Monthly Chart

Well, the sell-off came with some of the highest volume seen in the stock for many months. The momentum indicator on the monthly chart had come off, so I suppose you could not get around the sell off, which was inevitable. The surprise is that GBN.V had anticipated the decline in the gold sector this week. Note that the large gold miners had seen declines, but only after the gold price sell off on Thursday:

Shares of Canadian gold miners tumble

39 minutes ago via Thomson Reuters

*Gold stocks tumble after Thursday's bullion selloff

*Shares of Barrick, Goldcorp, Agnico drop in early trade

TORONTO, July 2 (Reuters) - Shares of Barrick Gold <ABX.TO> and other gold-mining majors fell on Friday on the Toronto Stock Exchange following a nearly 4 percent drop in the price of gold bullion on Thursday.

Canadian-listed stocks of gold miners reacted a day late to the gold selloff because Thursday was a market holiday in Canada. Thursday's fall was triggered by heavy selling by funds trying to cover losses in other markets.

Shares of Barrick, the world's biggest gold producer, were down 4.3 percent at C$43.75 in early trade on the Toronto Stock Exchange. Goldcorp <G.TO> and Agnico Eagle <AEM.TO> were down 4 percent and 3.8 percent, respectively.

Shares of Iamgold <IMG.TO> and Kinross Gold <K.TO> also fell, down 3.4 percent and 3.1 percent, respectively.

($1=$1.06 Canadian) (Reporting by Euan Rocha; editing by Peter Galloway)

The monthly chart still has some positive technicals, and many neutral ones. The obvious was the decline in the momentum indicator, which is now at an extreme low on the weekly chart. The bottom should be in when this momentum indicator crosses once again into a normal range on the weekly, but on the monthly we see the formation of peaks in the momentum that resemble the prior peaks very strongly.

We also seem to be tooling around inside a very long-term diamond formation:

supersize: http://www.flickr.com/photos/11747277@N07/4757496618/sizes/l/

stockcharts.com

$IRX

One thing that I had been looking for this week was a decline in the discount rate, which never came. What actually happened was the collapse of the 6mo. rate on Monday night, to 0.02%, while the 3mo. treasuries sold off heavily, causing the rate to rise to 0.18%. The 6 mo. rate was subsequently revived the next morning, and all was normal, except that the $IRX was higher than before. Now, considering that naked shorters in GBN.V stock had been settling on declines in the discount rate, this left no room for buying back the shares they never owned. So we saw the GBN.V share price move directly opposite to the rise in rates. I think the decline in rates is inevitable, even into the negative and that we may see a repeat of some of the action last week. What would benefit shareholders in GBN.V shares are a decline in the shorter term rates.

Apparently Merrill Lynch had bet very heavily on a steepening in the yield curve, but instead its flattened, so with their bet going bad, this caused some very strange activity at the outset of the week. Now, the U.S. markets are closed on Monday, but Canadian markets open.

Note that the company released all of the news into the rise of the discount rate running three weeks time, so they are clearly not anticipating a rise in the stock. Quite curiously, the news releases, while depending on the rise in the discount rate to limit any upside anticipated the decline in the gold price.

supersize: http://www.flickr.com/photos/11747277@N07/4757532796/sizes/l/

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Marker Sales

Marker sales are sales that occur when an insider holding 10% or greater of the stock sells shares into the market, and there is no reporting required of these sales. Marker sales are reported on a daily basis with a delay of a few days, so when marker sales show up in the insider report, then this activity denotes actual shares sold into the market. The naked shorting volume is much, much less for this stock than the marker sales have been in the last couple of weeks. In fact, there was basically one large seller into the market, and this chopped the share price by a good 30%.

As I had surmised, a holder of equity swaps, once faced with a rise in the stock price will be obliged to sell inventory held in escrow against their position in order to raise some cash. In so doing, what follows is the float will be expanded to accommodate another round of equity swaps. What is required is probably 10% of the outstanding float, so another 26 million shares. Naked shorting in the stock is done separately by the sell-side broker, which had been settling for a period of months after selling shares into the market they didn't own for a period of years.

With the expansion of the float and a share price decline due to marker sales, the shareholder takes a haircut and shoulders all of the risk through dilution of the shares.

Now I had taken a slough of insults by the 'tards over at stockhouse for trying to point out why the stock never seems to rise, and that my contention was that whatever is occuring within the company defers to the bondholder's interest. I think we have definitive proof here finally. But don't believe me, the facts are in bold.

While we have insider buying at market, we also have volumnious marker sales:

Look under 'Previous Day's Marker Trading:' http://www.flickr.com/photos/11747277@N07/4756928537/sizes/l/

supersize: http://www.flickr.com/photos/11747277@N07/4756928693/sizes/l/

What, exactly is the game here, I am very uncertain. But the marker sales here are far greater than any insider buying by a long stretch. The simple explanation is that the insider involved in marker sales is very probably betting on a crash in the gold markets, or a rise in interest rates. GBN.V is a serial underperfomer because the person releasing the news and divulging information defers to the bondholder's interest. Drill core results of any importance are only released out of season or on market corrections, notably in the gold price followed by marker sales.

Conclusion: Now, as for me, I hope I'm totally out to lunch on this one, and that other factors are at play, but a decline in interest rates and a rise in the gold price will seal this insider's fate. I would be looking for substantial, panic 'Buys' in Marker Trading.

Monthly Gold Chart

End of the gold bull market? Hardly. Possibly the next move will take us to the projected price level, or at least keep churning upwards:

supersize: http://www.flickr.com/photos/11747277@N07/4757062897/sizes/l/

stockcharts.com

Zeal Newsletter

http://www.zealllc.com/2010/esjnr.htm

-F6