The Venture Exchange has been our most reliable and accurate indicator of the direction of gold and the overall markets over the past couple of years. It telegraphed last year’s market crash and financial crisis by breaking down technically in early July, 2008, just before the major markets broke down and before gold and commodities in general collapsed. More recently, its violent reversal October 29 (a 47 point jump) signaled a major new advance in gold which is exactly what happened – gold began its charge to $1,225 in early November. And what the CDNX is telling us now, technically, is that gold’s recent correction is nothing to worry about and the precious metal’s next major move is up, not down.
Some pundits are predicting that the gold bull market is over. Nothing could be further from the truth, and the CDNX confirms that. We cautioned our readers in early December that gold was clearly overbought and that it was a good time to lock in some profits on gold stocks. We were correct. Now it’s a great time to be back on the buy side as gold itself has become deeply oversold, based on stochastics, and the CDNX appears to be gearing up for another major move to the upside which confirms that gold indeed likely bottomed last Thursday at $1,095 and is headed higher once again.
While gold dropped 10.6% from its high earlier this month and the TSX Gold Index fell 16%, the Venture Exchange shed only 3%. This confirms to us that gold’s drop is merely a correction to buy into – if gold was about to change its primary direction, there is no way the CDNX would have held up so well over the past couple of weeks. No way at all. The Venture remains firmly in a parabolic uptrend – this is an incredibly powerful market – and it reminds us of the 2002-2004 period when it ran from 900 in late 2002 to nearly 2,000 in early 2004 before a substantial correction. Yes, we see a very real possibility that the Venture will make a run to the 2,000 level – that’s a further 40% increase from here – in early 2010, and that could only happen with new record highs in the price of gold and higher commodity prices in general.
We will see a new 52-week high in the CDNX by month end we’re anticipating a very strong January. Be a buyer and stay long until this market tells us otherwise.
