TSX Venture Exchange and Gold
It was another difficult week for the Venture which fell below important support around 918 and lost 36 points for the second straight week, closing at 883. The Index is off 13.8% since the beginning of September (20 down sessions out of 24) compared to a 19.8% slide in the TSX Gold Index and a 7.5% drop in bullion. Gold stocks are hinting – they could prove right or wrong – at more weakness to come in the metal.
As far as the Venture is concerned, some simple technical facts to ponder:
1. Extreme oversold conditions have emerged as you can see in this 6-month daily chart;
2. The break below the 920 area (an uptrend line in place since last year) was significant, and this level is now new resistance on any rally;
3. Next major chart support is 860.
Friday was the first bullish session in the last five with some increased volume as well. Sell pressure is declining, so Monday’s trading will be important in terms of confirming the possibility of an immediate “relief rally”. The Index fell as low as 872 intra-day Thursday before bargain hunters stepped in and (encouragingly) continued to buy Friday despite a drop in Gold below $1,200 an ounce.
Fundamentally, the Venture needs some exciting news very quickly on the exploration front along with a reversal in the commodities’ sell-off.
Venture 5-Year Weekly Chart
The landscape has changed dramatically in just 5 weeks with the Venture (and commodities in general) going into a sudden tailspin, thanks in large part to a surging U.S. Dollar Index. The first warning of increased downside risk came when the Venture’s RSI(14) recently broke below an uptrend in place for more than a year on this long-term weekly chart. With surprising ease, the Index then cut through strong support around 970 and 920 like a knife through butter. Historically, such a dramatic u-turn – especially given rising 200 and 300-day moving averages (SMA’s) – is highly unusual. Investors should prepare for a very volatile October with the possibility of big moves in either direction.
The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks
There’s no better cure for low prices than low prices. The great benefit of the collapse in Gold prices in 2013 is that it forced producers (at least most of them) to start to become much more lean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their their overall operations. Exploration budgets among both producers and juniors have also been cut sharply. In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to carry out exploration or put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe). Ultimately, all of these factors are going to create a supply problem – think about it, where are the next major Gold deposits going to come from? On top of that, grades have fallen significantly just over the past decade.
Gold
The big question regarding Gold – can it hold critical support around $1,180? An important initial test will come as the new trading week begins tomorrow.
A stronger-than-expected U.S. jobs report Friday led to another surge in the greenback and a $23 haircut for Gold, leaving the yellow metal down $28 for the week at $1,191.
Two positive signs: 1) Overall sentiment toward Gold is very negative, especially among North American investors, and 2) Commercial traders have sharply scaled back their net-short positions recently. When the “smart money” commercial traders have reduced their net-shorts to extreme levels (possibly sometime this month), that’s when a sharp reversal in the Gold price can be expected.
Moves to the upside or the downside in any market often get exaggerated, so another spike down in Gold seems very possible to force panic selling and capitulation. This 6-month chart shows a build-up of overhead resistance in the $1,200’s.
Silver fell 80 more cents last week to close at $16.86 (updated Silver charts tomorrow morning). Copper fell 3 pennies to $3.04. Crude Oil sank $3.80 a barrel to $89.74 while the U.S. Dollar Index gained another full point to 86.64.
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 three decades in 2013, the fundamental long-term case for the metal remains solidly intact based on the following factors:
- Growing geopolitical tensions, fueled in part by the ISIS terrorist group 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
- Continued strong accumulation of Gold by China which intends to back up its currency with bullion;
- Massive government debt from the United States to Europe;
- Continued net buying of Gold by central banks around the world;
- Flat mine supply and a sharp reduction in exploration and the number of major new discoveries.
Deflationary concerns around the globe and the prospect of Fed tapering had a lot to do with Gold’s plunge during the spring of 2013 below the technically and psychologically important $1,500 level, along with the strong performance of equities which drew momentum traders away from bullion. The June 2013 low of $1,179 was the bottom for Gold in our view. Extreme levels of bearishness emerged in the metal last year. With the long-term bull market remaining intact, we expect new all-time highs in Gold as the decade progresses. Inflationary pressures should eventually kick in around the globe after years of ultra-loose monetary policy and the reluctance of central banks to increase interest rates.
Jon: what is your take of a ‘big’ correction in the DOW in the next few weeks? Then, gold and silver reverse course? Hearing that a major correction is coming soon? That leaves the Venture with ____ as it did not participate in this 5 year rally on the DOW??? Your thoughts on this as everyone is so positive on the bigger markets, maybe this guy is right this time when everyone is soooo bullish??? Thanks for your response and what would happen to the beaten up Venture?…..
Comment by STEVEN1 — October 5, 2014 @ 11:04 am
Hi Steven, a big correction in the Dow will eventually come but this is such a resilient market at the moment, and if anything there could be a “melt up” before we see a “meltdown”. Too many people predicting a “crash”. Lots of money still on the sidelines. Moves in the major U.S. markets also tend to accelerate as the greenback appreciates. We could be a few months away yet (maybe January?) before we see a really sharp sell-off in the Dow.
Comment by Jon - BMR — October 5, 2014 @ 11:21 am
The us bosting on better than expected job numbers, but they neglect to report that a majority of those jobs were minimum wage paying jobs, mid term elections is what this is all about, just my opinion.
Comment by Tombc — October 5, 2014 @ 11:29 am
You bring up a good point, Tom. There are some inherent weaknesses in the jobs report, different ways of looking at things, that don’t give as rosy a picture as Friday’s market action would suggest. If you look under the hood a little bit, this “jobs growth” engine is certainly not firing on all cylinders.
Comment by Jon - BMR — October 5, 2014 @ 11:34 am
So much for AIX having legs. How hard up can they be.
Filing
Date Transaction
Date Insider Name Ownership
Type Securities Nature of transaction # or value acquired or disposed of Price
Oct 3/14 Sep 30/14 England, Michael Bruno John Franz Direct Ownership Common Shares 10 – Disposition in the public market -400,000 $0.010
Sep 27/14 Sep 24/14 Lewis, Casey Direct Ownership Common Shares 10 – Disposition in the public market -15,000 $0.015
Sep 16/14 Sep 11/14 England, Michael Bruno John Franz Direct Ownership Common Shares 10 – Disposition in the public market -200,000 $0.025
Comment by Bert — October 5, 2014 @ 4:25 pm
ABR – Same guy selling & buying
Date Transaction
Date Insider Name Ownership
Type Securities Nature of transaction # or value acquired or disposed of Price
Oct 3/14 Oct 3/14 England, Michael Bruno John Franz Direct Ownership Common Shares 10 – Acquisition in the public market 300,000 $0.025
Sep 16/14 Sep 11/14 England, Michael Bruno John Franz Direct Ownership Common Shares 10 – Acquisition in the public market 51,000 $0.030
Sep 2/14 Aug 28/14 England, Michael Bruno John Franz Direct Ownership Common Shares 10 – Disposition in the public market -350,000 $0.030
Comment by Bert — October 5, 2014 @ 4:30 pm
Sev was the big stock on the venture last week keep a close eye on it this week again expecting a big potential tv or virtual reality deal – 4 institional houses have coverage on the story
Comment by berrypolin — October 5, 2014 @ 6:58 pm
Berrypolin
It may be difficult to sway anyone on this board, we all seem to be stock shocked.
SEV did have a good ,run but i did notice a couple of up days were followed by down
days, the run wasn’t prolonged for sure. Anyway, appreciate you bringing it to
the board’s attention.
Comment by Bert — October 6, 2014 @ 3:35 am
No doubt, it’s near impossible to guess what may happen
in the market, even charting will lead one astray, but
if pre-market this morning is an indication, we may be
in for a good day. The first time for an extended period
of time, all commodities that interest us, are in the
green. The only negative thing is it reminds me how fast
my grass grew this past summer.
Comment by Bert — October 6, 2014 @ 5:04 am
DBV has been HALTED
Comment by John BMR — October 6, 2014 @ 5:11 am
DBV – Halted
Comment by Dan — October 6, 2014 @ 5:24 am
DBV halted!!!!! Must be big news to halt it.
Comment by goldbul636 — October 6, 2014 @ 5:26 am
That’s typical of that group
Comment by Jessie — October 6, 2014 @ 5:27 am
Bert- Are you familiar with FNC, recommended by tony t.If so,would like to hear your opinion on the company. At a glance it looks interesting and undervalued.
Comment by Greg J. — October 6, 2014 @ 5:32 am
Are we holding on to our Hats?
Comment by Ivan — October 6, 2014 @ 5:44 am
DBV is halted pending news…
Comment by Bert — October 6, 2014 @ 5:55 am
Has anyone heard if DBV is halted or not??? (Sarcasm alert 🙂 ).
I hope BMR will be able to make comment before trading resumes. The last time they halted the stock, the results were ok but there was a sell off. However, on that occasion the SP had moved up quite significantly prior to the results. This is not the case this time around. Hoping for some decent grades and a clear and easy to understand press release.
Comment by Tom UK — October 6, 2014 @ 6:13 am
Greg J
I hate giving an opinion, mostly because i am not very good at it.
Because you asked i did take a look & i noticed it has 138 million
shares o/s, no doubt the reason for the present price, also of
importance, there was around 2 million shares moved on the negative
side in September & that was enough for me to turn the page.
Comment by Bert — October 6, 2014 @ 6:16 am
BMR should sent out an alert if they like what they see on DBV! This is hopefully what this market needs to get going!
Comment by STEVEN1 — October 6, 2014 @ 6:37 am
Bert- as always, appreciate your input!! Thanks for the reply back.
Comment by Greg J. — October 6, 2014 @ 6:40 am
I am ashamed to state that i was so wrong this a.m.
I felt for sure that we would have a good start,
considering commodities were in the green, but it
was not meant to be. We can’t depend on commodities
being up, we can’t depend on charts, but we have one
thing we can depend on & that is the Venture is going
down…
Comment by Bert — October 6, 2014 @ 6:49 am
Tom UK
I was the last to post the DBV alert, but when i typed that
post, i didn’t know but i was the first, that’s the result of
not being able to post live. Anyway, i am not knocking the
system, better to be advised several times than not at all.
Have a good day..
Comment by Bert — October 6, 2014 @ 7:05 am
Just when everyone thought PEM was dead – 112 meters over 5g/t AU
Comment by Dan — October 6, 2014 @ 7:07 am
Nice numbers, Dan, and the stock is responding well.
Comment by Jon - BMR — October 6, 2014 @ 8:21 am
AIX news out today
Comment by brian — October 6, 2014 @ 12:19 pm