20 Day MA Rally Concludes

by Zubin Driver
June 22, 2009

It had to happen sometime, and last week it finally did: the 20 day moving average, which has been the support line for the rally that began in March, was conclusively broken. Though markets bounced Thursday and Friday, they are down sharply to begin this week. With July just a week away, one gets the sense that this gravity-defying run, which most expected to end far sooner, may finally have run its course.

As the frantic rush to own stocks gives way to a stampede for the exits, the interesting test will be to see where markets find support. Over the last month sentiment swung all the way around to a belief that recovery had begun. How far will it now swing back in the direction of pessimism? Those with cash can patiently pick their spots...

Undesired Results

Last weekend Mahmoud Ahmadinejad was re-elected Prime Minister of Iran by a wide margin, winning 65% of the vote. There had seemed to be expectations that the election would be closer in the run-up to the event, and immediately after, Mir-Hossein Mousavi, the opposing candidate, questioned the validity of Ahmadinejad's victory. Ahmadinejad is known to be the preferred candidate of the religious clerics who truly run Iran, led by Supreme Leader Ayatollah Khomeini. Mousavi has been portrayed as the 'reform' candidate, though to what extent he truly represents a break from the clerics is unclear. Violence and rioting have riven the streets in Iran since the election, as some Iranians signal their disbelief that the results were accurate.

One frequently hears that a sizeable segment of the Iranian people do not share the clerics' hard line views or antipathy to the west. Initially, Ahmadinejad and the Ayatollah were dismissive of citizens' anger and their demands for a review of the results, but by the end of last week a review by authorities was conducted. The review found 'irregularities' in some electoral districts, but also stated that these irregularities would not have impacted election results. Certain communications websites like Facebook and Twitter have been censored, and text messaging has been shut down; western journalists have been instructed to stay at their offices and off the streets where the protests are taking place.

It seems that both sides are dissatisfied. Some voters believe that the election results aren't accurate. On the other hand, the Ayatollah and prime minister got the election result they wanted, at the expense of a reaction that suggests that they do not have as much support from the people as the voting tallies say they do.

Discoveries

Last spring saw discoveries in the shale gas and coal sectors, which led to some massive runs for venture stocks involved. Then in the fall, speculative appetite for exploration fell to essentially nil. However, this spring with the recent improvement in the markets, interest in exploration has been revived, and a few companies in the gold space have excited investors with their drill results. Some are more advanced than others; none are anywhere near building a mine at the present moment, yet investors have bid them up, in some cases, more than ten times the prices they traded for at their lows. Ventana Gold, Underworld Resources, Northern Freegold, Appleton Exploration, West Timmins Mining, and Colossus Minerals are a few such companies, giving hope to the hundreds of others that an audience can still be found and money raised for junior exploration plays.

Best regards,
Zubin

Zubin Driver
Investment Advisor
(W) 604 643-7608 / (F) 604 643-7606
Email: zubin_driver@canaccord.com

Canaccord Capital Corporation
Attention: Zubin Driver
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2200 - 609 Granville St.
Vancouver, B.C. V7Y 1H2

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OFFICES IN MAJOR CENTRES ACROSS CANADA. MEMBER OF ALL CANADIAN STOCK EXCHANGES AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA. MEMBER CANADIAN INVESTOR PROTECTION FUND (CIPF).