CDNX and Gold
The CDNX continues to climb a “wall of worry” and has now enjoyed an amazing 11 consecutive weekly advances. With Friday’s close of 1950, this red-hot market is up 45% since early July (that sounds incredible, but this writer witnessed the old Vancouver Stock Exchange jump 50% in 1 month in January, 1983) and has achieved another milestone – it has broken above (by just 1 point, mind you) its 200-week moving average for the first time in over 2 years. In fact, the Great CDNX Crash 0f 2008 started in July when the Index broke below its 200-week moving average at the time. At the beginning of this month (October) we predicted the CDNX would likely quickly reach a resistance band between 1900 and 2000 – so the question is, what’s next?
It seems the CDNX is determined to hit the psychological 2000 mark in quick order and then it’s likely going to need at least a few days to decide if it’s comfortable with that level at the moment. We’ll let the market tell us what it wants to do over the near term. A convincing move past 2000 on strong volume would be a clear indication that the Index could rapidly advance to the next major area of resistance around 2200.
It’s important to keep the “Big Picture” in mind which is the undeniable fact, we believe, that the CDNX and precious metals stocks in general are in the midst of a move of historic proportions which should ultimately take the CDNX to new all-time highs, quite possibly sometime during next year. We’ve stated this repeatedly – the “mania stage” has yet to kick in. The important breakouts we’re seeing in a lot of individual stocks is additional technical evidence that something very big is just around the corner in the speculative junior resource market.
At some point in November or December we do expect a minor pullback in the CDNX and then some sideways trading to unwind the current overbought conditions and close the gap a little with the long-term moving averages. However, any significant weakness is going to be met with strong buying from pros and smart retail bargain hunters who see what we see beginning by late December at the latest – another massive move in the CDNX and a super-charged market through at least March on the strength of higher Gold and Silver prices, stronger commodity prices in general and major markets (Dow, Nasdaq, TSE) that are also advancing. The expected Republican takeover of the U.S. House of Representatives and possibly even the Senate in Tuesday’s Congressional elections should be welcomed by investors (in both the United States and Canada). The far left, anti-business, tax-the-“rich” agenda of the self-described “community organizer” in the White House who hasn’t worked a day in his life in the private sector is about to be stopped in its tracks. Obama’s Chief of Staff knew when to bail when he bolted Washington recently for Chicago.
After falling the previous week for the first time in 6 weeks, Gold found support around $1,320 and powered higher Friday to close at $1,360 for a $33 weekly advance. It’s impossible to say for sure how the Gold market will react to the outcome of Tuesday’s Congressional elections and the Fed’s announcement this coming week regarding more quantitative easing measures. A bounce in the U.S. Dollar could occur on the hope – a false one – that the U.S., with Republicans in control of perhaps both the House and the Senate, is about to get serious regarding its out-of-control spending and debt levels. A “sell on news” mentality after the Fed speaks could be negative (briefly) for Gold.
