Chart of the Week – Monetary base breaking out! Will gold prices follow?

Stock of the Week – A major energy stock may be poised to break out.

D.C.

This week…

• A shortened Technical Commentary is attached.

• The S&P 500 closed over 1,500 for the first time since October 2007. Potential objectives remain up to 1,600. The rise has become increasingly steep raising the risk in the market. There are numerous negative divergences across all time frames. In years ending in three tops and bottoms tend to occur in either January or February.

• Bonds fell this week (however, the Cdn bonds were flat). Bonds fell because of increased confidence in Europe.

• Gold had a difficult week falling for three consecutive days once again on odd trading activity. The gold stocks had an even more difficult week as they panicked with gold’s fall. Gold falling this past week against the backdrop of strong fundamentals appears counter intuitive. The US$ also fell this week as the Euro was up even as the Japanese Yen continued its recent decline. Gold in Yen hit new all-time highs even as it weakened in US$ terms.

• Oil prices continued their recent rise. Oil stocks enjoyed another good up week. Oil continues to be buoyed by improved economics in Europe and renewed economic activity in China.

• The TSX Composite was up again with 7 sub-indices making new highs.

D.C.

This week…

• The S&P 500 reached new highs this past week as Congress and the White House appeared to attempt to forge a compromise over the debt ceiling. Some decent earnings reports didn’t hurt.

• US Treasury bonds and the Cdn Government bonds both eked out small gains this past week as congress and the White House acted somewhat conciliatory over the debt ceiling.

• Gold and silver both enjoyed a good up week. The Bundesbank announced that they would repatriate its gold held in the New York Fed and at the Bank of France. This is seen as bullish for gold. The US Mint suspended silver American Eagle sales temporarily as demand has been high. Gold was up despite a rise in the US$ this past week. The Japanese Yen was down sharply this past week as Japan continues efforts to devalue the Yen. Gold expressed in Yen made new all-time highs.

• Oil prices were higher sparked by improved economic numbers in China and the US and the attack on the Algerian gas plant. Oil prices closed over $95 for the first time since September 2012. $95 was a key resistance point and a close over that level could suggest a rise to $99/$100.

• The TSX Composite was up again continuing its recent gains. The CDNX faltered but continues to show that a possible low is in.

D.C.

Chart of the Week – Dow Theory revisited

Stock of the Week – High flying crackberry

D.C.

This week…

• Despite the looming debt ceiling debate the stock markets eked out another gain and are now very close to taking out the September 2012 highs. An outline of what happens in years ending 3 is provided. Whatever happens the high or low for the year has usually taken place in either January or February over the past 120 years. There was one exception the Iraq war year of 2003 where the low for the year was seen in March.

• Bonds marked time this past week.

• Gold was up but fell on Friday despite a decline below 80 by the US$ Index. It appears that the hedge fund liquidation may not be quite over. With the US$ Index falling and a potential breakdown under 79 gold could rise sharply here.

• Oil prices were also up on the week but remain below $95 resistance. While tensions continue in the Mid-East there is no sign of any potential blow-up that could send oil prices soaring.

• The TSX Composite rose again this past week. If the commodity sectors of Energy, Metals, Gold and Materials start rising to any degree the TSX Composite could soon make new highs for the current move. The TSX Venture Exchange continues to show signs of a bottom.

D.C.

Chart of the Week – behind the Unemployment numbers in the US.

Stock of the Week – A utility on the upswing?

D.C.

This week…

• The “fiscal cliff” was averted but the deal struck was incomplete and left serious bruises amongst the Democrat and Republican combatants. Looming is a fight of what expenses to curtail and the looming debt ceiling. Many consider the debt ceiling more important than the “fiscal cliff”. Failure to reach an agreement over the debt ceiling could trigger a US default and downgrade.

• Reaching a deal on the “fiscal cliff” and the stronger than expected jobs numbers helped lift the stock markets this past week. Odds now appear to favour new highs for the stock markets. The stock markets shrugged off musings about the ending of QE in 2013.

• Bond prices fell on stronger than expected jobs numbers. Long bonds in both Canada and the US gave intermediate stand aside signals.

• Gold and silver had a wild week. Gold and silver reacted quite negatively to the FOMC musings about the end of QE in 2013. But the selling took place only the paper (futures) market primarily in thin trading markets in Asia. Both gold and silver ended the largely unchanged. As well the stock market barely budged over the FOMC musings. The stock market benefits as much from QE as gold and silver. Other metals were higher on the week and that could be a better indication of the future direction of gold and silver. The US$ initially strengthened on the FOMC but it also came off its highs afterwards.

• Oil prices were up on the week based on stronger economic numbers. Resistance is now at $95.

• The TSX Composite was up on the week and only two sub-indices (out of 14) actually had losses on the week. The losses, however, were minimal.

D.C.

This week…

• The story this week was the announcement from the FOMC that they would purchase an additional $45 billion of US Treasury securities each month in addition to the $40 billion of mortgage backed securities (MBS). QE3 is now a very high $85 billion per month with no end date. The FOMC in an unprecedented move tied the program to lowering the unemployment rate to 6.5% from the current 7.7%. The FOMC also modified its guidance concerning interest rates.

• The stock market seemed to ignore all of this monetary stimulus as the S&P 500 fell on the week. Instead of focusing monetary stimulus the stock market remained concerned about the failure to find an agreement over the “fiscal cliff”. Will the market have the Santa Claus rally or has it already topped? The key level for the S&P 500 is at 1,385 and a break under that level would be negative.

• The bond market did respond the additional monetary stimulus by falling (yields rose). The bond market is more concerned about future inflation.

• The US$ also fell as expected but gold unexpectedly fell as well. Not so the gold stocks who were up on the week in what is a divergence with gold prices. As well the other precious metals (platinum and palladium )were also up on the week. Copper also rose on the week.

• Oil prices were up on the week but natural gas continues to be afflicted with oversupply and fell sharply.

• The TSX Composite was up on the week and almost all of the sub-indices were up as well. Some sub-indices made new highs. This is a positive development. But the Cdn stock market generally follows the US market and if the US market turns down then odds favour that the Cdn stock market will fall as well.

• The key for the Cdn stock market are the commodity sectors of Energy, Metals & Mining, Materials and Gold. If they rise it could pull the TSX higher as well. The CDNX showed potential signs of a double bottom.

NOTE: This will be the last report until after the Holidays.

To all a safe and happy Christmas and New Year.

See you in 2013 (assuming that the world does not end on December 21, 2012 as some would like us to believe according to their interpretation of the Mayan prophecies).

D.C.

Chart of the Week – Strange goings on in the gold market once again.

Stock of the Week – The perfect recession stock?

D.C.

The US stock market eked out a small gain this week thanks to the stronger than expected jobs numbers. This offset the negative news out of the Bundesbank that German growth would be below forecast. Tis the season to be jolly and the market is looking for the traditional “Santa `Claus“ rally. Last year the market failed around this time but bottomed on December 20, 2011. A rally began that not only carried into January it carried until a top was seen in March 2012. Could history repeat itself?

• US bonds fell because of the stronger than expected US jobs numbers. The job numbers seemed to offset most of the other numbers that were anything but stellar. Still as John Williams of Shadow Government Stats points out the job numbers were no big deal.

• Gold slipped slightly on the week as the US$ was slightly stronger again because of the job numbers. Attempts to push gold prices under $1,700 were met with buying. Physical demand remains robust. Short covering was evident on release of the weekly COT numbers. Positive seasonals are approaching.

• Oil prices were hammered down this past week as tensions appeared to be easing in the Mid-East and the US$ was stronger following the job numbers. The XOI was, however, up on the week a divergence with the weakness in the oil market.

• The TSX Composite was off slightly as it could not overcome weakness in Metals, Golds, Materials and Energy.