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October 20, 2014

BMR Morning Market Musings…

Gold has traded between $1,235 and $1,250 so far today…as of 8:00 am Pacific, bullion is up $6 an ounce at $1,244…Silver has gained 12 cents to $17.39…Copper is off 4 pennies to $2.99…Crude Oil is 81 cents lower at $81.94 while the U.S. Dollar Index has retreated nearly one-fifth of a point to 85.11…

Traders are citing a modest increase in physical demand from Asia as a key factor in Gold’s climb from an October 6 low in the $1,180’s, just above the 2013 double bottom…technically, as John’s chart showed Saturday, Gold is now trading within an important resistance band between $1,240 and the low $1,250’s…a confirmed breakout through the $1,250’s would likely trigger considerable short-covering and drive Gold closer to the $1,300 level…

Hedge funds and money managers increased their bullish futures and option bets in Gold in the week up to October 14 after 8 consecutive weekly declines, according to the latest Commodity Futures Trading Commission report…meanwhile, SPDR Gold Trust, the world’s top bullion-backed exchange traded fund, is showing a slight uptick in demand…its holdings rose 1.5 tonnes last week, the first weekly inflow since early last month…holdings recently hit their lowest level since December 2008…

The Gold/Silver ratio, which measures the number of Silver ounces needed to buy an ounce of Gold, is near a 5-year high at 71.63 and about 10% above the 3-decade average according to Bloomberg data…check out updated Silver charts at the bottom of today’s Morning Musings…

Today’s Equity Markets

Asia

Asian markets were strong overnight, responding to Friday’s rally in U.S. stock prices…China’s Shanghai Composite added 15 points to close at 2357 while Japan’s Nikkei average surged over 500 points (3.98%) – its biggest daily jump in more than a year – to finish at 15111…a weaker yen underpinned gains with the currency retreating from a 5-week high hit last week…reports that the country’s $1.2 trillion public pension fund – the world’s largest – will raise its allocation of domestic stocks to 25% also gave sentiment a boost…

China Stimulus

The Financial Times reports that China’s central bank is planning to inject 200 billion yuan ($32.6 billion) into the banking system, according to financial executives briefed on the matter, as recent credit-easing measures have failed to push the world’s second-largest economy back to stronger growth rates amid deepening worries about a global slowdown…the latest effort by the People’s Bank of China, which will offer funds to about 20 large national and regional banks, follows last month’s move to pump 500 billion yuan into the country’s 5 major state-owned banks…it comes as concerns mount in Beijing that the nation will miss its growth target – set at 7.5% this year – for the first time since the 1998 Asian financial crisis…meanwhile, China Securities Journal has reported that the government may ease a property transaction tax…

China’s Communist Party began its plenary session today…the meeting may produce some legal, land, tax and market reforms…this session comes amid fresh concerns regarding China’s long-term growth…according to a report today from the Conference Board, China’s growth will slow sharply during the coming decade to 3.9% as its productivity nose dives and the country’s leaders fail to push through tough measures to remake the economy…

Important data tomorrow from China – the National Bureau of Statistics is due to announce Q3 economic growth and September industrial production, retail sales and fixed-asset investment…

Europe

European markets are down moderately in late trading overseas…on the data front, German producer prices for September were flat compared to the month before, but showed a yearly drop of 1%…

North America

The Dow is off its lows of the day but down 47 points as of 8:00 am PacificIBM posted earnings pre-market this morning that fell short of analysts’ expectations, after seeing a “marked slowdown” in September…

The S&P 500 is up 4 points at 1891 as of 8:00 am Pacific…earnings are expected from about 20% of the S&P 500 this week including Apple (later today) and Microsoft (Thursday)…the index has endured its first 4-week losing streak since August 2011…

The drop in Oil prices is saving U.S. consumers money going into the Christmas shopping season…gas prices have plunged by more than 50 cents per gallon on average since the end of June, and pump prices are falling at the fastest rate in 2 years…according to AAA, one-third of all U.S. gas stations are selling gas for less than $3 per gallon…most drivers are already spending about $5 to $15 less to fill up their gas tank than they were in early July…savings per family could range from $20 to more than $100 per month…

The TSX is up 18 points through the first 90 minutes of trading while the Venture is flat at 810…

Klondex Mines (KDX, TSX) is higher this morning after reporting a nearly 75% increase in Q3 AuEq recovered ounces over Q2 levels (AuEq ounces sold were 28,337, a 12% jump over Q2)…mill throughout remained consistent in Q3 but recovered ounces increased due to the processing of multiple zones of very high grades at Fire Creek…the company has boosted guidance for total recovered AuEq ounces in 2014 to 95,000…

Blackbird Energy (BBI, TSX-V) has recovered another 3.5 cents to 35 cents…the company has spudded its first Middle Montney well at Elmworth…the well will be drilled to a vertical depth of approximately 2,330 m and a lateral length of approximately 2,000 m…drilling operations are expected to take approximately 30 days to complete…Blackbird also reported this morning that it has closed the non-brokered tranche ($7 million) of a private placement announced September 22…the brokered tranche of the PP is expected to close as early as tomorrow…

Barisan Gold (BG, TSX-V) is up a penny at 15 cents after reporting fresh drill results this morning from its Upper Tengkering Cu-Au porphyry discovery in Indonesia…the high-grade zone has been extended to both the north and the south…hole UTD-012 returned a 412-m interval (from 212 m to 624 m) grading 1% CuEq

Venture 3-Year Weekly Chart

It’s an important week for the Venture…what to watch for, technically, is follow-through from the bullish action at the end of last week including confirmation of the hammer candle shown in this 3-year weekly chart…

CDNX346

Pine Cliff Energy Ltd. (PNE, TSX-V) Update

Energy stocks took a pounding on both the TSX and the Venture last week with the sell-off in Crude Oil…Pine Cliff Energy (PNE, TSX-V), which fortunately closed a $60 million bought deal at $2.05 September 23, fell as low as $1.31 last Thursday morning before recovering to finish Friday at $1.54…interestingly, the fall to $1.31 took PNE to the very bottom of an upsloping channel that has remained in place since late 2012…

PNE is up a penny at $1.57 as of 8:00 am Pacific

PNE5

Updates On Three Companies With Revenue Streams

Three interesting companies we’ve been watching closely recently have managed to “buck the trend” this month and two of them are up significantly in October…what they have in common are healthy balance sheets and revenue streams…

Mission Ready Services Ltd. (MRS, TSX-V)

Mission Ready Services (MRS, TSX-V) hit a new high of 45 cents last week…the company provides solutions to the global defense, security and first-responder markets in the areas of cleaning, logistics, maintenance, program management and client representation…on company has been gaining momentum with some of its clients, and 10 days ago announced the closing of  $4 million private placement at 25 cents per unit…

Recently, MRS was awarded a $1.5 million contract for research and development of the U.S. Marine Corps’ next-generation body armor architecture…this followed the awarding of a larger contract MRS is participating in for warehousing and operations support services to clean and launder, stock, and store up to 7,800 pallets of individual protective personnel equipment (IPPE) for the Marine Corps’ Logistics Systems Command (MCLC)…

MRS started trading late last year after completing its qualifying transaction (formerly Priceless Piranha Capital Corp.)…

Technically, MRS has been climbing an upsloping channel since the beginning of August and confirmed a breakout last week above resistance in the mid-30’s…

MRS is off 3 cents at 42 cents as of 8:00 am Pacific

MRS3

Highbank Resources Ltd. (HBK, TSX-V)

Overlooked during last week’s market mayhem was a forward guidance statement for fiscal 2015 from Highbank Resources (HBK, TSX-V)…the company is projecting pretax profit of $11 million on gross revenues of $27 million for its first year of production at its Swamp Point North aggregate project near Stewart (during that period, the company would be required to make application to expand its existing mine permit)…SPM is expected to have a total capex of less than $8 million to access a $2 billion NI-43-101 resource…

HBK is up half a penny at 27.5 cents as of 8:00 am Pacific

HBK18

Cematrix Corp. (CVX, TSX-V) Update

Cematrix Corp. (CVX, TSX-V) announced last week that it has secured another $1 million in contracts for Oil sands, and refinery and infrastructure projects…this brings the company’s 2014 contracted work to a record $15.7-million…currently, $9.5-million of this contracted work is scheduled for completion in 2014, $5.2-million in 2015 and $1-million in 2016…record revenues are great but hopefully this can also translate into some earnings momentum…CVX reported earnings of less than $100,000 in Q2 after a Q1 loss of over $700,000…Cematrix provides cellular concrete product for many applications in Oil sands, Oil and gas facilities, and infrastructure projects throughout Canada…

“This is a truly historic day for our company,” stated Jeff Kendrick, CVX President & CEO in a September 25 news release when the company announced that it had secured a record $6.8 million contract.    “The results we are achieving today from a revived oil sands and refinery construction market, together with the growth of the infrastructure market throughout Canada and the United States, are a testament to the dedication of the Cematrix team and our unwavering belief in our product and solutions. Some of these projects are years in the making as we work with our customers from the design phase of each project including thermal modelling, through to the final pouring of our product,” he added.  

CVX recently overcame resistance at 20 cents early this month and closed Friday at 25 cents for a total market cap of $8.4 million…

CVX2

Silver Short-Term Chart

Silver’s immediate technical challenge is to overcome resistance around $17.40 and push above RSI(14) resistance at 40%…sell pressure has weakened considerably since peaking in late August/early September…in addition, the metal has emerged out of an extreme RSI(14) oversold condition that mirrored the overbought levels that dominated from mid-June to mid-July…

SILVER209

Silver Long-Term Chart

This long-term chart suggests that Silver is in the process of bottoming out but may not have found a final low just yet…next major support is at $16, and that may have to be tested…the 2008 and 2010 lows came on spikes to the downside – that’s something to watch for…

SILVER210

Note:  John, Terry and Jon do not hold share positions in any of the above-mentioned companies…

25 Comments

  1. Is this the week we see some news from GGI. SEPT.was going to be the big month for news.now 2/3 through Oct. and still waiting ?????????

    Comment by BRIAN — October 20, 2014 @ 7:18 am

  2. Brian!

    I agree with you! I think they will wait until the sentiment i a bit better, and it starts getting better now! Gold got higher and so did silver, Venture put a bottom at 780 I think! I hope that will hold!!

    Comment by Yvonne Kindström — October 20, 2014 @ 7:38 am

  3. Well ! it appears world turmoil trumps chart readings. I felt we
    had chart readings on Friday, that indicated a good day today,
    yet what do we get, a Venture still struggling. No doubt, it has
    been awhile & yes, again we wait for confirmation & what will that
    tell us, nothing !!!!

    Comment by Bert — October 20, 2014 @ 10:15 am

  4. Thought we were going to hear news from GGI in September? Oct winding down and still nothing. They sure know how to test investors patience.

    Comment by Dan — October 20, 2014 @ 10:32 am

  5. Nice to see the venture holding from Fridays close considering what nfk.v (32 million sold down 87%) and dxe.v (15 million sold down 83%) are doing (venture is in the green, so far).

    Comment by Tony T — October 20, 2014 @ 10:51 am

  6. Hi Bert

    If you look at the attached chart it shows that after the last two reversals there were 1 -2 weeks of lower volatility and lower Vols.

    http://stockcharts.com/h-sc/ui?s=$INDU&p=D&b=5&g=0&id=p71900468353&a=372290548&listNum=1

    John

    Comment by John BMR — October 20, 2014 @ 11:12 am

  7. those that bought dxe.v at 1 early in the morning are in a double – crazy for sure

    Comment by dave — October 20, 2014 @ 11:21 am

  8. That’s not too shaby of news on BG.V – surprised she did not pop a little.

    Comment by dave — October 20, 2014 @ 11:24 am

  9. My top picks buy them and prosper – SEV DVG ENP my reputation will be based on results watch and see proof is in the pudding so far sev had doubled since i mentioned it here !

    Comment by berrypolin — October 20, 2014 @ 11:29 am

  10. Berry – DVG – technology to replace pump jacks yes??

    Comment by Jeremy — October 20, 2014 @ 1:03 pm

  11. John – Thanks for that ! One can’t compare the Dow with the Venture.
    The Dow is driven by much different factors than the Venture.. The
    Venture, for an extended period of time, has lost it’s direction, as
    it moves down on every whim out there & even fails to recognize good
    news. I realize you have an ability to completely analyze charts, but
    even you, with your ability, have failed to precisely chart a direction.
    Ordinarily, i would not direct such words your way, but there’s no shame
    in not be able to predict in this market, what one can consistently do
    in a good market. Hold your head high my buddy, because i have gained a
    better knowledge of charting because of you, so everything is not lost.
    Another positive thing i should add, no doubt, you are gifted with patience
    or are you ? Have a good evening.

    Bert

    Comment by Bert — October 20, 2014 @ 2:19 pm

  12. Bert
    On the daily chart of the CDNX, RSI shows there has been a short term momentum change to Up Momentum but the ADX indicator does not show the Trend has reversed from bearish to bullish. -DI is still 40% above +DI. There will not be a change in S/T Trend until we see a confirmed +DI/-DI bullish cross.This will take time.
    Have a good night

    Comment by John BMR — October 20, 2014 @ 3:24 pm

  13. Jon, when is your next report on GGI? Have heard anything on Sheslay drilling and Mexico developments? Drill core pics posted but nothing yet.

    Comment by Dan — October 20, 2014 @ 4:07 pm

  14. Hi Dan, as soon as we have something more to go on…looking fwd as u are to news from GGI. Reminds me of April, early May. The lull before the storm.

    Comment by Jon - BMR — October 20, 2014 @ 5:37 pm

  15. Thanks Jon. Don’t normally wish for storms, but in this case bring it on!

    Comment by Dan — October 20, 2014 @ 6:05 pm

  16. How come BMR has completely missed the VRY Petro-Victory Energy story? This is one of the
    most exciting stocks on the Venture and not a peep about it on BMR, still going on about GGI
    and the Sheslay.

    Comment by anonymous001 — October 20, 2014 @ 7:31 pm

  17. (:20 a.m. Nfld time

    I am reluctant to suggest the direction of our ad-Venture market
    this morning, but am pleased to state that the U.S. futures are
    green, the European markets are green & Gold is green. I noticed
    Gold broke through the 1250. resistance earlier, but has since
    dropped back to trade just below, but the day is long. As for GGI,
    i doubt if they will start drilling the Sheslay this time of year,
    especially since they are all tied up in Mexico..Where has all the
    Sheslay excitement gone ? I am now wondering what the only one left
    up there is really up to. Not bashing my friends, just posting what
    i see out there….

    Comment by Bert — October 21, 2014 @ 4:01 am

  18. We haven’t, Anonymous 001. There are a lot of things going on in this current market environment to be watching closely.

    Comment by Jon - BMR — October 21, 2014 @ 4:16 am

  19. 11:45 a.m. Nfld time

    There’s no reason why we shouldn’t have a positive day.
    Everything is green & i notice Gold has now broken through
    the 1250. resistance, copper up over 3.00, silver up, oil up,
    Bert down until the market goes UP…

    Comment by Bert — October 21, 2014 @ 5:18 am

  20. Haven’t heard anything here about the former BMR darling GBB. They are anticipating a C of A anytime to let them do some milling with IAMGOLD and a rolling start. What say you Jon? Maybe it’s time for a conversation with Frank?

    Comment by TJ — October 21, 2014 @ 5:18 am

  21. If i miss on GGI i doubt if i will want to continue
    this game. They have a discovery, they have a cash flow,
    they have interested parties circling, they have a smart
    team, they have this & they have that. I sit & wait.

    Comment by Bert — October 21, 2014 @ 5:23 am

  22. We mentioned GBB a little while back with regard to that IAMGOLD deal which is interesting. GBB still requires its final permit from Quebec authorities. Watching closely. We’ve always believed in the potential of the Granada Property and the opportunity for it to become a producer. They appear headed in the right direction. A lot of shares to be cleaned up in the market.

    Comment by Jon - BMR — October 21, 2014 @ 5:38 am

  23. I hear you Bert about GGI, if it doesn’t hit I will be done too…

    Comment by Greg — October 21, 2014 @ 8:12 am

  24. Greg, I think you misread Bert’s words…

    Comment by Jon - BMR — October 21, 2014 @ 8:15 am

  25. IF we don`t hit on GGI I will go from a HERO TO A ZERO I can hear my wife already.

    Comment by BRIAN — October 21, 2014 @ 10:13 am

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