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May 5, 2011

BMR Morning Market Musings…

It has been a wild day on the markets and the action this morning has the feel of an important bottom…Gold has dropped as low as $1,478 this morning, just $1 above the first major support level John identified in last night’s chart…as of 9:30 am Pacific, the yellow metal is down $33 an ounce at $1,483…Silver fell slightly below $36 an ounce and is currently off $3.28 at $36.11…in addition to the CME raising margin requirements on Silver three times in a week, CNBC reported late yesterday that Mexican tycoon Carlos Slim has been a heavy seller of Silver futures and options to hedge his Silver production well beyond 2011…this has further spooked the longs…holdings in global Silver-backed exchange-traded products fell by 520 metric tons yesterday, the second-largest daily drop ever, according to analysts with Barclays Capital…the largest-ever daily decline was 555 tons in January, 2008…Silver ETP’s have suffered net redemptions of 1,105 tons in seven days, Barclays stated…as John’s chart showed last night, major support levels for Silver are between $27 and $37…there is particularly strong support at $35 which is also the Fibonacci 38.2% retracement level…bargain hunters started stepping into Gold and Silver stocks yesterday, which is evidence a bounce in the metals could be at hand, as the CDNX rallied 25 points from its intra-day low of 2099 while the TSX Gold Index actually finished in positive territory for the day after earlier touching its 300-day moving average (SMA)…the TSX Gold Index has held support at its 300-day SMA since early 2010…traders/investors pocketed large profits by jumping in at that supporting moving average on four previous occasions since early 2010…it’ll be interesting to see if that trend continues…the 500-day SMA at 360 is secondary support on the TSX Gold Index…the bottom line is that this is a correction within an ongoing bull market and Gold in particular will be supported by strong physical buying which has the potential of producing a rapid reversal…the U.S. Dollar Index is up two-thirds of a point to 73.75 as it finally begins to gain some traction after being in deeply oversold territory…there’s more evidence of weakness or choppiness in the U.S. economic expansion…this is still a fragile recovery with numerous risks which means the possibility of a new round of quantitative easing from the Federal Reserve can’t be ruled out after June…new U.S. claims for unemployment aid unexpectedly rose last week to touch their highest level in eight months…initial claims for state unemployment benefits rose 43,000 to a seasonally adjusted 474,000, the highest since mid-August of last year according to the Labor Department…economists polled by Reuters had forecast claims dropping to 410,000…the four-week moving average of unemployment claims, a better measure of underlying trends, increased 22,250 to 431,250, the highest since November…the data falls outside the survey period for the government’s closely watched employment report for April which will be released tomorrow…nonfarm payrolls are expected to come in at 186,000 for last month, according to a Reuters survey, after rising by 216,000 in March which was the most in 10 months…as of 9:30 am Pacific, the CDNX is down 47 points at 2079, only about 40 points above its rising 200-day SMA…RSI(14) levels on the CDNX are at previous important market lows in March and July and February of last year, so now is not the time to be throwing stocks overboard…nerves of steel are required…some very attractive opportunities have opened up…Gold Bullion Development (GBB, TSX-V) is off 3.5 pennies at 38 cents, just 3 cents above its March low where there is rock-solid support…Currie Rose Resources (CUI, TSX-V) sold off to 14 cents, its rising 300-day SMA, and has since recovered to 16 cents where it is unchanged for the day…GoldQuest Mining (GQC, TSX-V) remains heavily oversold with superb support at 20 cents…it’s up half a penny at the moment at 20.5 cents…Visible Gold Mines (VGD, TSX-V) has also reached extreme oversold conditions…it’s unchanged at 30.5 cents this morning…one of the junior producers we like a lot which has been a major market out-performer so far this year is Richmont Mines (RIC, TSX) which is off 25% from its April 29 all-time high of $9.95 simply due to market weakness…Richmont is a solid money-maker with no debt and a growing resource at its Wasamac deposit…RIC dropped as low as $7.17 this morning and is currently off 31 cents at $7.36…Spanish Mountain Gold (SPA, TSX-V) touched its rising 200-day SMA at 57 cents this morning and is currently at 58 cents, down 2 pennies…Adventure Gold (AGE, TSX-V) is down a nickel at 59 cents, just three pennies above its supporting 100-day SMA…

15 Comments

  1. I find reading your post difficult when you continually use words such as rock-solid support, superb support, etc. I have no idea when this selling will stop nor how far the stocks will drop. I doubt anyone else can predict as well.

    Sure, the stocks look attractive (depending on one’s perspective). I still own some but I would rather own mid cap with a proven asset rather than speculative micro cap at this time.

    Comment by Bruce — May 5, 2011 @ 8:49 am

  2. buying gbb at 38c -39 c this am, i don’T beleive it will stay there long, financing must of shocked some..But it’s done at 61 c !!
    i guess if someone throws 5 mill. at them at 61c it’s good enough for me ! I wish they could bring some more drills with this money, not just Castle’s rig , but a rc to drill for grade .

    Comment by Dude — May 5, 2011 @ 8:50 am

  3. As you said Jon, when you’re on the small market cap, “nerves of steel are required” actually!

    Comment by Sylvain — May 5, 2011 @ 9:06 am

  4. Just read Peter Grandich is jumping back into juniors 100%. Good sign!

    grandich.com/

    Comment by dave — May 5, 2011 @ 9:17 am

  5. Well.. If you look at the history of small market cap in the medium to long term… 90 % loose there money. To make it simple you have a 10 % chance to make money with the ventur. It’s better then going to the casino but still your chance to make money is very low.

    Comment by Andre — May 5, 2011 @ 9:38 am

  6. Where is the support levels? Are we getting close on the Venture? So many days of this already!

    Comment by Steve — May 5, 2011 @ 9:46 am

  7. where are the support levels now?

    Comment by Steve — May 5, 2011 @ 9:57 am

  8. John has already outlined support levels at 2000 and 2050 for the Venture…….it is in heavily oversold territory at the moment, so my thinking is we’re close to a near-term bottom…..keep in the mind the rising 200-day SMA is at about 2040, right around the mid-March low which should obviously provide support……the CDNX declining like this is not a comfortable feeling for anyone but on days like today, it’s never wise to sell out of fear and the brave will be buyers…this is a time to make money, I see some great deals out there…

    Comment by Jon - BMR — May 5, 2011 @ 9:57 am

  9. Great opportunity in GBB for those who can be a little patient……

    Comment by BMR — May 5, 2011 @ 10:02 am

  10. If GBB keeps going down the latest financing could be cancel or modify. With a flow-trough financing at 0.61 and the real cost after tax credit is around 0.35 cents why peoples would buy This new PP with no warrants ..a long hold period … and complicated tax filling… when they could just buy it on the market without any of those problems. Oh tomorow jobs release in the US…better be good.

    Comment by Andre — May 5, 2011 @ 10:13 am

  11. Can you take a look at CQX looks like someone just sold all they had left this morning down 3 cents, is the land they own worth more that the market cap of the entire company? if not it is getting close? Is this still one of the companies you believe is going to have a great 2011?

    Comment by GREG H — May 5, 2011 @ 10:17 am

  12. BMR,

    I think this would be a great time to release your list of oversold PM prospects if you have one. I realize that you have included a lot in your posts, but a simple list with good entry points would be appreciate. For those reader that need justification for your picks or entry points they can read the prior posts. I think you mentioned back in March/April that you would be providing this list.

    I know that there are a lot of disgruntled investors in these posts, but your thoughts are always appreciated. Unfortuntely, this time around the CDNX gave us some mixed signals so it was tough to predict this drop. However, this rally was primarily a dollar driven rally so I didn’t expect much more upside considering the dollars oversold position. Risk management is key in this business and past experiences from losing your shirt on small cap stock also help bring an overinflated mind back to reality, but so do the quick snap backs in these stocks as well.

    Right now, I intend to get greedy when people are most fearful. The more the rubber band is pulled the greater the snap back. But, just don’t try to catch the falling knife.

    Comment by Andrew M — May 5, 2011 @ 1:21 pm

  13. Hi BMR
    What do you think about CQX at the moment, it has fallen a lot under so low volume for the last weeks. You say before that CQX was one of this years top pick. Is this still your opinion? CQX is also cooperating with VGD and VGD was one of a very few winners today, the only positive I can see right now regarding CQX :), can you see anything else positive with CQX
    Thanks Jon and BMR!
    Bosse

    Comment by Bosse — May 5, 2011 @ 1:32 pm

  14. Hi guys,

    Bought few CQX this pm, do you knows what appenned with the assay Richmont have drilled on their properties (they lost it lol)

    Good luck

    Martin

    Comment by Martin — May 5, 2011 @ 4:30 pm

  15. it wasn’t hard to predict this drop. I have been calling it since mid march. We can still see 1930 by end of June

    Comment by david — May 5, 2011 @ 9:02 pm

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