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Why’s the Canadian TSX Venture Exchange prone to booms and busts?

Finance

Why’s the Canadian TSX Venture Exchange prone to booms and busts?

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”Stocks are super-attractive should the Fed is loosening and rates are falling. In sum: Don`t fight the Fed!”Martin Zweig, fund manager, Winning on Wall Street

”You know a nation is falling apart when maybe the government will not accept a unique currency.”Jim Rogers, financier, adventure capitalist, Quantum Funds

”A weak currency could be the signal of an inadequate economy, plus a weak economy results in a weak nation.”Ross Perot, American businessman, 2-time 3rd-party presidential candidate, 1992 and 1996

 

Bear market talk abounds! We suppose it’s not surprising, since S&P 500 had fallen almost 11.Five percent from your September 21, 2019, or 9.9 % on a close basis. On just two pages on the October 31, 2019, edition with the Globe and Mail there were six bear stories. Could it have been because doing so was October 31 (Halloween) and they merely wanted to scare the bejesus from us. Although the headlines were there: “What if there is a collision as you retire?,” “Hunting for bargains? Try heath care treatment,” “Is it a great time undertake a five-year GIC ladder?,” “Beware, markets haven’t hit very cheap yet,” “As stocks’ nine-year bull run fades, a bear market beckons,” and “Seeking businesses that have revealed they’re able to weather the storm.”

Maybe they caught the Dr. Doom disease (Marc Faber, author in the Doom, Boom & Gloom Report). Dr. Doom once said the S&P 500 would definitely fall 50 percent. But is in August 2016 once the S&P 500 was 2,180. The S&P 500 rose another almost 35 % and then. Faber did remember that industry will not be driven by any genuine buying. Instead it turned out driven by stock buybacks, takeovers, acquisitions, and it also has been rising on narrow leadership (FAANG stocks). He forgot low interest and QE. The tax cuts we had not yet been enacted.

No you have ever claimed that we’re perma-bulls. “Perma-bear” and “gold bug” are words we have been generally known as. Unfortunately, history is full of financial crises, recessions, and depressions combined with wall street game crashes of fifty percent if not more. Since 1970, there were 15 stock market declines to the Dow Jones Industrials (DJI) of 14 percent or maybe more. That’s roughly a decline every several years.

But also, in that time the DJI increased 25-fold. We have had amazing advancements in communications, heath care treatment and more. But half the world resides in poverty, and The us (Canada as well as U.S.), over 10 % have a home in poverty even when that poverty is superior to A hundred years ago. In the event you stay with you for a specified duration, this marketplace recoups it on your behalf. To suit well with all the Warren Buffett philosophy. But advice, it can try taking some longer if the market falls above Fifty percent. Although the DJI only did once since 1970 (2007C2009), most markets are not the DJI. On average, since 1900, DJI bear markets fell 30.6 percent and lasted 401 days.

Things may be worsea lot worse. Take, such as, the TSX Venture Exchange (CDNX). The CDNX only launched in November 1999 following the merger on the Vancouver Wall street game (VSE), the Montreal Stock trading game (MSE), as well as Alberta Wall street game (ASE). The CDNX has gotten two bulls: 1999C2007 by using a gain well over 400 percent and 2008C2011 to get a gain of more than 260 percent. It’s also had two bears: first in 2007C2008 where it fell 80 percent as well as in 2011C2015 where it dropped 81 percent. Despite a rally from 2015C2019 where it gained just over 100 %, the CDNX has dropped back by 32 percent. It remains down 81 percent looking at the 2007 all-time high. Since its beginnings at the end of 1999, the CDNX as a possible index has returned next to nothing. Now, that may be pain.

But don’t despair. After rising over 143 percent from its beginnings at the end of 1999 to some top in March 2000, the CDNX promptly fell 42 percent above the next nine months. Once it found its low, this hadn’t stop rising before full off May 2007. So maybe history will repeat itself whenever the marketplace finds a bottom, an extensive bull market could follow. Cyclically, it truly is overdue for just a new bull. The CDNX does give true intending to boom and bust.

? David Chapman

But do you find it just venture capitalist type indices that follow a boom and bust pattern? The CDNX consist of roughly Fifty % junior mining ventures. Inside bust phase, it is not unusual for several of these to fall Ninety percent or even more. Boom and bust is a pattern quite experienced with markets. A lengthy amount boom is sometimes and then a vicious bust. The Grand Daddy of all of them in the past century was the “Roaring Twenties” stock market boom that saw the Dow Jones Industrials (DJI) gain 345 percent 1923C1929. It was actually pursued by an 89 percent bust from 1929C1932. It was actually the time scale of your Great Depression.

We were not safe from boom and bust ever since. The post-war boom of 1949C1966 saw the DJI rise 515 percent. The bust followed in 1966C1974 plus the DJI fell 42 percent. Other markets fell a lot more. Gold soared 766 percent 1976C1980, then fell 68 percent 1980C1985. The Tokyo Nikkei Dow (TKN) soared 462 percent 1982C1990, simply to get into a protracted slump. From 1990C2003 the TKN fell 80 percent. The TKN remains to be down 44 percent looking at the all-time high in 1990 twenty-eight years later.

From 1999C2008, WTI oil was up an incredible 1,283 percent. As soon as the crash came, WTI oil fell 77 percent in just a few months from July 2008CFebruary 2009. From 1990C2000 the high-tech/Internet boom was underway plus the NASDAQ rose an incredible 1,489 percent. The crash went to the theater lose 78 percent from 2000C2002. Many businesses just disappeared. Finally, the DJI ran up 97 percent from 2002C2007. The financial crash of 2007C2009 saw the DJI fall 54 percent. Today saw Bitcoin rise 292 thousand percent 2010-2017 that must be followed with a crash of over 70 percent. Many cryptos fell 90 percent or even more and quite a few just disappeared. Bitcoin is, however, still up over 105,000 percent from your humbling beginnings.

So, there shouldn’t be complacency while using the current bull market who has seen the DJI rise 317 percent from 2009C2019. History lets us know that, once it heats up ends, it most probably will end badly. The key systemic risk is debt. Since the financial crash of 2008, stuck accumulated a large degree of debt, estimated how to cover $250 trillion. That’s almost $100 trillion above it was actually back 2007 at the start of the economic. Never in the past has a great deal debt accumulated in this particular limited time. It doesn’t matter whether it’s government, corporations, or consumers. They have got all been on a debt binge. Debts are an illusion of wealth. So long as the stock markets or housing expense is rising we presume we’re wealthy.

? David Chapman

? David Chapman

Possibly nothing illustrates the huge debt growth greater than examining margin debt on the NYSE. The chart below examines margin debt in a very larger context. It has free cash accounts and credit balances in margin accounts. The credit balance is the sum of the free credit cash accounts and credit balances in margin accounts minus margin debt. It overlays with all the S&P 500. The chart is nominal and not adjusted for inflation. Exactly what shows is the negative credit balance has never been so huge. It doesn’t only pale where it was prior to when the 2000C2002 high-tech/dot.com crash, however the level seen before the financial crash of 2008 seems puny as compared to now. Debt has fueled the rise of your stock trading game. In the event the markets shift to down from up, leverage could be deadly.

The data here only goes ’till the end of September 2019. It will probably be interesting to observe the October numbers, considering the drop in the stock exchange the 2009 month. Nonetheless, the extremes seen here bear close watching.

? David Chapman

None with this would be to declare that finance industry is on the verge of crash. Various stories in the mainstream papers may perhaps be an illustration that the market can have bottomed due to this phase. There are lots of stories via the internet coming from the Marc Faber’s and others constantly preaching that doom and gloom lie near. Eventually, they could be right. But, as Martin Zweig said, “Don’t fight the Fed.” For a long time, the Fed held rates of interest near zero and flooded the economic climate with liquidity through quantitative easing. Now they are raising interest rates, and typically the Fed starts already happened and hikes them also high.

We aren’t at that point yet where interest rates are way too high. At 2.25 percent, the present Fed rate is roughly in accordance with current headline inflation. The Fed rate can become too high when it is approximately the pace of inflation. In the possibility of another hike in 2019 and potentially three more in 2019, that implies to all of us that the potential for an economic depression ought not to be upon us until late 2019 or early 2020. Incorporate the currency wars, trade wars, and global big power tensions, not to mention prospect of political instability inside U.S. following the mid-terms, there are at some time the opportunity of another Lehman Brothers moment. Just not today.

The fun just keep rolling along additionally, the stock markets, typically, seems to be managing the hiccups. The current good employment numbers are really a great example as was the strong Q3 GDP. Earnings remain strong, and when the trade wars threaten to accentuate, word comes them to will certainly make a deal (China/U.S.). An expansion back into the September stock market highs by year-end or early 2019 will not be unthinkable. Keep an eye on the U.S. dollar and gold for clues that your market is amiss. Following nine numerous what might be the most historic bull market ever, history lets us know that it will not end well. Time is drained.

Bitcoin watch

? David Chapman

For earlier times a couple of months, Bitcoin has traded in a narrow range roughly between $6,200 and $6,700. Too, Bitcoin ended October in the red, marking three consecutive months of losses. That was the earliest sustained amount losses since 2015. It’s not at all like the losses were large. August was the worst, down 9.2 percent while September fell 5.8 percent. October dropped 4.3 percent. The glory days of 2017 have grown to be a distant memory. In May 2017 Bitcoin leaped an astounding 72.9 % since it charged towards $20,000. Despite the only thing that, among the initial stories we got for November was how Bitcoin has historically enjoyed positive Novembers. The bulls became excited that your might be their month.

It because if Bitcoin or cryptos have been popular too long to very much establish seasonal patterns. Measuring from 2010 does not lead to a huge number of observations. But the author from the report contending that Bitcoin may break a three-month losing streak was clearly wanting to be optimistic that November will bring better times. The three-month high seen instruction online September was around $7,400. Which is the point that Bitcoin will need to sign up for. Support have materialized at $6,200 and further support can be viewed right down to $5,800. But below a decline to $5,000 is probably. One of the most likely result is another month of boredom, waiting to discover whether Bitcoin arises or down.

Remember Dogecoin (DOGE)? Well, it apparently enjoyed a bad October, falling some 36 percent. Amazingly, Dogecoin remains from the top 25 of cryptos by size, by using a recent reported market cap of some $442 million. That is incredible objective many think about a joke. Dogecoin is a meme-themed crypto. Dogecoin hit its zenith in January 2019 which has a market cap of $1,257 million make that read $1.257 billion, yes billion. Dogecoin continues to be down 65 % since then. All we’re able to have to say is, “Woof.” There are 116.8 billion Dogecoins circulating across the crypto world. Well what does one expect if a Dogecoin = US$0.003784. You’d need 800 to order a tall-boy Starbucks coffee. It’s not that you will could. Truly sure with an outdoor oven buy which includes a Dogecoin, but apparently you are able to. The most common uses are typically in the webs pornography and poker industries.

The market cap off cryptocurrencies was reported on November 2, 2019, as $206.1 billion. That is down $2.4 billion on the week. Amazingly enough there had been 2,092 cryptos reported at Coin Market Cap, up from 2,070 per week earlier. The universe just keeps on expanding. There had been 15 cryptos listed which includes a market cap over $1 billion. That is down from 16 one week earlier. The volume of dead coins appears to have stalled out. It remains at 929 as stated by Dead Coins.

The conclusion is there are more cryptos having a baby than there are dying. Not surprising regulators are tearing their head of hair out.

? David Chapman

U.S. and Canada job numbers

The October job numbers for the U.S. and Canada arrived on the scene on November 2. The U.S. reported an increase within the nonfarm payrolls for October of 250,000. The market had expected only 190,000. The September nonfarm payrolls were revised, because of 118,000 from 134,000. Generally, it was considered a solid report. Initially stock market trading rallied, but later came off and turned negative. The unemployment rate (U3) was unchanged at 3.7 percent, although technically it rose to a few.74 percent from 3.68 percent in September. The broader U6 unemployment slipped to 7.43 percent from 7.45 percent as the Shadow Stats unemployment rate (U6 plus long term unemployed and discouraged workers defined out from the labour force in 1994) arrived at 21.2 percent down from 21.Three percent.

? David Chapman

The nonfarm payrolls almost certainly jumped due to previous distortions the result of the hurricanes in and Florida. As always, however, when one compares the other numbers reported by the Fed they don’t really necessarily accumulate. The civilian labour force grew by 711,000 in October. Because of this, the labour force participation rate jumped to 62.9 % from 62.7 percent. Workout . looking helps pushup the unemployment rate. The use level was up 600,000 while those employed full-time rose by 318,000. Those employed part-time rose by 242,000. Subsequently, the civilian employment population ratio also rose to 60.6 % up from 60.Four percent.

The count of unemployed also rose up 111,000. But the number not inside labour force fell by 540,000, thus helping hike the labour force participation rate and fueling the increase in the civilian labour force. The sheer numbers of men searching for work who are not in the labour force fell by 9,000 and also for women it absolutely was down 77,000. Those who are not while in the labour force but would like a job fell to 2,298,000 down 83,000 to the month. A unique figure may be the amount of people whorrrre multiple job holders. It is a number that is rising. This year the amount was only 6,657,000. The most up-to-date figure was 7,883,000, up 176,000 during the month. How many individuals who hold two part-time jobs also rose up 130,000 inside the month. This all demonstrates that people are can not make do and lots of need two jobs simply to pay bills.

Average hourly earnings rose 0.2 percent and, annually, these are up 3.1 percent. The dpi will attract the Fed and, put together with the strong employment numbers, the pressure will to the Fed to hike mortgage rates another 25 bp in December. They should hike, despite Trump’s musings that he or she doesn’t enjoy it.

In Canada, Statistics Canada reported that Canada added 11,200 jobs in October. In September, they reported an increase of 63,300. There were an extra 33,900 full-time jobs while part-time jobs saw a decline of 22,600. The unemployment rate were only available in at 5.8 percent, down from 5.9 percent. The labour force participation rate slipped to 65.2 percent from 65.Four percent. Which enables you lower the unemployment rate. The Ontario unemployment rate fell to five.6 %, the bottom in the decade. Ontario has added 83,000 jobs up to now year, many full-time.

? David Chapman

Markets and trends

? David Chapman

? David Chapman

We assume that a brand new bear publication rack now underway. Recent decline through the September high appears to have fallen in five waves, suggesting an impulse wave towards the downside. It needs to be noted that your rise to all-time highs in September was largely predicated on just two stocksAmazon and Apple. They included a complete third of your rise witnessed in 2019. That reminds us on the famous “nifty-fifty” rally of 1972 that saw the marketplace peak in January 1973. What followed was the devastating 1973C1974 bear market that saw the DJI fall 45 percent and lots of other indices lose much more. There’s two main trendlines shown here. First, usually the one in red increased from your February 2016 low, and the second one in blue is on its way from your March 2009 low. Interestingly, it obtained the March 2009 trend line, yet barely. The world thinks the S&P 500 has completed a five-wave advance to the peak in September and the collapse in October is the first wave down. A corrective wave should now follow that might, hypothetically, take you the way in which back in the highs and also slightly higher.

The S&P 500 jumped 2.Four percent last week and today, doing the mid-terms on Tuesday, the marketplace is positive for the year unless, however, Monday wipes out the gains. We doubt that. No matter what end result on Tuesday, we know maybe it’s a catalyst to spark another rally back to your recent highs. The Dow Jones Industrials (DJI) gained 3.2 percent earlier this week although the Dow Jones Transportations (DJT) was up 4 %. The DJT, however, remains documented on the entire year by 2.3 percent. The NASDAQ gained 2.7 percent as you move the small cap Russell 2000 was up 4.3 %. Elsewhere markets were also positive. The London FTSE 100 gained 2.2 percent, the Paris CAC 40 was up 2.7 percent, as well as the German DAX jumped 2.8 percent. In Asia, China’s Shanghai Index (SSEC) gained 3.0 percent as you move the Tokyo Nikkei Dow (TKN) was up a stellar 5 %. Interestingly, however, all five indices remain upon 4 seasons when using the SSEC the worst off 19.1 percent about the year.

A new bear phase is, we know, now underway. This bear market could last more than 2 yrs or over, with lots of twists and turns. Most probably it will take a Lehman Brothers moment or perhaps huge sovereign default to trigger an even bigger decline. Advice that we now have very shaky sovereigns available, particularly Turkey, Argentina, and Italy. The S&P 500 has resistance as much as 2,800, but above that level an effort of your high at 2,940 could occur. Major support lies at 2,600. You will find there’s gap around the chart, roughly between 2,680 and 2,700. If that level is filled, then odds favour an experiment of 2,600. However the action, up to now, suggests to us that your first phase from the bear is likely over as well as the mid-terms, regardless of the result is, could spark a rally (a relief rally?). Which should play into your traditional rally after Thanksgiving as well as the so-called “Santa Claus” rally.

? David Chapman

It wasn’t surprise that volatility jumped while in the recent decline. Regardless of the decline, volatility, as measured because of the VIX, only hit 25, in short supply of the 37 seen within the February 2019 decline. You’ll be able it really is a divergence because the plunge inside the S&P 500 was at least add up to the February decline. The October decline largely fulfilled the targets from the possible wedge triangle that formed at the summit. The possible divergence around the VIX signifies that the S&P 500 could come back to test the breakdown zone, currently near 2,900. B waves could take this marketplace to new highs and fool everyone. In spite of this, we’d be very impressed to check out the VIX get the current lows near 11 on any rise with the S&P 500.

? David Chapman

The MSCI World Index rebounded last week with the remaining portion of the market. The index, however, remains well below its 200-day MA, suggesting that it must be now inside a bear market. A rebound back in 1,900 or simply 2,000 isn’t impossible. We doubt any higher as signs abound that any new bear publication rack underway.

? David Chapman

The Wilshire 5000 Composite is usually as broad an amalgamated as you will look at. Similar to the other indices, it too has divided under its 200-day MA. Understand that the Wilshire briefly took out the February lows but remains quite a way from taking off the 2017 low. The Wilshire, like with other indices, appears to have completed a five-wave advance on the February 2016. It would not be unusual to find out the Wilshire claw its sources that are to 30,000 before succumbing again. Under 27,000 new lows are highly probable.

? David Chapman

The longer-term weekly chart from the DJI shows any complete five-wave advance from the March 2009 lows. If that is correct, a significant correction must be underway, a correction that may keep working for a three years or so and go ahead and take markets down 40 percent-60 percent. The DJI has broken below its 40-week MA, even so it did that next year and again in 2015/2016, and then rebound and move back higher than the key weekly MA. A dysfunction under the trendline up through the March 2009 lows currently near 22,400 would state that a significant bear industry is underway.

? David Chapman

The Invesco QQQ Trust (QQQ-NASDAQ) acts as a proxy with the NASDAQ 100 Index. After comitting to a high-volume tight on October 29, the QQQs or Qs as is also known, rebounded, gapping higher on October 31. This may be a breakaway gap. Notably it stalled in the 200-day MA. A move above 171 again could, however, send the Qs higher towards resistance at 179. The Qs could bounce around wanting to form a bottom. But any real assault to the August/September highs would not occur till the Qs firmly acquired 180. A far more positive scenario remains constantly in place assuming that the Qs hold above 166.

? David Chapman

The TSX Composite bounced back this past week combined with the remainder of the market, gaining 1.6 percent. The TSX Composite appears to have fallen in five waves within the high noticed in July 2019. A rebound which takes us to test the 200-day MA near 15,885 isn’t not possible. The TSX Composite has out its February lows which is actually a negative sign. The TSX Composite in addition applied for the lows of 2017 that is another negative sign. It suggests to us that your longer-term bear publication rack as a result of stages. All of that remains is for the monthly indicators to make negative. Within the recent lows the TSX Composite was down almost 12 percent by reviewing the high.

? David Chapman

As a sign of the developing bear niche for the TSX Composite, the amount of stocks trading above their 200-day MA is Thirty percent. This really is off of the low that had been recently seen at 22 percent. This confirms that this TSX Composite has moved into bear territory. The all-time low for the index was 3 percent back along at the height in the 2008 overall economy. It is interesting to notice that your index fell below Fifty % in August 2007 and remained like this until June 2009.

? David Chapman

This is usually a close-up of your TSX Venture Exchange (CDNX). The CDNX have fallen in five waves with the high affecting January 2019. If correct, a significant rise is deserving of underway. The CDNX is in least 50 percent junior mining stocks so that they remain a vey important component. The CDNX also holds significant junior energy, high-tech, and biotech stocks. Since we noted with our main essay, the CDNX is at risk from periods of boom and bust. We’re also by having a significant bust period and, if correct, it is actually setting us up for the next boom, the one which may even see the CDNX double or maybe more from current levels.

 

? David Chapman

The strong job numbers on Friday sent yields about the U.S. 10-year Treasury note higher, closing at 3.22. It’s a new high close, although 10-year didn’t take away the earlier high of 3.23 percent. Our minimum target with the 10-year remains 3.45 percent. Canadian bond yields also jumped because Canadian Government 10-year bond (CGB) jumped to 2.52 percent, up from 2.39 percent. Canada also reported robust job numbers.

Recession watch spread

? David Chapman

The recession watch spread (2C10 spread) moved higher this past week to 31 bp from 27 bp the last week. The strong job numbers on Friday helped push the 10-year higher with no discernible development of the 2-year. The 2C10 spread remains in the bear channel. In spite of the rise last week, our view than a recession may be for us, possibly in 2019, except for sure in 2020 has not yet changed. The 2C10 spread still has to fall to negative simply because it has in the past cycles and remain negative for upwards of several months. The Fed will, more than likely, hike interest levels in December despite the musings of President Trump attacking the policies in the Fed as well as Chairman Jerome Powell.

? David Chapman

Like trading stocks, the iShares iBoxx High Yield Corporate Bond ETF (HYG-NYSE) appears to have digested. Unlike stock exchange trading, however, the HYG is constantly offer the 200-day MA. The HYG is becoming a proxy for prime yield (junk) bonds. If a debt crisis is arrived, the HYG should fall rapidly. At this point, this indicates to remain “hanging” in. It is not much different, some respects, then an 2C10 spread continuing to “hang in,” whilst it moves inexorably lower.

? David Chapman

The US$ Index jumped to new highs last week at 96.98, barely treatment of August most of 96.86. On November 1 the US$ Index plummeted on word that Trump was prepared to find a currency war with China. Indeed, the reports counseled me contradictory, as first they had been negotiating an agreement, and then they weren’t. U.S. dollar sentiment hit of up to 95 percent before the pullback on November 1. The past time sentiment was that top was instruction online August for the high. We’ve got with the US$ Index two wave counts. In red is actually a count that implies a five-wave corrective, labeled ABCDE. In blue may be a the usual wave count of 1-5 using the AB waves in the corrective wave towards downside. We love our ABCDE count countless of your waves were irregular or perhaps in threes, suggesting a correction. If correct, this will complete the corrective wave that got under while using the 88.15 lacking in February 2019. What’s key now will certainly be a breakdown under 93.50. There may be considerable support at 95 and into 94. A little strong move above 97 specifically above 98 could suggest to us the US$ Index will test the January 2017 most of 103.82. We doubt that scenario.

? David Chapman

After falling swiftly noisy . section of the week gold prices rebounded on Thursday carrying out a down draft inside the U.S. dollar as Mr . trump suggested currency wars with China. Inspite of the sharp up go forward Thursday gold ended the week off a compact 0.2 percent. Silver gained 0.4 percent. However, the important star each week was platinum with a gain of almost Five percent. Palladium prices also rebounded, up 1.7 percent. The strong job numbers on Friday helped propel copper prices higher to $2.81, a gain of 2.6 percent around the week. Gold successfully tested the recent breakout line near $1,210 before rebounding retrace $1,230. The recent high remains at $1,246 and $1,250 will be the next hurdle. Once over $1,250 gold should test the 200-day MA near $1,274 and up to $1,280. There may be after that class of resistance between $1,280 to $1,320 to overhaul before a serious attempt can be built on the highs near $1,370. The bullish scenario is within place providing gold remains above $1,200. An explanation under $1,200 could create a turn to new lows. Sentiment remains bearish as you move the commercial COT remains quite bullish.

? David Chapman

The commercial COT for gold improved last week to 46 percent from 44 percent the earlier week. The report overall remains quite bullish. Long open interest rose over 2,000 contracts while short open interest fell by almost 13,000 contracts. That implies to all of us which the commercials used the prior week’s pullback to fund shorts while adding minute their longs. The larger speculators COT (hedge funds, managed futures, etc.) slipped to 52 percent from 54 percent. The massive speculators remain quite bearish by historical standards. This would continue being supportive of gold prices in the years ahead.

? David Chapman

Silver prices jumped 0.4 % earlier this week and are now at their highest close in weeks. Our prime Friday of $14.92 was just shy of the $14.95 seen way back in late September. The pattern that has formed because September low $13.97 continually look bullish. A firm breakout above $15 might even see silver increase to almost $16. You can find resistance at $15.40/$15.50 and again at $15.85.This scenario holds provided that silver remains above $14.30 and preferably above $14.50. The bullish scenario fails under $14.25. A bullish commercial COT and weak sentiment should remain supportive of silver prices. Seasonals can also be rolling around in its favour although, like gold, the actual move might not get underway until December.

? David Chapman

The silver commercial COT improved to 47 percent last week from 46 percent. Long open interest rose roughly 6,000 contracts at the same time short open interest jumped approximately 2,000 contracts. The big speculators COT slipped to 47 percent from 48 percent since they mostly added to their shorts up over 4,000 contracts. The silver commercial COT remains quite bullish.

? David Chapman

Despite gold and silver coins not gaining much the 2009 week, this didn’t stay away from the gold stocks. The TSX Gold Index (TGD) was up 3.2 percent as the Gold Bugs Index (HUI) jumped 3.3 %. Granted, with the down swoop they suffered the first sort week, some form of bounce had been inevitable. The rebound this week recouped roughly one half of the fact that was lost the previous week. The fact that was impressive is usually that the TGD bounced nicely off the 50-day MA and tested the neckline with the items had been a small head and shoulders bottom pattern. The H&S pattern had projections approximately at least 174. That level of cla was achieved while using the first upward thrust. A move throughout the recent highs near 174.80 could send the TGD for its next target near 184. That also leaves us an affordable distance on the 2019 near 205 along with the hottest elevated in June near 195. So, there exists still plenty of try to be practiced. The uptrend scenario continues as long as the TGD remains above 158. Below 153, new lows are probable. The rally up to now is not known as strong. However, we doubt strong buying comes in until we not less than begin out 195/205. The gold stocks were gross underperformers so that they are not yet attracting sufficient attention on the funds to justify buying them at this moment.

? David Chapman

Philadelphia Oil & Gas Index (XOI) also has categorised. The prospective zone there appears to build up 1,300. That has a low up to now 1,307, the XOI often have already fulfilled its objectives. A good breakdown under 1,300 could, however, send the XOI due to stronger support while in the 1,240 zone. Certainly, the XOI is oversold, enough that a rebound rally might take place. The reason holding WTI oil prices up was possibly supply disruptions thanks to Iran sanctions with the U.S. However, the U.S. has decided to exempt eight nations from sanctions. They are going to, as a result, keep purchase Iranian oil. The audience supposedly includes China, an essential buyer of Iranian oil.

There is a band of support for WTI oil between $58 and $60, but under $58 the targets noted above are more likely. Regaining back above $70 would customize the scenario and in the prospects for new highs.

Chart of the week

? David Chapman

It is usually interesting to see an inflation-adjusted chart. In many respects it gives a truer picture of performance mainly because it takes note the ravages of inflation. While on an inflation-adjusted basis, the Dow Jones Industrials (DJI) has risen 180 percent from he March 2009 lows. For a nominal basis, the DJI has gained 234 percent. That stays quite a solid performance. The DJI has hit all-time highs, both on a nominal and inflation-adjusted basis. Gold wasn’t so lucky and remains down some 42 percent looking at the inflation adjusted high witnessed in January 1980.

What is interesting for the chart would be that the DJI is apparently forming a tremendous ascending wedge up through the August 1982 low. At a nominal chart which isn’t obvious. The top part line is utilized by the 1966 top. Given the long time it can be meaningless. However, when it comes to patterns in technical analysis we have now discovered that time ‘s no necessary component for patterns. The DJI appears to have hit the top of the channel. The base of the channel is down around 14,000. Still, that you will find healthy drop when the DJI fell to that particular level during the next major correction.

Over Century two major declines jump out: the truly great Depression drop in 1929C1932 when the DJI fell 80 percent (89 percent in nominal terms) also in 1965C1982 as soon as the DJI was down 73 percent. (In nominal terms underneath was found in 1974, not 1982, plus the DJI was down 41 percent in nominal terms (close only)). In inflation-adjusted terms the decline into 1982 was more devastating for the reason that DJI fell returning to levels found in the late 1930s along with the 1940s. Such like now is always to view the DJI fall into inflation-adjusted levels affecting the 1970s.

The nominal chart on the DJI is shown below.

? David Chapman

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