TSX Venture Exchange and Gold
The Venture posted its 8th straight weekly gain and reached a 7-month high as it added another 5 points last week to close at 581. The Index, which is now up a whopping 24.7% since its January 20 record low of 466, is rapidly closing in on the next Fib. resistance at 591. Significantly, this is shaping up to be the best March for the Venture since 2009, and a strong March has always led to a positive year for this market. The bear has finally fled.
A powerful argument can be made that what we’ve seen since late January is in fact the first wave in a new bull cycle (most investors don’t usually accept or recognize the start of a new bull or bear market until well after it has started). It’s reasonable to expect a modest pullback in the not-too-distant future after the robust gains since late January. However, that may not occur until there is a further acceleration in this trend and a move through the 600 area. Any pullback would find very strong support in the 550’s, right around the highs of last August, September and October. There has been a dramatic improvement in the technical health of this market as John’s latest charts have shown, supporting the thesis that a long-term bear cycle has finally run its course (hallelujah). In some ways, this feels a bit like 2009. Every major central bank in the world said something last week that was stock and commodity supportive.
The Venture has outperformed the broader equity markets over the last 6 months. That’s notable because it represents a major trend shift, a critical indicator in assessing the likely direction of the junior resource sector over the course of at least the next year. In early 2011, the Venture’s 2-year outperformance vs. the major indices came to an abrupt halt. And we all know what happened not long after that as the commodity complex went into a prolonged downturn beginning late that year, taking just about every stock with it. Another important shift has occurred, this time in the Venture’s favor, and it bodes well for the balance of 2016 and into 2017.
Venture 6-Month Daily Chart
Technically, the Venture continues to be supported by rising short-term moving averages (the EMA-8 and EMA-20 are currently 573 and 558, respectively). As long as this continues, so will the upward momentum. Nearest resistance is 591. First major support is in the 550’s.
Significantly, for the first time since the beginning of 2014, the Venture has also pushed above its 100-day SMA which has also reversed to the upside (not shown on the chart below).
RSI(14) conditions are clearly in overbought territory at 79% on this 6-month daily chart. However, in the context of the first wave in a new bull market, this is not unusual and simply reflects powerful new momentum. Weekly and monthly charts, which remove a lot of the daily “noise”, aren’t showing an overbought state. What could quickly evolve in a chart pattern such as this is a sharp (vertical) move to the upside as more investors jump in, fearing they’re missing out on something. The market then temporarily tops out, consolidates for a period of time, and then pushes to new highs.
In today’s Week In Review And A Look Ahead…
1. Why the U.S. Dollar Index confirms the bullish state of the Venture…
2. Signs of a near-term breakout in Silver…
3. Expect Oil to continue to climb…
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