TSX Venture Exchange and Gold
For the second week in a row, the Venture managed to escape the worst of a storm that sent major averages in New York and Toronto down by 3.5% and Crude Oil tumbling by another 8%. The Venture lost 10 points or just 1.8%, and closed Friday with a small gain along with the TSX Gold Index.
How Friday evening’s attack on Paris – an act of war by ISIS – impacts markets in the week ahead remains to be seen. France, as it should, will respond ruthlessly and other allies will follow, with the exception perhaps of Canada whose new leadership unfortunately appears to be of a naïve mindset with regard to the threat of Islamist terrorism and issues of national security, or they’re simply too drunk on Climate Change Kool-Aid to think straight (perhaps both, which of course is even worse). Hopefully we don’t have to suffer brutal, simultaneous terrorist attacks like France just experienced to wake up most of our elected representatives in Ottawa. One would have thought that last year’s attack on Parliament Hill would have been enough to send a message that the ISIS ideology is a rapidly spreading cancer that kills.
9/11 changed the world. Friday’s horrific events in France will also have profound implications. In addition, news outlets are reporting that at least one of the French bombers entered the country after posing as a Syrian refugee, yet the Canadian government, pursuing its “sunny ways”, continues to insist it wants to rush in 25,000 Syrian refugees to Canada by Christmas. Coal in our Christmas stockings would be more preferable, but liberals despise coal more than terrorists.
ISIS is not contained, as President Obama has kept insisting, and clearly has a dangerous global reach. Market-wise, one possibility is the immediate emergence of a “risk premium” in Crude Oil which would allow prices to recover after getting hammered the last 2 weeks. Safe haven buying could also come into Gold. It’s conceivable, too, that the U.S. dollar, the best of a bad bunch of global fiat currencies, could gain further favor with investors. It’ll be fascinating to see what unfolds. Military budgets are going up and wars are raging on different fronts. Historically, that kind of environment has generally been positive for Gold and Oil, though Crude of course continues to battle a major supply glut while the demand outlook is not exactly robust due to weak global growth.
Venture 4-Month Daily “Awareness” Chart
The key to making money on the Venture at the moment is to focus on very select opportunities (resource and non-resource) that have the right dynamics to push higher. The Venture has been holding together well enough since the late August low to allow for some profitable short-term trades, as we’ve frequently seen. More broadly speaking, we believe there’s a basket of plentiful stocks that can be accumulated now, and over the next several weeks, for exceptional upside potential from late December through the end of Q1 2016.
Encouragingly, the Venture appears to have found RSI(14) support at 30% on this 4-month daily chart. That’s a level that served as resistance throughout July and August, and it really needs to hold. The early October low of 521 came around the time the RSI(14) bounced off 30%. The Venture closed Friday at 524.
U.S. Dollar Index
The Dollar Index regained technical strength recently after pushing above a descending triangle, fueled by speculation that the Fed will initiate its first rate hike in nearly a decade next month. However, this fresh dollar strength works against the Fed’s mandate to kick-start inflation, American manufacturers will have a tougher time selling their goods abroad, while U.S. companies with international operations will suffer bottom line hits to earnings. It all adds up to a confusing picture and makes the Fed’s job very problematic.
The Venture performs best when the greenback is in neutral or retreat. The amazing move in the dollar since the summer of last year has driven down the price of commodities and has been the key factor in the Venture’s nearly 50% decline during that time.
On this 2-year weekly chart, RSI(14) on the Dollar Index should meet resistance at the 70% level which was support from September 2014 through the end of March this year. A breakout above the spring high would not be a welcome development, and it’s not something the Fed would want to see either.
Gold
Gold started losing momentum during the week of October 19 when buy pressure began decelerating rapidly as shown by the CMF in our 6-month daily chart. This continued into the following week, which is when we decided (Oct. 27) to recommend buying the DUST (3x Gold Miners Bear ETF) as a hedge against a drop to $1,100 or below in bullion. We closed out that position Friday (Nov. 6) for a gain of 60% over just 9 trading sessions. That’s not to say the DUST won’t ultimately head higher, but what we’ve been watching for recently are signs of a bounce in the TSX Gold Index after a steep decline of 20% over just 8 trading sessions (Oct. 28-Nov. 6). The Gold Index started to stabilize last week, staying within a range of 121 to 126, and potentially could move higher this coming week if safe-haven buying comes into Gold following France’s horrific 9/11 moment.
For the week, bullion declined slightly to $1,084. This 6-month daily chart shows oversold RSI(14) conditions that usually mark a favorable time to be a buyer. Sell pressure is also starting to abate.
Gold 2.5-Year Weekly
Gold has traded within well-defined parameters over the last 2-and-a-half years as shown in this long-term weekly chart, with repeated moves between the bottom and the top of the downsloping flag. However, the high in May ($1,232) fell short of the top of the flag, as did the recent run that peaked at $1,192 in early October. At some point, Gold will make a decisive move either above or below the flag – that will be a critical turning point.
Gold is currently closing in on the bottom of this flag which increases the possibility of a near-term turnaround.
Silver, which has fallen for 12 straight sessions, lost another 3% last week after a 5% tumble the week before. Copper fell 7 cents to $2.20. Crude Oil shed more than $3.50 a barrel or 8% to $40.73 while the U.S. Dollar Index fell one-third of a point to 98.80.
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 current weakness, 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.
My suggestion for anyone that’s having a difficult time deciding whether to buy GGI or DBV?
I STRONGLY suggest that you buy ” 6 of one AND Half Dozen of the other”…
Comment by Jeff — November 15, 2015 @ 11:35 am
Just to mention 10,000 of those Syrian refugees had been in the screening process prior to Harper putting a hold on the situation before the election . The remainder will held in military institutions in Canada until processed .
Comment by Les — November 15, 2015 @ 11:50 am
Nothing would be better that to have GGI get some super numbers in these coming lab results and DBV get results from an extension of either hole 24 or 25 to 1000 meters.
Comment by Les — November 15, 2015 @ 12:04 pm
Update on Alberta… man they are screwed…
This time, it was Encana putting their gas plant in the Duvernay Region on hold. The company says it’s because they are unsure about the outcome of the Notley government’s climate change and royalty review panels. Encana CEO Doug Suttles said, “We need to know the rules of the game before we start to play.”
Encana, on Thursday reported a loss of 1.2 billion in the last 3 month reporting period. Encana has also laid off 40 percent of its staff since 2012 including about 400 employees this year.
Encana is withholding investment in Alberta. And if you think it’s about the price of oil or natural gas alone, you’d be wrong.
Encana is refocusing its business interests in Texas, spending about 2.2 billion dollars there this year. That’s no surprise. Texas has a stable business environment with low taxation of businesses. Texas doesn’t have a carbon tax and Texas has a flat rate reliable royalty total rate of 25.3 percent, with 12.5 percent to the landowner and 12.85 percent to the state. Texas offers stability.
It’s easy to build a business plan around stability but Alberta doesn’t offer stability anymore.
If I was going to sabotage the oil patch, I’d do exactly what Rachel Notley is doing.
Comment by Patricia — November 15, 2015 @ 1:10 pm
It’s becoming a drug to go and see if they have posted new core pics loll, They are probably well advance in hole 4 now, don’t know to witch depht they have drilled hole three? it says to at least 308m! EOH?
Comment by Martin — November 15, 2015 @ 1:36 pm
In ref. to Tomuk post 118 yesterday, I mentioned right after the blockade halt that DBV was not done with hole #24. I don’t remember who the posters that bashed me were back then, but once again Tomuk is correct. They are not done with hole #24. Now ya’ll will be asking me how I knew that way back when.
Comment by dave — November 15, 2015 @ 2:45 pm
The blockade hole was #25, Dave…hole 24 was completed, hole 25 was halted at 270 m, in mineralization…
Comment by Jon - BMR — November 15, 2015 @ 2:51 pm
Big oil & gas companies are the victims, … RIGHT! They’re the ones who created this mess in Alberta. The oil/gas co. (read shadow government) pushed their agenda towards various mega projects overwhelming the workforce in Alberta, and opening the door to external workers, thus flooding the local market and flooding the oil/gas markets w/ Alberta production. Stelmach tried to temper our economy by gently re-introduciong a royalty rate that would have slowed down a galloping economy. The oil/gas co. did not like his route and removed him pretty quickly. In hindsight his plan may have sidestepped our current NDP led experience, not that the NDPs have done anything drastic, other then NOT have a special door reserved for oil/gas to gain direct access to provincial government for their own interests or dictate policy on behalf of us Albertans, as if they know whats best for me.
Comment by Barry R — November 15, 2015 @ 2:56 pm
GGI posted the pics of hole 3 last Tuesday so I would imagine that hole 4 is well underway if not done depending on what they are into. Wonder if hole 4 was the 800 meter step out, or if they will gradually drill every 200 meters until they reach the 800 meter step out. I doubt it because Regoci said they are drilling the higher highs and therefore are placing the drill where they think will have the best chance of getting. He said after that they will radiate out.
Comment by Dan1 — November 15, 2015 @ 4:11 pm
Should have said best chance of hitting.
Comment by Dan1 — November 15, 2015 @ 4:12 pm
Yes Jon, but I had said they were not done with #24. I meant they were going back.
Comment by dave — November 15, 2015 @ 5:26 pm
DBV continuous to drill hole 25 not hole 24 but DBV return to drill around hole 24. Be sure that lots news from DBV is coming !
Comment by Guy Delisle — November 15, 2015 @ 5:45 pm
LTE.C keeps climbing the ladder…. Hope everyone has looked up this chart by now. They have the potential to do 30M in sales next year IMO. Once again. Under 30M shares out!
I also bot KEK.V on Friday for the next run. It’s currently trading around .40. It’s been over $1.00 3x this year! Many calling for a company update this week. Under 20M shares out.
I love low floaters.
Comment by BigRig — November 15, 2015 @ 9:03 pm
Didn’t play eqt right sort of missed the pump. I’m out though like many here are after saying they d be buying on the way down
Lesson learned. I hope they do hit but I can’t handle the risk.
Comment by Dan — November 16, 2015 @ 6:36 am
Pick-up 40000 FTR this morning base on our growing understanding of the kaketsa so far, it will have is turn☺
Comment by Martin — November 16, 2015 @ 7:06 am
news on DBV
Comment by Guy Delisle — November 16, 2015 @ 7:11 am
I wouldn’t call that news guy, where is the real news we are all waiting for?
Comment by Sameer — November 16, 2015 @ 7:22 am
DBV – just dropped the wt exercise price to 20 cents, meaning they pass on $300K and only bring in $6-700K. hmm . Are they so tight for $ that they need it now, and cant wait for the pop all expect from hole#25 etc
Comment by david — November 16, 2015 @ 7:25 am
Lastly: I hope people don’t take stock house seriously, fradusters everywhere. JimRockford and others. Have led many retail sheep to the slaughter (those who couldn’t get out at the top)
Comment by Dan — November 16, 2015 @ 7:46 am
Sameer soon !
Comment by Guy Delisle — November 16, 2015 @ 8:11 am
EQT- I believe in the project and the technical team so I won’t sell until I at least see the assays and maybe
even the second set of assays.
I feel for people who sold at a loss, there is a lot of BS on stockhouse on both sides of the argument.
I think once they have beaten it down enough there will be people getting some shares back for the assays,
but I could certainly be wrong.
If this doesn’t pan out I will certainly be taking a loss.
Good luck to everyone.
Comment by murf — November 16, 2015 @ 8:38 am
Anyone follow my pick on KEK @.40 on Friday. .last at .57 today and moving.
Comment by BigRig — November 16, 2015 @ 8:40 am
If they have dropped the exercise price now, then it could be a precursor to news that is likely to push the SP above 20c.
A return to drilling and the remainder of hole 23 could be reported this week. Holes 24 and 25 assays will probably be 3 weeks or so away after they return to site.
Comment by Tom UK — November 16, 2015 @ 8:46 am
David , due to all that has happened over the year those warrants were priced to high . They are already included in the number of shares outstanding and will not cause further dilution just not getting as much for them. I would think they need cash as this nonsense of Chad’s has hurt us all. This is going to be a busy week for DBV.
Comment by Les — November 16, 2015 @ 9:02 am
Sameer , hold on to your hat , it’s going to be a busy week for DBV.
Comment by Les — November 16, 2015 @ 9:04 am
I hope so Les!
Comment by Sameer — November 16, 2015 @ 9:17 am
A small up tick in the CDNX today , looks like the 520 support area is holding but it must break resistance at 560 to change the trend.
Comment by Les — November 16, 2015 @ 9:43 am
KEK – nice call BigRig, news of an insider settling the debenture was timely
Comment by david — November 16, 2015 @ 10:18 am