CDNX and Gold
It was another strong week for the CDNX which gained 39 more points to finish at 1466, its highest close since June 21…the CDNX has posted gains in 17 of the past 20 sessions and is up 7% during that period…what is unfolding is the scenario that we presented last month – the completion of a normal major correction (20%) within an ongoing bull market, and a major move back up the ladder that could very easily take the CDNX to a new 52-week high before year-end…the chart similarities to 2004 are stunning…if we’re correct, and we strongly believe we are, astute investors who are positioned now in quality junior resource stocks stand to make massive gains over the next couple of months and beyond…this is the complete opposite view of the “Global Castastrophe Alert” recently issued by technical analyst Clive Maund and a similar “sky is falling” scenario that is being propagated by others…they obviously haven’t looked closely at what the CDNX is doing…the Venture Exchange has proven to be such an accurate and reliable leading indicator of future market and economic activity that the prospect of a “crash” anytime soon in the broad stock markets or the economy in general simply doesn’t exist based on the very bullish CDNX chart…our technical analyst will be reviewing the CDNX in much more detail over the weekend…this market does face significant technical resistance around 1500 which we expect it will test in the near future (sometime this month)…the first attempt to get through 1500 may not succeed, and that would be quite normal…we could see a reaction but a very modest one that would have the positive effect of cleansing any overbought conditions while keeping the Index at or above its 50-day moving average (SMA) which currently stands at 1430…fueled however by a reversal very soon in its 50-day SMA, and underpinned by rising 200 and 300-day moving averages, the CDNX will likely bust through that resistance within the next few weeks and then some really serious action begins…this market clearly bottomed in early July, so what we’re seeing now is no “sucker rally” – it is the beginning of a potential explosive upside breakout which historically has often occurred very soon after the CDNX has hit an important bottom…investors need to appreciate the significance of what is developing here…Gold, meanwhile, has ended a 6-week downtrend (the CDNX has been telling us a reversal in Gold was imminent) with bulls regaining control Friday as Gold got above $1,200 again to close at $1,206…a reversal in Gold’s 14-day moving average, a very reliable indicator, confirms that the near-term outlook for Gold has improved considerably…a period of seasonal strength is also quickly approaching (usually mid-to-late August)…we don’t believe Gold is ready immediately to shoot up like a rocket, but there should be good strength in this market over the next few months and a move to around $1,350 during that time seems very reasonable…possible more “quantitative easing” by the Fed and China’s decision this week to increase the scope of its banking sector that’s allowed to import, export and deal in Gold are positive developments for the yellow metal…