The Week In Review And A Look Ahead: Part 1 of 3

CDNX and Gold

Last Sunday, August 29, BMR issued an “Investor Alert” stating:   “September is shaping up to be a possibly dramatic month of trading for the CDNX with BMR anticipating a major upside breakout.”  Indeed the CDNX did stage a significant breakout this past week, surging through major resistance around 1500 and finishing with a 5.4% weekly gain (80 points) at 1566.  As readers know, we turned extremely bullish on the CDNX in July, shortly after it bottomed at 1343 July 6.  We came to our conclusion based on a number of technical and fundamental indicators including an eye-popping comparison between the CDNX chart for this year and the one from 2004 when the market surged 25% by the end of the year from its July low.  Since this year’s July low of 1343 a couple of months ago, the CDNX has been the best performing market in North America.  It’s up a whopping 17%, more than double the performances of the Dow (8%) and the Nasdaq (7.5%), and significantly better than the TSX (9.4%) and even the TSX Gold Index (10%).  Gold itself is up only 4% since early July.  This incredible out-performance by the CDNX, which has proven to be a remarkable leading indicator, suggests several important things:  1) Gold is going to new highs;  2) There is no near-term crash in store for the major markets – in fact, they are likely to head higher;   3) The world economic recovery is stronger than most people think which will continue to fuel demand for metals;  and 4) More QE (Quantitative Easing) is on the way.  The CDNX is in a primary massive bull market which commenced in late 2008, shortly after one of the worst market crashes of all time.  Where this bull market will end is anyone’s guess but we are not yet even close to the “hysteria stage” that could send junior resource stocks skyward like the dot com boom just over a decade ago.  Near-term, the new floor for the CDNX is 1500 with technical resistance at 1575 and 1625.  The primary move is obviously up so any pullbacks should be viewed in that context (i.e., buy on weakness when the opportunity presents itself).  We have little doubt the CDNX will climb to a new 52-week high (through 1700) by year-end – it’s possible we could see something close to that within 4 to 6 weeks with Gold expected to reach new highs.  Gold had another strong week.  All of its major moving averages are in bullish alignment and the stage for a move to new all-time highs is being set (the action in the CDNX also confirms that a new high is on the way).   One of our favorite analysts is Frank Holmes, CEO of U.S. Global Investors, who believes Gold could double in price over the next 5 years (a 15% annual return).  We suggest checking out the article by Daniela Cambone Friday on Kitco as she interviewed Holmes and wrote an excellent piece.