$INDU Monthly

A small modification in the INDU monthly chart, where an emerging broadening pattern is taking place, will prove that a top is in. You could not assume a backdrop of equity swap derivatives in the major blue chips and the shares that compose the index, but there is a strongly positively correlated relation with short term interest rates.

That means that the INDU and its component shares are trading on the basis of liquidity in-flows, rather than flows back and forth from long dated treasuries.

So we are definintely in the zone for the onset of a bear market in equities. As you will see, strongly postively correlated INDU with the three-month treasury bill rate picks out the tops and bottoms:

http://scharts.co/Ygc1xX

Conclusions: If the emerging broadening pattern is a bona fide pattern, which was the scourge of GBN.V investors over a period of years, then strong correlation of INDU with the IRX notes that a top is in, and that a bear market will follow.

If also the Dow/Gold ratio is expected to fall to 1:1, then the fulfillment of the emerging broadening pattern will ultimately give us a target price for the high in the gold spot market.

The prognosis is that gold prices will go up, while equities go into a relentless bear market.

$SPTGD Weekly

Much as gold miners are oversold, the emerging broadening pattern for the gold mining index says volumes about false expectations of a bull market. If there is an emerging broadening pattern in the INDU, and there is the onset of a bear market, then there will be a bear market in gold mining equities.

One thing to look for are bankruptcies of gold miners heavily exposed to labour disruption or that have divested themselves of gold properties only to rely heavily on base metals production, or are heavily exposed to a copper price decline.

Very likely the S&P TSX Global Gold Index will follow GBN.V down into the abyss of an intractable bear market, where GBN.V was merely the most vulnerable front-running stock to the bottom.

A recent strong inverse correlation with the Gold/Silver ratio says that a high in October was an interim 'top' where the bottom is yet to be carved out.

http://scharts.co/16xvYqJ

GBN.V Weekly

The bottom is more or less in for GBN.V shares, but the theatrics are not yet over. If the management really hasn't lost its marbles and they came about their plan rationally and had thought for months in advance, then they will contrive to make things look as bad as possible in the ensuing days.

You have to remember that the Q3 report, which was supposed to be a glowing revival, will turn out to be yet another occasion where they stupidly snatch defeat from the jaws of victory.

There is an immense opportunity cost to idling your mine, since overwhelming free cash flow could serve so many useful purposes.

For instance, if the gold price were to advance to average $2000/oz., then you could conceivably build a 1500tpd. mill for $150m. dollars(smaller, less costly than 2000tpd.) with one year of earnings after costs producing 100koz. per year. You would have to be less aggressive on depleting your mine, and stockpiling in advance and cautiously observe grade controls.

I think this will be the outcome, since Netolitzky intends to borrow money and then run a money-losing operation. He has already burned that bridge from all of his sources. Blackrock, Sprott, Waterton. They will not be able to borrow money or raise funds through equity finance in a bear market either.

They're completely stuck with what they have, and the share price acknowledges the fact.

Either way, full production should be the priority(although the priority is financially destroying the shareholders), rather than following a hare-brained money-losing scheme.

They will try to make the quarterly report look as bad as possible now that Sprott has settled off their equity swap with TD Securities.

http://scharts.co/Zvpg1g

OTOH: The shares are very cheap.

-F6