S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)

Following the huge outside week reversal the previous week, the market bounced back this past week. It is strange sometimes watching the reaction of markets to events. The bond market is now clearly showing signs of concern over rising inflationary pressures, and the US dollar appears to be hailing the rising inflation by rising because it believes the Fed will be forced to stop lowering interest rates and even hike them to stem the inflationary pressures.

The gold sector has naturally reacted negatively to the rising US dollar, as has oil. Both fell on the week. But the stock market seems unperturbed by rising inflation and clearly they don’t believe that the Fed will hike rates and may lower them further.

The S&P 500 was also helped by the report that first quarter growth was 0.9 per cent, revised
upward from the previously reported 0.6 per cent gain. As we have mentioned elsewhere, given
the fall in the first quarter for Canada, a rise in the US seems almost unreal. Further, some good results were reported on the week by stalwarts such as Dell. The drop in oil prices this past week also emboldened the S&P 500. [read more…]

TSX INDICES

Boy what a mixed week. The TSX Composite closed down very slightly on the week. The down week was led by Energy, Gold, Metals and Materials. Overall out of our 14 sub indices six were down and eight were up. But overall it was the four major downs that took the TSX down on the week. Others down were Health Care and Consumer Discretionary. The latter has performed very poorly and no reason to own the group at all.

The up groups are no big star performers at all. Utilities look good and so does the industrials group but most of the others are weak and are still to be avoided. They are trading for the most part under their 40 week MA and as long as we are under that level we will continue to stand aside. We do have up markets on the dailies and as long as that is in play we are probably in a bear market rally and one might selectively trade the group but no reason to hold on for longer unless we regain above the 40 week MA and the weeklies turn up as well. Given we are at or near resistance zones profit taking at these levels is suggested.[read more…]

S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)

It was a big outside reversal week, setting up a major sell signal on the markets. Outside reversal weeks see a higher high, a lower low and a close below the low of the previous week. We busted through and closed below our important 1,380 support. We also busted through the uptrend line from the March lows. It is amazing how in one fell swoop we wiped out a month’s gains.

The key day was Monday, when we ran right up to a perfect topping zone at 1,440. This was the area of both the 200-day MA and the 40-week MA. We raced to the highs, then collapsed late in the day to the opening levels. Except for Thursday’s small up day, the rest of the week was spent on the downside[read more…]

TSX INDICES

The TSX Composite roared to new all-time highs this past week on the back of energy and gold but at the end of the week the only one standing was the gold sector. All other sectors and the TSX Composite closed down on the week. Since we hit new highs for the Composite as well as for Energy and Income Trusts (propelled by the oil and gas trusts) and then closed lower on the week it does constitute a reversal week. But since we did not take out the previous week’s lows and close under that level as we saw with the S&P 500 and the NASDAQ it does not constitute a key reversal week.

Particularly hard hit were the Financials, Consumer Discretionary and Real Estate. The Energy sector closed lower despite record highs for oil and new highs for natural gas. That was disappointing but as we note in our oil and gas commentary it may be because they fell in sympathy with the rest of the market or maybe there is a lot of nervousness that the high prices will not be sustained and that at the least sign of trouble they rush for the exists. The latter reason is actually quite bullish although the former only suggests to us a mild bear at best. [read more…]

S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)

Our thoughts that we might see an up week because of huge put option positions in strikes just below levels we were at last week turned out to be prescient. The S&P had a sharp 2.7 per cent gain. The bulls were elated, but now we note that the consensus of newsletter writers (like us) has turned decidedly bullish.

As a result of this past week’s rally we are now right up into major resistance (the 40-week MA is at 1,425 and the 200-day MA is at 1,428). We have numerous negative divergences popping up in the indicators, particularly the dailies. But the bullish consensus reports are a sign that we may be reaching the end of this run. There is the old “sell in May and go away” adage; we are now halfway through May and we have been going up. [read more…]

TSX INDICES

Once again propelled by energy, golds, materials and the metals and mining and adding a dabble from industrials, financials and the income trusts the TSX Composite leaped another 3.2 per cent and broke out to new all-time highs. In theory this now set us on our way to targets as high as 17,300. But if we are to do that we must have participation from more than just energy, gold, materials and metals. Of course financials, industrials, real estate, telecommunications, utilities all jumped this past week as well. Only Health Care and Consumer Discretionary were down on the week. But many of them are now very close to resistance at the 40 week MA. We need to break and close over that level to confirm buy signals on sectors.

Groups like the Consumers (Discretionary and Staples) remain well below their 40 week MA so we remain out of these groups although there may be select stocks. The Financials remain below its 40 week MA as well so we don’t want to be in the sector. But Gold after a three week foray below its 40 week MA has now rebounded and closed above it this week giving us a buy signal. Ones like Health Care are at resistance as is Real Estate. If both could close above the 40 week MA next week again we would issue buy signals. Industrials have been strong propelled by Bombardier which is in our portfolio below. Information Technology is now above its 40 week MA for the past three weeks so reluctantly we would be long. But it is making what looks like a bigger topping pattern. [read more…]

WHAT’S WRONG WITH THE JUNIOR GOLD (PM) STOCKS?

What is wrong with junior precious metals (PM) stocks, and especially the junior producers and junior exploration stocks? In looking at scores of junior mining stocks that trade on the TSX Venture Exchange (CDNX), it seems to be mostly the junior gold miners that have taken a beating over the past six months.

Normally the CDNX follows the major metals indices such as the TSX Gold Index and the Amex Gold Bugs Index (HUI), although there are sometimes lags. Since lows seen last August at the bottom of the first wave of the credit crisis, the TSX Gold Index is up about 27 per cent, the HUI is up about 38 per cent and gold itself is up about 34 per cent. [read more…]