asked the federal government for an extension on filing their audited financial accounts…Aboriginal Affairs says 581 First Nations across Canada had until midnight Tuesday to file their financial information – including salaries and expenses of band members – under the First Nations Financial Transparency Act. as of Wednesday morning…a total of 191 – or just under one-third – had failed to do so…

“All Canadians, including First Nations, want and deserve transparency and accountability from their governments,” Conservative Aborginal Affairs Minister Bernard Valcourt stated…the law applies “the same principles of transparency and accountability to First Nations governments that already exist for other governments in Canada,” he added…

The Conservative government adopted this very sensible law in 2013 requiring First Nations to publicly post detailed financial statements, including information on chief and band council salaries…the federal Liberals and NDP have both come out against that law…

Stop Thinking About Gold Only In U.S. Dollar Terms

Below is an updated chart from John showing how Gold is in a bull market in Canadian dollars, which has really been to a boon to Canadian-only producers though many investors have yet to grasp this fact…

Columbia is another great example of the benefits to mining companies of a depreciating currency against the U.S. dollar…Colombia’s largest Gold producer is fetching near-record high prices for its output thanks to its sinking local currency (Colombia’s peso has lost 39% in the past year amid slumping prices of coal and Oil, the country’s main exports)…that’s shielding Mineros SA from bullion declines that are forcing cutbacks at other mining companies…Mineros shares have jumped 30% in the past 3 months while a peer group tracked by Bloomberg fell 18%…the Colombian peso is down 18% against the dollar in the same span, the worst performance among major Latin American currencies…

In Canada, if you think the loonie is low now, just wait until the NDP potentially sweeps into power…

Gold in Canadian Dollars

Gold is close to really breaking out above Fib. resistance at $1,514 CDN (it closed at $1,504 CDN yesterday) as you can see on this 2.5-year weekly chart…bullion has surged 17.3% in Canadian dollar terms since late last year…combined with low Oil prices, this is a major boost for Canadian producers, and 1 of them we like the most is Richmont Mines (RIC, TSX) which has turned into an earnings machine…

Gold-Crude Oil Comparative

Below is a 10-year Gold chart (U.S. dollars) relative to WTIC…what it shows is a major breakout by Gold, relative to Oil, above a multi-year downsloping channel that developed in 2009…what this presages, in our view, is not necessarily even lower Oil prices but a move higher in bullion over the next several months…the naysayers who are predicting Gold’s collapse have got it wrong…

Today’s Equity Markets

Asia

Thank goodness, we have a break from the circus…China’s Shanghai Composite is closed until Monday as the country commemorates the end of World War II…actions by Chinese authorities with regard to the recent economic and market difficulties there have been about as bizarre as their rules pertaining to their big military parade which was held today…the New York Times reports that Beijing was so determined to make a success of the parade that it issued a raft of rules to maintain decorum: no peeking from windows, no gawking from sidewalks, no cooking on gas stoves, no scissors allowed in offices (what’s that about?)…and, it says, specially trained monkeys have been let loose to scale trees on the route and dismantle birds’ nests, to ensure there’s no pooping on the tanks…or on Communist Party leaders too, presumably…

Japan’s Nikkei was up slightly overnight…

Europe

European markets were up strongly today as the ECB hinted that its asset-purchase program (QE) would be increased if needed – rest assured, they will throw just about everything into the mix including the kitchen sink in an effort to kick-start inflation and give the economy a further boost…QE has proven to be an effective drug for the stock market (the U.S. is the best example) but hasn’t yet proven to generate meaningful benefits on the inflation front…

ECB President Mario Draghi has buoyed markets desperate for more central bank aid, signaling this morning the ECB stands ready to extend the “size, composition and duration” of its €1.1tn bond buying program…

Meanwhile, euro zone business activity accelerated at its fastest pace in more than 4 years last month as Italy turned in its best performance since early 2011 and German growth strengthened, surveys showed today…but while those upbeat surveys provided some welcome news for the ECB, which is struggling to boost the economy and inflation, they still only point to modest Q3 GDP growth…

North America

The Dow has jumped another 165 points as of 8:15 am Pacific…in Toronto, the TSX has surged 116 points while the Venture has added 5 more points to 555…tomorrow will be a key day in the markets with the U.S. jobs report…

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

BMR Pro subscribers will be receiving a special update with a subscriber-only post over the weekend regarding Garibaldi Resources (GGI, TSX-V) and the Sheslay district in general as activity gets set to heat up there…

Below is John’s latest GGI chart (2.5-year weekly)…this is definitely 1 of the most bullish charts we’ve found on the Venture, given the breakouts above the price and RSI(14) downtrend lines, the increasing buy pressure (CMF), the peak that occurred in the bearish trend (ADX indicator), and the 50-day moving average (SMA) which is just now beginning to reverse to the upside…previous reversals in the 50-day have been followed by substantial advances in GGI…

GGI is off half a penny at 7.5 cents as of 8:15 am Pacific…

Amarc Resources (AHR, TSX-V) Options IKE To Thomspon Creek

Amarc Resources (AHR, TSX-V) has bought in some bigger guns to attack its promising IKE Cu-Mo-Ag Porphyry Project in south central British Columbia…Amarc has struck an option agreement with Thompson Creek Metals (TCM, TSX) which allows Thompson to earn an initial 30% interest in the project under a stage 1 option by financing $3 million of exploration expenditures on the property this year, and a total of $15 million before December 31, 2019…significantly, Amarc will remain as operator during stage 1…Thompson Creek has an option, after acquiring its initial 30% interest, to acquire an additional 20% of the project, subject to certain conditions, including the completion of a feasibility study…

Robert Dickinson, chairman of Amarc: “HDI (Hunter Dickinson) companies have a long history of discovering and developing Copper porphyry deposits in B.C. that have gone on to generate decades of wealth and opportunity for British Columbians. Thompson Creek’s Mount Milligan mine northwest of Prince George, for example, is a Copper-Gold porphyry that our group drilled and discovered years ago. We’re delighted that today, under Thompson Creek’s committed leadership, it is generating high-value jobs and economic benefits for British Columbians, and we are excited to be joining forces with Thompson Creek at IKE, a property we believe has the potential to become a company maker in the years ahead.”

Nine discovery drill holes by Amarc, announced late last year, intersected chalcopyrite and molybdenite mineralization from surface and over a broad area, measuring 1,200 meters east-west by 600 m north-south and to a depth of approximately 500 m…mineralization at IKE remains open in all lateral directions and to depth…the discovery holes and post-drilling geological, geochemical and geophysical surveys completed outwards from the drilled area indicate that the IKE porphyry system has the potential for important-scale resource volumes…

AHR is up 1.5 cents at 10 cents as of 8:15 am Pacific…

Brazil Resources Inc. (BRI, TSX.V)

An “awareness” chart this morning from John regarding Brazil Resources (BRI, TSX-V) which readers should put on their radar screens as we believe this one may have bottomed…

Based on BRI’s current technical posture, what we expect to see is a major breakout above the downtrend line before year-end…fundamentally, the company is in a healthy financial position with the ability to raise additional capital…it has several million ounces of Gold resources in Brazil, and has recently made some interesting acquisitions in Canada…we’ll have more on BRI in the near future…as always, perform your own due diligence…

BRI is off a penny at 53 cents as of 8:15 am Pacific…

Mezzi Holdings Inc. (MIZ, TSX-V) Update

Mezzi Holdings (MZI, TSX-V) announced yesterday that it has arranged a non-brokered private placement offering at 15 cents for gross proceeds of $700,000…the company says the non-brokered private placement is fully subscribed with the majority being taken by insiders, long-term, existing shareholders and cornerstone institutional investors…

Technically, a rally appears to be brewing here…strong base support has held at 14 cents, and note the breakout above the downtrend line in June…

MZI is unchanged at 15 cents as of 8:15 am Pacific…

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

Gold has traded between $1,131 and $1,143 so far today…as of 9:00 am Pacific, bullion is down $5 an ounce at $1,135…Silver is off a nickel at $14.57…Copper is up 3 pennies to $2.32…Crude Oil has retreated another $1.56 a barrel to $43.85 while the U.S. Dollar Index has added one-third of a point at 95.81…

Growth in China’s imports of precious metals is likely to be stronger than for most commodities over the next half decade, according to Barclays in a report published today…with the world’s largest population and as the country further develops its infrastructure, China is obviously one of the world’s largest consumers of commodities…the country’s shift toward “green energy” and a consumption-oriented economy should boost demand for certain commodities.  “Natural gas, corn, Silver, Gold and Palladium are also likely to see rapidly rising import growth,” the bank said…

Commerzbank’s technical team says Gold is well-positioned to again test the $1,160’s in the near future as long as it holds above last week’s low…

Oil Update

After enjoying its best 3-day gain (25%) since 1990 Thursday through Monday, Crude Oil is extending its pullback today from yesterday’s sharp losses which were due in part to data from industry group American Petroleum Institute that showed U.S. Crude stocks surged by 7.6 million barrels to 456.9 million in the week to August 28…analysts in a Reuters’ poll had expected just a 32,000 barrel gain…

Meanwhile, this morning, the U.S. Energy Information Administration reported that Crude inventories rose by 4.7 million barrels in the last week, the biggest 1-week rise since April, compared with analysts’ expectations for no change…

As John’s chart showed yesterday, Crude faces a strong band of resistance between $45 and $55…OPEC is finally some showing some concern about low prices, so we’ll see how that plays out in the coming weeks – so far, their strategy of trying to squeeze out North American shale producers hasn’t quite worked the way they had hoped…

Today’s Equity Markets

Asia

Asian markets were modestly lower overnight with China’s Shanghai Composite finishing 12 points lower at 3155…the Shanghai was off nearly 5% at one point before the government’s “rescue team” jumped in and brought the market back to nearly even by the end of the session…

Europe

European markets were up modestly today…

North America

The Dow is up 103 points as of 9:00 am Pacific after a horrible start to September yesterday…in Toronto, the TSX has lost 38 points while the Venture has added 3 points to 551 through the first 2-and-a-half hours of trading…

U.S. private sector job creation held steady last month, albeit slightly below expectations according to an ADP report released this morning…companies added 190,000 jobs to close out the summer, a number that was better than July’s downward-revised 177,000 but below the expected 201,000 new positions (ADP has shown private sector job growth of less than 200,000 in 5 out of the last 6 months)…the report tees the market up for Friday’s critical non-farm payrolls report from the Labor Department in advance of the upcoming FOMC meeting in mid-September…

U.S. worker productivity advanced this spring, reflecting a resurgence in economic activity following a slow start to 2015…the productivity of non-farm workers, measured as the output of goods and services per hour worked, increased at a 3.3% seasonally adjusted annual rate in Q2 according to the Labor Department…that was the strongest pace since the 4th quarter of 2013…from a year earlier, productivity was up 0.7%…however, this morning’s report showed weaker productivity gains in the manufacturing sector than previously thought…

TSX 6-Year Monthly Chart Update

One technical factor the TSX has going for it – along with U.S. markets – is a rising 1000-day moving average (SMA) which has provided support (on a closing basis) going back to late 2012 on the TSX as you can see on John’s 6-year monthly chart…

The fall below chart and Fib. support at 14150 on August 19 started the intense sell-off on the TSX that led to the very volatile Monday, Aug. 24, session when the index tumbled as low as 12705 before rebounding to close at 13053…

RSI(14) conditions are currently in very oversold territory at 18%, consistent with the late 2012 low in the TSX when it plunged 24% from its spring high…last week’s intra-day low of 12705 was a 19% correction from last summer’s all-time high of nearly 15700…

There’s a nearly 1650-point range on current Fib. support between 11502 and 13144…

Venture Short-Term Chart

The Venture’s main technical challenge at the moment is to overcome resistance at its EMA(20) – currently 561 – which it nearly touched at the close of last Friday’s trading…the Index finally emerged out of extended oversold conditions last week and also pushed above a downtrend line (not shown on this chart)…sell pressure became very intense near the end of July and appeared to peak at that time…

RSI(14) support on this 4-month daily chart should come at the 30% level, resistance throughout July and August…

Venture Long-Term Chart

Below is John’s latest long-term chart for the Venture…was 509 a final bottom?…impossible to tell, but what’s certain is that extreme values – never previously seen on this monthly chart – are clearly evident in several indictors including RSI(14) which has fallen slightly below its 2008 Crash reading…

Curiously, many investors are all too eager to chase a market – a particular stock or an index – when extreme “overbought” conditions are prevalent, but they’re reluctant to embrace extreme oversold conditions…that’s a dynamic of human psychology, how the emotions of excitement, greed and fear play heavily on investors’ decisions…

Skeena Resources (SKE, TSX-V) Goes After Dolly Varden Silver (DV, TSX-V)

An interesting situation has developed on the Venture in recent days, and it all started after Dolly Varden Silver (DV, TSX) released a NI-43-101 resource estimate last Thursday covering the 4 known deposits on its 100%-owned Dolly Varden Project in northwest British Columbia…this is certainly a prospective property (94 sq. km) that warrants a lot more work…the deposits are hosted in Lower Jurassic Hazelton Group stratigraphy, the same stratigraphy that hosts the past producing Eskay Creek precious-metal-rich VMS (volcanogenic massive sulphide), and the high-grade Gold Brucejack deposits, located on trend and approximately 130 km and 110 km, respectively, to the northwest of Dolly Varden…this rock package and structural trend extends northward from the historic deposits throughout the Dolly Varden Property…

As a company, Dolly Varden has certainly experienced some internal upheavel over the past year…below are a couple of paragraphs from a news release from DV last year, as the “principal”, so to speak, had to separate the 2 of these guys and tell them to “chill out”…

“At the request of the board of directors, John Burns and George Heard have stepped back from their duties at Dolly Varden Silver Corp., taking leaves of absence as chairman and chief executive officer/president, respectively. The board has constituted a special committee of the independent directors to investigate disputes between Mr. Burns and Mr. Heard, as well as other management matters that have recently come to the attention of the board (our emphasis).  The investigation is expected to be completed in the next few weeks.”

In late January, Dolly Varden appointed Rosie Moore as interim CEO and President – she came from Hecla Mining Company which is DV‘s largest shareholder…

Interestingly, in its March corporate presentation available on the company website, DV listed Skeena Chairman Ron Netolitzky (a co-founder of Eskay Creek who was recently inducted into the Canadian Mining Hall of Fame), as an “advisor”, though his name does not appear on the “advisor” page of DBV’s website today…

This brings us to Skeena’s move against Dolly Varden 2 days ago, immediately after DV’s Friday release of its resource estimate (the combined indicated mineral resource estimate totals 31.8 million ounces of Silver, contained within 3.07 million tonnes of material with an average grade of 321.6 g/t Ag…the inferred mineral resource estimate totals an additional 10.8 million ounces of Silver at a grade of 373.3 g/t)…

Skeena announced the following on Monday:

“On Aug. 27, 2015, Skeena Resources Ltd. delivered to Dolly Varden Silver Corp. a binding proposal to acquire 100% of the common shares of Dolly Varden for consideration consisting of common shares of Skeena having an aggregate value of approximately $4.2-million. Under the proposal, each Dolly Varden share would be exchanged for 2.763 Skeena shares, which values each Dolly Varden share at approximately 22.1 cents, representing a premium of 30% to the closing price of the Dolly Varden shares on the TSX Venture Exchange on Aug. 27, 2015, and 50.9% to the 10-day volume-weighted average price of both companies’ shares.

Skeena believes that the proposal is in the best interest of both Dolly Varden and Skeena shareholders. More specifically, the proposal provides an opportunity for Dolly Varden to merge with a well-capitalized company that has the ability to finance exploration programs on Dolly Varden’s Silver properties. Skeena has a dedicated technical team with a proven record of successful mineral discoveries in British Columbia. A business combination of Skeena and Dolly Varden will allow Dolly Varden shareholders to gain exposure to Skeena’s Spectrum high-grade Gold project in northwest British Columbia.”

Dolly Varden quickly rebuffed the offer with this announcement yesterday:

“The Skeena proposal was timed to deprive Dolly Varden’s shareholders of full value. The timing of the Skeena offer was highly opportunistic, given that it was made less than 9 hours after the company publicly disclosed its resource estimate. The company’s board viewed the Skeena offer as an attempt to exploit the lower market price of Dolly Varden’s shares before the market could fully consider and reflect the resource estimate issued earlier that same day. The board believes this timing was an effort to opportunistically transfer the upside value in the Dolly Varden property to Skeena’s shareholders at the expense of Dolly Varden’s shareholders.

“A superior alternative is expected to emerge (our emphasis).  Over the past month, the special committee of the company’s board (comprising Tom Wharton, Allen Ambrose, Don Birak and Allan Marter), together with Dolly Varden’s management team, and financial and legal advisers, has been aggressively working to advance a range of strategic alternatives to enhance shareholder value, which are, in the opinion of the board of directors, after having received independent financial and legal advice, and on the recommendation of an independent special committee, superior to the Skeena proposal.”

It’ll be interesting to see how this one plays out…Netolitzky is certainly astute and opportunistic – those are qualities that have made him so successful in the industry…he obviously sees value in the Dolly Varden Property – especially if he can snap it up for $4.2 million in shares…

DV is up 2.5 cents at 22.5 cents as of 9:00 am Pacific while SKE is off half a penny at 7.5 cents…

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

Last Thursday morning, we immediately pointed out a financial turnaround in Lingo Media (LM, TSX-V) following the release of its Q2 financials…LM closed up 6.5 cents that day at 34.5 cents, and then surged as high as 60 cents the next morning before retracing to close the week at 41 cents…another example of volatility, and how astute traders can profit from it…

Earlier this year, LM’s chart gave a strong sign of pending improved fortunes for the company when the stock broke out above a multi-year downtrend line…those are typically very reliable signals…

Lingo, which brands itself as a leader in changing the way the world learns English, has promising prospects based on last week’s news, and the improved financial performance should help underpin the share price…John’s chart shows what we see as a very solid support band between the 23.6% and 38.2% Fib. levels (high 20’s to high 30’s)…the rising 20 and 50-day moving averages (SMA’s) are currently at 30 and 27 cents, respectively, and have provided excellent support throughout this year…

LM is off half a penny at 37 cents as of 9:00 am Pacific…

Mission Ready Services Inc. (MRS, TSX-V)

Speaking of financial turnarounds, there could be one brewing at Mission Ready Services (MRS, TSX-V) which on Monday reported net income of $400,000 for Q2 vs. a $350,000 loss in the previous quarter…

We love what this company stands for, and the times we live in demonstrate there’s a growing need for this company’s products: “Mission Ready is committed to saving lives and enhancing the performance of military personnel, first responders and those who protect us by working to ensure they are equipped with the best possible personal protective equipment.”

Mission Ready is focused on profitable growth as it executes its strategy of expanding services to the U.S. Department of Defence, U.S. law enforcement agencies, and other protective agencies within the U.S. and other countries…the company has several wearable protective products, developed by its research and development division, that are being readied for market and has entered into discussions with several potential customers to commercialize these products this year (ballistic combat shirt, tactical police shirt, no-contact modular riot shield cover)…the company is also expanding its decontamination, cleaning and repair services, both in the U.S. military and to municipal firefighters and emergency-first responders…

• Record revenue in Q2 of over $2.7-million, a 147% increase over Q2 2014;
• Net income of $400,000 in Q2 2015 compared with a $500,000 loss in same period last year;
• Revenues of $4.8-million year to date

As per its June 30 financials, the company had working capital of $800,000 and minimal debt (less than $200,000)…

Technically, Mission Ready hit an all-time low of 6.5 cents recently after reaching a yearly high of 27.5 cents in late March…declining 50 and 200-day moving averages (SMA) beginning in December last year put steady downward pressure on the stock price, but extreme oversold conditions emerged last month which suggest a recovery is now underway…at 8.5 cents, the current market cap is $4.8 million (57 million shares outstanding)…if the bottom line shows continued improvement, MRS could be ready for a strong finish to the year…as always, perform your own due diligence…

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

“Bottom fishers” should keep a close eye on Kiska Metals (KSK, TSX-V) which we mentioned in some detail last week…tt’s during times like now, when junior exploration and mining companies are so much out of favor, that the greatest opportunities emerge for future 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 which is trading at only 2 cents, just above its all-time low of 1.5 cents…Kiska could 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…

Check last Thursday’s Morning Musings for additional information regarding Kiska…

What immediately has our attention with regard to Kiska is its Kliyul Project in north central B.C. that Teck began drilling in July…geologists at Teck are very intrigued with the 65 sq. km project which rests less than 70 km southeast of the past producing Kemess mine in the prolific Quesnel Trough…historical drilling was relatively shallow and returned very significant Cu-Au drill intercepts…this is an exceptionally promising, potentially large system as defined by alteration footprint and geophysics…importantly, it’s also adjacent to an all-weather road and a 230kV power line…

Teck can earn a 51% interest in the project by incurring cumulative aggregate expenditures of $5.5-million on or before January 31, 2018, and up to a 65% interest by incurring additional expenditures of $6.5-million ($12-million total) on or before Jan. 31, 2021…

Technically, we love this long-term chart…KSK broke out above a multi-year downtrend line in early 2014, and retraced back to that downtrend line just recently…every indicator here is looking positive for an eventual important upside move – exact timing is just uncertain…

Note:  Jon holds a share position in KSK.