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Toronto Stock Broker David Chapman
Experience
November 23, 2014

Technical Commentary

This week….

-          The US stock markets once again soared to new all-time highs as China cut interest rates and announced QE and the ECB was showing signs of QE. Japan is going to have an election to give Abenomics a mandate for its massive QE. The FOMC released its October minutes and they don’t seem to concerned about the growing problems in the EU, Japan and China nor do they show much concern for war drums that are beating. The FOMC’s motto seems to be “don’t worry, be happy, buy stocks, we have your back”.

-          Bonds put in another nothing week. Bonds seemed to yawn cut interest rates and QE.

-          Gold was up again even as the US$ was up. A potentially positive divergence. The gold stocks enjoyed another strong up week and appear to be leading the way. Gold stocks broke their recent downtrend. The US$ made new highs even as gold that normally moves inversely to the US$ rose in tandem. This is the week of the Swiss referendum. The Swiss authorities seem worried they might lose given how nasty the campaign has become. The polls are too close to call.

-          Oil prices finally had an up week as oil was encouraged by the Chinese cutting interest rates and Japan, the EU and China bringing on more QE. Cold weather helped push natural gas prices higher. But a thaw is coming.

D.C.



November 22, 2014

Technical Commentary

This week…..

-          Once again the US stock markets made new highs. But the week was spent trading in a narrow range and failed to close above the broadening channel. The market appeared to be churning on low volume. War talk is looming in the background.

-          Bonds were flat on the week. Not much to say there.

-          Gold put in a strong up day on Friday and closed over $1,180 regaining the breakdown zone. While this is a positive development gold and silver both have considerable work to do to confirm that a low is in. The gold stocks put in another strong up week. The Gold/HUI ratio was at historical highs. The Swiss referendum on gold looms on November 30.

-          The US$ Index made new highs then reversed and closed lower. This may suggest that a top is in for the US$. Six major banks were fined $4.3 billion for currency manipulation. More fines could follow as well as criminal charges.

-          Oil prices plunged to new lows although they got a boost towards the end of the week. The collapse in oil prices is forcing countries that depend on high oil prices to revamp their budgets. Strain could appear for those involved in the shale oil industry. The group generally is highly leveraged and many of them become unprofitable with oil prices below $80. The Cdn oil sands could also feel the squeeze. Many continue to believe that oil prices were forced lower to hurt Russia that is highly dependent on oil revenues.



Chart of the Week

Chart of the Week – Gold – Maybe not so much into the Abyss or “Splat Back”.

It was only a week ago that gold appeared to be staring into a deep abyss (Chart of the Week – Gold and Oil – Into the Abyss? – November 6, 2014). The dreaded “vomiting camel” pattern appeared poised to “hurl” gold down to $700/$800. While I warned about the potential for “splat back” technical objective calculations projected gold to fall to around $950 following the breakdown under the triple bottom of June and December 2013 and October 2014 just above $1,180. (more)



November 13, 2014

Chart of the Week

Chart of the Week – Gold – Maybe not so much into the Abyss or “Splat Back”.

It was only a week ago that gold appeared to be staring into a deep abyss (Chart of the Week – Gold and Oil – Into the Abyss? – November 6, 2014). The dreaded “vomiting camel” pattern appeared poised to “hurl” gold down to $700/$800. While I warned about the potential for “splat back” technical objective calculations projected gold to fall to around $950 following the breakdown under the triple bottom of June and December 2013 and October 2014 just above $1,180. (more)



Technical Commentary

This week…..

-          Once again the US stock markets made new all-time (nominal) highs. The US mid-terms are over and gridlock is now assured with the Republicans controlling both the Senate and Congress. But it may also heighten conflict between the President and the Senate/Congress given the large number of “Tea Party” types that dominate the Republican party. The S&P 500 left a small bearish sign on the charts on Friday.

-          The bond markets did very little this past week. Job numbers were out in both Canada and the US.

-          The gold bugs finally had something to be excited about with Friday’s huge upside reversal. Further gains were seen for gold following the close of futures on Friday. As a result gold could gap higher on Monday. So is the bottom in? Well given the strong upside reversal on Friday a temporary low may well be in. But a major low? That still needs to be determined. Gold is also well away from its major downside objectives.

-          The US$ spiked again on Friday but closed off on the day. Has the US$ topped? As with gold reversing the US$ may have made a temporary high. The currencies (Euro, Yen, Cdn$) all reversed as well on Friday.

-          Oil prices fell again this past week but the energy stocks held in. The TSX Energy Index gained on the week. Natural gas had a huge up week. Oil prices are now below $80. Could they fall further? Geopolitical concerns may lessen oil’s drop as conflicts were threatening to break out once again in Ukraine and in East Jerusalem.



Chart of the Week

Chart of the Week – Oil and Gold – Into the Abyss?

Gold bugs will be pardoned if they are having thoughts of “hari-kari”. Gold bugs woke up on November 5, 2014 to another $25 plus drop in the price of gold. Seems that someone found it convenient to dump $1.5 billion of naked gold futures (equivalent to roughly 1.3 million ounces of gold) on the market at around 12:30 AM EST. There are not too many market makers around at that time to absorb the sale. Silver joined the party and at one time, it was down over 80 cents to around $15.20. The dump on November 5 might not have been unusual except the pattern has been repeated on a number of occasions of late.



Technical Commentary

This week…..

-          The Fed ended QE. The BOJ started a new program of QE. The stock markets rejoiced. Gold was repulsed. The stock markets soared to new highs. Gold was trashed to new lows. The gold stocks were hurled into a panic decline.

-          The US stock market could be making a broadening top pattern. The recovery from the mid-October mini-meltdown has been nothing short of spectacular. But it is too much too fast. Could stocks soar into a nirvana blow-off? It is possible but not likely. Sentiment is at 27 year bullish highs.

-          Bonds yawned at all the goings on.

-          Gold gave off “gurgling sounds”. But there is hope as indicators are at extremes and sentiment is at multi-year lows. Gold stocks plunged to new lows. If you are a gold bug even hari-kari looks good right now. But it is in these kind of conditions that potential major bottoms are made.

-          The US$ soared. The Japanese Yen tanked. US exporters and multinational corporations are becoming “antsy”. A new Republican Congress and even Senate might want to go after those “currency manipulators”.  Japanese exporters on the other hand are rejoicing.

-          Oil prices weakened again but so far $80 is holding. But for how long? Right now too much oil is being pumped and it is possible that the lowering of oil prices is just another attempt to hurt Russia economically irrespective of collateral damage.

-          This week is the US mid-terms (November 4) and the release of the October nonfarm payrolls (November 7).



Chart of the Week, Stock of the Week

Chart of the Week It’s the debt, stupid!

Investors fear a stock market collapse. What they should really fear is a bond market collapse or more specifically a debt collapse. A stock market collapse can cause considerable damage. Debt collapse could lead to bankruptcy and an economic depression. (more)

Stock of the WeekA short duration ETF

In the event of another financial crisis the question is always “where can one hide”. During the 2008 financial meltdown there was few places to hide. One of the surprises I recall from that period was that even bank preferred shares fell 50%. Gold only fell 33%. As noted in the current Chart of the Week (It’s the Debt, Stupid – October 30, 2014) former Fed Chairman Alan Greenspan was recommending that one hold gold. Another place that might prove to be a hiding spot is in short duration bond funds. (more)

D.C.



October 18, 2014

Technical Commentary

The stock markets are up today which is probably no surprise. Given the sharpness of the drop a rebound of some sort was probably to be expected. Everyone is reminded, however, that the stock markets (TSX, S&P 500, NASDAQ, DJI, DJT) have all issued sell signals this week. The DJT is probably the strongest of all the indices. Most have fallen sharply below their 40 week MA. The rebound today is probably an attempt to test the breakdown zone.
Today is options expiration as well so there is most likely some maneuvering to ensure as many as possible lose money especially all of those that purchased puts the past few days expecting a further drop into the October options expiration. They might continue this into Monday as well before the plug is pulled once again. Could a stronger rally develop and a bottom created? It is possible. A close for the S&P 500 above 1,905 today might allow a strong rally to develop even a bottom. But basically in a few short weeks all of the gains since April 2014 were wiped out. Bears do that. The 1,905 zone was the last weekly low seen before the move to the highs of September. So that area should provide stiff resistance.
Bonds spiked this week but came off sharply after spiking. This suggests that they might not be as strong as everyone might like to think. Bond issues in Europe went poorly this past week. Could another debt crisis be brewing in the EU?
Gold was the best performer on the week. Gold broke a down channel which is positive. Gold is in the $1240-$1250 zone and as long as it can hold above $1220-$1225 then we could break through to the next level of $1280. But reality remains the last high at $1340 needs to be taken out to suggest we may have made a significant bottom. Silver is lagging and that is a concern. Unlike gold silver is still in its recent down channel. But gold up on the week was part of a flight to safety although the main safety choice was bonds. The gold stocks were up again as well but they still have a ways to go. The divergence of silver making new lows and gold not making new lows remains in place.
Oil threatened to break under $80 (did briefly) but rebounded strongly into the end of the week. Heard lots of stories especially the one that the Saudis might be behind it to help push down the price to hurt Russia. If the Saudis were involved (pump more oil at lower prices to generate cash to maintain the level of $ flow) then most likely the US was involved as well. Whether there is any validity to the story it is at least a possibility. But there has just been too much oil of late. But the lower prices will hurt Western Canada and all the fracking as they need prices of $80 or higher to stay in business. It wouldn’t be surprising to see prints into the $70′s. And one can’t forget a possible objective of $40. Resistance should be at $85 which is where the bounce appears to be taking the market. But above that could test up to $90 but probably not higher.
The US$ broke this week with the US stock market. Amazing how fast it can come off. Has now traded down to 85 support for the US$ Index. Good support doesn’t come in until just under 84. A temporary top at least appears to be in.
A full report will return next week.
Webmaster’s Note: Much apologies for the absence of articles over the past week due to technical problems being resolved.


Technical Commentary

This week…..

-          A shortened version of the Technical Commentary over the long holiday weekend. Canada is closed Monday for the Thanksgiving holiday.

-          Global stock markets were “hammered” this past week. Not even the FOMC and its musings that “zero” interest rates were here to stay could save the day. Volatility was high. The stock markets closed Friday on a very weak note. The Dow Jones Industrials (DJI) is down on the year.

-          ***Special section*** Could a stock market crash happen? Characteristics of previous crashes are discussed. Conditions are similar today.

-          Bonds rallied this past week even as the stock markets fell. A rush to safety?

-          Gold and the precious metals went against the grain and were up on the week. Could gold and the precious metals be detaching themselves from the broader market? After months of weakness gold and the precious metals could be due for a change. Other commodities fell in price on the week although copper held up. The gold stocks were flat.

-          The US$ reversed course this past week and fell following the FOMC minutes. It broke one of the longest string of up weeks ever.

-          Oil prices fell sharply given falling demand and rising supplies.



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