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Toronto Stock Broker David Chapman
March 23, 2015

Technical Commentary

This week……

-          The Fed lost patience but downgraded its growth outlook and lowered its Fed funds targets. The markets rejoiced as stocks, bonds and golds all “leaped” to the upside. The US$ went in the opposite direction.

-          The S&P 500 continues its upward march within what looks like an ascending wedge triangle. The rise is becoming narrower and narrower. The end is getting closer and closer.

-          Bonds jumped this past week realizing that the Fed is not about to hike interest rates anytime soon. Still some cling to a June rate hike. Others pushed it out September, December and even 2016. I am in the “it won’t happen” camp. Although I agree that if the economy were to turn down the Fed has no room to lower interest rates unless they want to go negative as Switzerland, Sweden, Denmark already have.

-          Golds had a strong rebound week. I believe this is the start of the C wave to the upside. However, gold still has work to do with considerable resistance above and hopefully no new lows. Silver had a strong up week and appears to be leading. The gold stocks also enjoyed a strong up week but as with gold they have considerable work to do.

-          The US$ was a the big loser on the week. Some speculate that the Fed’s dovish stance was meant to help knock down the US$ as it was becoming a problem for US exports and profits for the multinationals.

-          Oil prices plunged to new lows but the Fed save also saved oil prices as they reversed and closed higher on the week. Energy stocks also enjoyed an up week. Oil still appears to be in a potential consolidation corrective phase.

March 20, 2015

Chart of the Week

Chart of the Week – The Fed drops “patient”.

The Fed lost patience. Well they did not so much as lose patience but they dropped the word “patient” in their “guidance” language. It seemed to be widely expected that they would. Then the Fed talked out of both sides of its mouth simultaneously (aka – Fed speak). The Fed may no longer be “patient” but in the same breath they downgraded the expected pace of growth and inflation. In other words, they are no longer using the word “patient” but they will still be “patient”. Go figure that one out. The word “patient” may have become the most overused word in the English language over the past few months. (Read More)

March 17, 2015

Technical Commentary

This week…..

-          The US stock markets fell for the third week in a row. The S&P 500 sits on the cusp of a mini-collapse or it will rebound once again. The high US Dollar is beginning to take its toll. The FOMC meets this week and everyone will be hanging on the language to see when the Fed might hike interest rates. US economists are lousy forecasters. So says the surprise index.

-          Bonds rebounded this past week. Maybe the bond market is watching the lousy economic numbers that keep rolling in. All eyes will be on the FOMC this week.

-          Gold was down again. That is almost becoming “what else is new”. Gold thinks that the Fed is going to hike interest rates. Maybe gold didn’t pay attention to the falling inflation numbers. Maybe gold should.

-          The US$ Index was up, up and away again. The US$ Index reached 100. The Euro sunk again, but so did the Pound, the Yen, the Franc and oh yes the Cdn$. The Euro at the rate of decline could soon be at par with the US$.

-          Oil, oil everywhere. The US doesn’t know where to store it any more. So oil prices fall. New lows are probable. A decline below $40 is quite possible. What happened to Peak Oil? Went like the Dodo bird it seems.

March 13, 2015

Chart of the Week

Chart of the Week – The Death of the Euro

Is the Euro getting that sinking feeling? Find out more.

March 8, 2015

Technical Commentary

This week…..

-          Have the markets topped? The markets are 15 years from the March 2000 top and 6 years from the March 2009 bottom. Could March once again be signaling a top? Selling pressure was hard on Friday following the release of the February nonfarm payrolls. Fear of the Fed hiking interest rates sooner rather than later gripped the markets.

-          Bonds “tanked” on Friday following the release of the monthly employment numbers. That much of the report was dubious is beside the point. As well other economic numbers released earlier in the week were not exactly barnburners. Cdn bonds also “tanked” along with the US bonds. The BofC left the key bank rate unchanged as expected.

-          Gold was trashed on Friday following the release of the US employment numbers. Gold closed below $1,170 suggesting that new lows below the November low are possible. I outline a possible alternative scenario for gold different than the February 27, 2015 version of Chart of the Week. Gold as a barbarous relic? I show a real barbarous relic well radiate actually .

-          The US$ soared Friday following the release of the employment numbers. If bonds, stocks and gold hate the thought of higher interest rates the US$ loves it. But it is false hope as a rising US$ could prove to be difficult for the US economy. A rising US$ also suggests deflation not inflation.

-          Oil prices were fairly quiet this past week. Indeed oil and gas may have been the calmest markets this past week. There is still too much supply in the US.

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Chart of the Week

Chart of the Week – NASDAQ at 5,000!


March 3, 2015

Technical Commentary

This week…..

-          Once again the US stock markets made new all-time highs. Well all except the DJT. New highs were seen in the Euro zone as well and Japan. With interest rates at or close to zero and below zero especially in the Euro zone funds are rushing into the stock markets. Complacency reigns. Beware the Ides of March?

-          Janet Yellen spoke and the bond market interpreted her words as bullish for bonds. Even Vice Chair Stanley Fischer failed to put a damper on the bond rally. While Janet was coy about hiking interest rates she expressed concern about negative inflation (deflation). Fischer tried to dampen the enthusiasm musing about the Fed hiking rates in June or September. Nonfarm payrolls out this Friday.

-          Gold even managed to rally this past week. Could our potentially negative scenario change? Yes. But resistance lies above to be taken out. Some similarities between today and late 2008. But proof is in the pudding and resistance zones must be taken out above and hold the key support zones. And overcome seasonal weakness that could last into May/June. But the recent COT continues to encourage.

-          The US$ Index rebounded this past week and the Euro fell to new lows. No wonder with negative interest rates coming to dominate the Euro zone.

-          Oil prices slipped back this past week and natural gas was hit hard. Simply too much supply especially in North America and not enough cut back in production, yet. Brent prices widened with WTI. But then Brent has interruptions thanks to wars.

February 27, 2015

Chart of the Week

Chart of the Week

After peaking at just over $1,300, back on January 22, 2015 gold has been on a bit of a slide. The prime reason appears to be the fear that the Fed is about to hike interest rates. Is the fear rational? Probably not. Memories are no doubt short. They probably forgot that in the late 1970’s gold was rising as interest rates were also rising. Studies have shown that gold does not have a strong correlation overall with interest rates. If gold does have a strong correlation with anything it is the US$. The US$ has been rising so gold is falling. At least that what conventional wisdom says. (more)

February 1, 2015

Technical Commentary

This week….

-          A shortened commentary this week.

-          It was a volatile week with lots of things happening. There was the FOMC, renewal of fighting in Ukraine, and an anti-austerity Greek party wanting to renegotiate the austerity plan imposed on Greece.

-          US stock markets fell on the week. As a result there was no follow through from the previous week’s good news of the massive QE from the ECB. The US stock markets appear poised to commence a waterfall decline.

-          Bonds continued their strong rally and yields have fallen for the most part to record lows. Bonds are at important resistance so further gains may prove difficult.

-          Gold enjoyed its best month since June/July 2014 with a solid gain. Silver did even better. The gold stocks were stellar. Can it continue? There are a lot of doubters and sentiment while it has improved is still not at levels that could suggest a top. But the commercial COT is somewhat of a worry as it fell again.

-          The US$ Index hit another new high then reversed and closed lower. Has the US$ Index hit a temporary top. Downside follow through this week would be helpful. While most currencies actually rose this past week against the US$ the Cdn$ fell under 79 following a lower than expected November GDP report. Given oil prices and other things could Canada fall into a recession? Some are expecting the BofC to cut rates again.

-          WTI oil plunged to new lows then reversed and closed higher on the week. A reversal week? Follow through to the upside this coming week would be important. A correction of some sort is overdue and seasonals are turning positive. But how high could oil prices go?  I believe it will difficult to get beyond $60.

January 23, 2015

Chart of the Week

Chart of the Week – Banks tipping over?


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