Recently, I have posted a few times on Nova and I thought I would relate a few thoughts that have risen up regarding the meaning of Nova’s performance lately. I have been a very slow comer to Novagold. I have always just kinda written them off as a high cost, remote, never to be built kind of proposition. I recall John Doody commenting about Nova that yea someday it will be built but todays shareholders will never profit from it. I have to admit that comment sunk in and was part of the metric that deep sixed this project in my universe.

Then came my education in Chartology.

I have always liked technicals. but it hasn’t been until I ran smack into Rambus and Weinstein that they really gelled in my head. Fundamentals are important, but for an investor plunking down hard cash, technicals trump fundamentals. Why? because the technicals gather all the known information about a stock and impute it into price. The lesson from Weinstein is that when the price breaks above the 30 W EMA, backtests it and rises again, its the market saying its in stage 2 and the stock its in a bull market….Powerful stuff knights…powerful stuff.

Here we have a depiction of this going on in Novagold. Look at these weekly technicals folks. It doesn’t look better than this very often. 30 W EMA turned up, Stochastics configured up and look at the OBV and Accum/Dist. It takes a long time to get these 30 W EMAs headed in the right upsloping direction with the indicator above the EMA. This chart is a thing of beauty.

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Now let’s break this down to its daily chart. Here we see what Weinstein looks for. Check out its break above the 150 DMA (dark dashed line serving as 30 W EMA proxy). We see it making this move on elevated break out volume. Not huge massive volume, but 2-3X normal volume. Not bad for a sector bear market.

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Now I would like to introduce my monthly bull/bear chart. Its the markets authoritative say as to whether we are in a bull or bear market. It lags the market by a lot so its not a leading indicator, but takes out the markets noise and confirms that you are squarely in a bull or a bear. I use three moving averages. The thick black one is the 35 month EMA. When the price is above it with the 10 month on top and the 20 month in the middle its telling you we are configured in a bull market. So we can slowly watch the process develop. Note we are almost there. Also notice the work its doing below with the OBV and Accum/Dist.

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Let’s knock it down to a 5 year version to see the averages better. Note we confirmed the bear market back in March of 2012 when price and the 10 M EMA broke below the 35 M EMA. Fast forward to now and we see price has broken above the 35 M EMA and the 10 has crossed over the 20. Soon we should see both the 10 & 20 cross over the 35 and once that happens that confirms the bull is in gear. Again its a lagging confirming indicator.

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OK so that’s an interesting technical look, but now let’s ponder what this is all telling us. Above I mentioned how Novagold never really got my attention because of its high costs and forever timeline, so I have been slow to warm up to this stock. Recently, however I have been forced to think about what is the message of the market with it breaking above its 30 EMA and entering stage 2 way out in front of the rest of the sector. If it was a producer I could understand it. Lower input costs translating to a better bottom line stock price goes up. We have seen this with the Detours and the Kirkland lakes so why Nova since it just seems like a concept stock really…..right?

Here is what hit me squarely between the eyes. This is early stage flight capital fleeing into the ground where it can’t be stolen and has very little carrying costs. Also while gold itself can’t find a natural equilibrium due to suppression (yes folks, I do believe it is suppressed, just read what Paul Volker said they should have done to gold when he was trying to get the economy under control) Novagold is free from direct CB price suppression.
So this is the purest form of expression of what big informed money thinks of the future of the gold price and its already made the turn into the next bull market. Big informed institutional money out of NYC holds over 50% of the stock. The CEO has publicly stated they will not move towards production anywhere near this gold price so production has no impact on the stock price. This is a pure unfettered indicator of what big money thinks of the future of the gold price and where one should hide out until that monetary future unfolds. Similar projects like SA and PVG are effected by development issues, environmental permitting or grade. Nova has none of these to interfere with its pricing. Its just big money’s view of the future price of gold and the soundness of the currency.

Therefore, unmistakably this is a pure play on the future gold price and its telling us the bull lies dead ahead.