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The CDNX and Gold

We saw some very encouraging signs with the CDNX Thursday when it dipped as low as 2093 and then reversed intra-day to finish ahead for the day and above 2100 despite weakness in Gold.  That momentum carried over into Friday with the CDNX gapping up to 2112, pulling back to 2105, and then rallying strongly to finish the day and the week at 2124 (a 29-point gain for the day and a 10-point advance for the week).    The CDNX out-performed all markets Friday, a very bullish sign.  At 11:15 am Pacific Friday BMR issued a market alert, stating that we have seen the low for December in the CDNX (2072) and that a bullish new move is underway that should take the Index through the 2150 to 2250 resistance band by year-end.    This is based on technical factors that John outlined in his chart including the fact the CDNX is now breaking out of a horizontal trend channel.

Seasonal factors are definitely in the CDNX’s favor right now as well.  Last year the Index advanced 7% or 100 points over the final 8 trading sessions (there are 8 trading sessions left this year).  And in 2008 the CDNX moved an incredible 15% over the final 3 trading sessions, marking the beginning of what we believe is the greatest bull market ever for the CDNX.

This is definitely the time to be heavily weighted in quality junior Gold stocks.  As BMR readers know, one of our specialties is tracking the CDNX.  We correctly called the bottom for this market last July and we have urged our readers to take advantage of any pullbacks, including the 8% correction in November.  We’re expecting an extremely bullish market from now through at least the end of February with the strong potential for some spectacular gains in the Index.  The masses have yet to jump in on this market, so there’s plenty of gas that has yet to be thrown on this fire.

Gold fell as low as $1,360 this week and closed Friday at $1,375.50 for a weekly loss of $10.50.  Gold‘s softness of late is nothing to be concerned about, in our view, especially since the CDNX (an extremely reliable leading indicator) is currently out-performing the yellow metal.  Gold’s overbought condition has been unwinding very nicely recently and the price is holding up well.    There is extremely strong technical support between $1,325 and $1,370 where the 50-day moving average sits.  With Christmas just a week away, we expect the Gold market to be relatively quiet and trade within a fairly narrow range (barring any major international developments) over the next couple of weeks until the beginning of January when things should start to heat up again.

Gold is up 25% so far in 2010, its biggest yearly advance since 1979.  This will also be Gold’s third double digit gain in the last four years.  But Gold is far from being in the “bubble” stage and is headed much higher in our view based on many technical and fundamental factors that we have outlined at BMR repeatedly over the past year-and-a-half.

We are in the midst of a bull market of a lifetime and the “top” is a long ways off yet – enjoy.