TSX Venture Exchange and Gold Plus Special BMR Editorial
Go Blue Jays!
Importantly, the Venture has broken out above its short-term moving averages which were pressuring the Index for several months. These moving averages are also now rising and should provide new support from about 540 to 550 on any minor pullback in the Venture. Key resistance is now 560. Note how the Venture climbed as high as 559 intra-day Friday before stepping back slightly from the 560 “ghost” and closing down less than half a point for the day. RSI(14) is currently at 60% on John’s updated 4-month daily chart, so it wouldn’t be surprising to see a test of potential new RSI(14) support at 50% before the Index gathers the energy to push through the 560 level.
The Venture is also now trading above its 50-day SMA, currently 550, for the first time since May. What will be critical is for the 50-day to reverse to the upside. One distinct possibility is that when this occurs, likely within about 10-15 trading sessions (end of October or during the first week of November), the Venture could really start to gather steam, and that could easily lead to a quick 10% (50-point) burst to the upside.
Two scenarios, therefore: 1) a “catalyst” suddenly ignites the Venture next week with the Index breaking out aggressively through 560; or 2) the Venture consolidates in a healthy fashion for the next couple of weeks or so, within a relatively narrow range, and then takes off higher. Either scenario is positive for investors. What we don’t believe is in the cards is a “breakdown” – the August 24 low was highly significant, in addition to the late September/early October double bottom. The current risk-reward ratio is very attractive, though that’s a concept far too many investors simply don’t grasp.
The Venture advanced for the second straight week, adding 4 points to close at 556.
The timing couldn’t be better for a discovery, especially somewhere in Canada.
Venture 4-Month Daily “Awareness” Chart
Will Canada Be Turned Over To Justin Wynne & Kathleen Trudeau?
We advise Canadians, in particular Ontario voters, to carefully consider their critical choice in Monday’s election. This country is once again running a surplus, taxes are low, and Canada is considered an economic “beacon of light” throughout this troubled world. We’re surviving the commodity sell-off, and investors (average Canadians) now have an opportunity to contribute as much as $10,000 annually to a TAX-FREE savings account which the Liberals and NDP both want to trim back by almost 50%. Such a move, in essence, is equivalent to a HUGE potential TAX HIKE for millions of Canadians over a period of several years. This would have a life-long impact on your ability to create and build wealth that’s protected from any government taxation.
We’re surprised there hasn’t been more discussion during this election campaign surrounding the TFSA issue. A tax-free savings account was one of the best new measures the Conservatives have introduced, along with the First Nations Financial Transparency Act which both the Liberals and NDP strangely oppose.
But the above is just the “tip” of the iceberg.
Justin Trudeau, whose father as Prime Minister saddled this country with enormous debt and bigger government by running 14 deficits in 15 years, appears determined to go down that same 1970’s path. That’s the kind of change Canada doesn’t need. Justin is promising $150 billion in new spending under a federal Liberal government and a guaranteed, promoted immediate return to deficit spending in order to, among other things, finance “infrastructure” projects (failed “green” initiatives and other silly schemes like Ontario has pursued?) that will “create jobs”.
Justin believes the budget will magically “return to balance” within a few years. That can’t and won’t happen without a combination of major tax hikes and program cuts (he’s starting out by attacking your TFSA). Disgustingly, much of the mainstream media have given this former drama teacher and the son of a past PM a free ride in this election campaign. He hasn’t been forced to defend numbers that simply don’t add up. And ask yourself this, what’s Justin Trudeau’s private sector experience???? His resume is, politely speaking, unimpressive to say the least.
The Ontario Mess
Successive Liberal governments in Ontario have racked up the provincial debt to a staggering level of nearly $300 billion. This is downright dangerous as Moody’s and others have warned. Unbelievably, almost $1 billion of Ontario taxpayers’ money is spent EACH MONTH just to pay the interest on that debt which is growing at a faster rate than the economy. Premier Kathleen Wynne, elected in 2013, is completely oblivious to this train wreck in the making.
What’s particularly worrisome is Wynne’s strong endorsement of Justin Trudeau, which has been an unprecedented intervention in a national campaign by a provincial Premier. The combined implementation of these two politicians’ policies (along of course with Rachel Notley’s radical Alberta NDP agenda) would deliver a toxic brew to the Canadian economy at a time of global economic uncertainty.
The emerging situation in Alberta is bad enough, but it’s an undeniable truth that our great country doesn’t need a financially reckless Premier of the nation’s largest province to be “empowered” by a Liberal Prime Minister in Ottawa who is an ideological clone. They drink each other’s Kool-Aid. They are both convinced that government is always the solution, never the problem. Bigger government, more spending, is better. Is that really the “change” Canadians want? Is that a wise path for our nation to take? Do you want to give the government more of your hard-earned dollars to waste on useless programs and “infrastructure” boondoggles?
Canadians will pay a steep financial price if Justin Wynne and Kathleen Trudeau are leading the nation and the country’s largest province, respectively – an incompetent Liberal government in Ontario with the unqualified support of their Liberal cousins in Ottawa.
Justin’s Debt Trap
Justin believes it’s a smart idea and the right time (“interest rates are low”) for Canada to end fiscal discipline and begin running deficits again that will likely become chronic, just as the nation discovered in the 70‘s and 80’s, and Ontario residents can plainly see today with the damage their Liberal provincial governments have done. Individuals and families have to live within their means, otherwise they go bankrupt. Why should governments be any different?
According to Justin’s plan, which few Canadians have obviously read, here’s what the Liberals are promising:
$149.8 billion in new spending/investments/benefits over the next 4 years;
$31.2 billion in total new revenues;
$80.7 billion in total new “savings”.
According to the Canadian Taxpayers Federation, 9 Liberal promises are uncosted.
The Liberals will drive Canada off a sensible fiscal track and run substantial deficits in each of the next 3 years, escalating the national debt. In Year 4 of their mandate, just in time for another election, they will magically post a $1 billion surplus. Justin must still be smoking pot because he’s in a drug-induced fantasy if he actually believes he can jack up spending by $150 billion and hike taxes and find $80 billion in new savings and by Year 4 suddenly go from a string of deficits to a small surplus. He is misleading Canadians while promising “unicorns and rainbows” as one commentator put it.
The Liberal government of Ontario, meanwhile, is entirely void of fiscal discipline It’s a jurisdiction that’s on its way to becoming the Greece of Canada. Voters in that province on Monday need to wake up and help elect a federal Conservative government to protect Canadians’ pocketbooks while countering the Premier of Ontario and keeping her and her tax-and-spend Liberals “in check” to the fullest extent possible.
Watching Wynne give Trudeau a victory hug Monday night would sicken the stomach.
Feel free to circulate this post to friends, relatives, co-workers, etc., especially in Ontario.
Dollar Index 9-Month Chart
Technically, as we’ve been stating for several months since the March high of 100.71 and the spring double top in the Dollar Index, the greenback is in trouble. Two uptrend support lines have been broken, resistance between 96 and 97 has been relentless since August, and RSI(14) is moving lower and will likely test support at 30% on this 9-month daily chart.
The Dollar bulls, who were stampeding on a false promise by the Fed to hike rates, have had the floor taken out from underneath them, and to add insult the injury the U.S. is losing prestige on the international stage. It’s growing increasingly likely that the Dollar Index will test base support around 88 over the next several months, and such an event will give both commodities and the Venture a boost.
Gold
Gold enjoyed another strong week, gaining $22 an ounce as it pushed through resistance at $1,160 and closed Friday at $1,178.
According to respected analyst Adrian Day of Adrian Day Asset Management, the “tide has turned” in favor of Gold. “Investors are no longer concerned about whether the Fed will raise rates any particular time; that particular boy has cried wolf far too often,” he said. “Investors generally are underweight Gold; we feel there will be meaningful short-covering and, soon, a scramble to buy from investors who have been waiting on the sidelines.”
Bullion has had a powerful run since the beginning of this month, so it’s quite possible we could see a minor pullback next week to what should be new support around $1,160. Keep in mind that a strong band of resistance exists between $1,190 and $1,210, and Gold may need a bit of time to vigorously test that. It briefly climbed slightly above $1,190 last week, to a 3.5-month high, before backing off. Buy pressure on this 6-month daily chart eased slightly at the end of last week while RSI(14) reacted near resistance at 70%.
Overall, Gold is looking very good, and the trend suggests a possible major breakout (above $1,225) within a couple of months. Bullion will “do its thing”. Just be patient.
Silver climbed another 21 cents last week to close at $16.03. Copper remained steady at $2.40. Crude Oil, after a powerful surge the previous week, retreated $2.23 a barrel to $47.26. The U.S. Dollar Index fell one-fifth of a point to 94.73.
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 weakness this past summer, the fundamental long-term case for the metal remains solidly intact based on the following factors (not necessarily in order of importance):
- Growing geopolitical tensions, fueled in part by the ISIS and al Qaeda, and a highly dangerous and expansionist Russia under Vladimir Putin, have put world security in the most precarious state since World War II;
- Weak leadership in the United States and Europe is emboldening enemies of the West;
- Currency instability and an overall lack of confidence in fiat currencies;
- Historically low interest rates/highly accommodating central banks around the world;
- Continued solid accumulation of Gold by China which intends to back up its currency with bullion;
- Massive government debt from the United States to Europe – a “day of reckoning” will come;
- Continued net buying of Gold by central banks around the world;
- Mine closings, a sharp reduction in exploration and a lack of major new discoveries – these factors should contribute to a noticeable tightening of supply over the next couple of years.
China has delivered another jolt of stimulus…China’s central bank cut interest rates for the 6th time since November today, and it again lowered the amount of cash that banks must hold as reserves in another attempt to jump-start a slowing economy…China’s monetary policy easing is at its most aggressive since the 2008-09 global financial crisis, underscoring concerns within Beijing about the health of the world’s second-largest economy…the People’s Bank of China said on its website that it was lowering the 1-year benchmark bank lending rate by 25 basis points to 4.35%…that still leaves them plenty of room to cut further…in addition, China has additional flexibility given the fact it’s running a budget surplus and holds $3.5 trillion in foreign exchange reserves…
