S&P 500 STRATEGY: STAND ASIDE

The S&P 500 eked out a 1.4 per cent gain this past week, keeping alive the recent uptrend which we believe is corrective only.

t managed to close higher on Friday despite the waft of poor economic numbers (The New York Empire State Index was negative 11.7 per cent and the Michigan Sentiment Indicator came in at 9.6, sharply below the expected 78). At one point the S&P 500 was down about 12 points but
managed to gain about one point on the day. That gave us a tiny buy signal for Monday.

The S&P 500 does have some possible targets at 1,380, 1,400 or even as high as 1,420 before we should once again start our way down. The lows of March and August 2007 were at 1,364 and 1,370, and we closed 2006 at 1,418. It is no surprise we are trying to trade around that important pivot point and finding ultimate resistance at the upper level. The lows of 2007 have fallen, telling us that we have begun a bear market. A definition of a bull market is when we continue to make [ read more... ]

NASDAQ STRATEGY: STAND ASIDE

Despite a fall in the stock markets on Thursday and Friday the NASDAQ managed a small gain in the week. Once again we appear to be failing at the 20-day MA, an area that often acts as stiff resistance in bear markets (and support in bull markets). Failure to break through this level leaves gaining higher levels in deep doubt.

Indicators continue to rise but most remain in bearish territory. Even our vaunted Commodity Channel Indicator that we use to tell us whether we are in a down move or up move remains bearish.

It was option expiration week, and now with that out of the way the market can decide whether it wants to try and rally further or fail at these levels. It is still possible that we see at least one more attempt at the 2,400 level before we plummet once again. Other key MAs remain well away, with the 50-day MA near 2,500 and the downtrend line from the October highs near 2,600. The 200-day MA generally coincides with the downtrend line from the October high. These zones could be targets if we did get more [ read more...]

US BOND STRATEGY: LONG – CAUTION

US Treasuries at the long end of the curve fell again this past week (yields, which move inversely to prices, rose) despite continued signs that the economy is weakening. Part of the reason for the decline is word that international buying of US Treasury bonds unexpectedly fell in December. Figures showed that the central banks of Japan and the UK sold US Treasuries. On the surface this seems to fly in the face of the rise of marketable securities held in custody for foreign official and international accounts. But then, this past week they fell some $4.7 billion, the first decline in weeks. Still, year over year they are up a whopping $301 billion.

Signs that the economy continues to weaken were emphasized on Friday when the NY Empire State Index posted a negative reading for the first time in about four years. The number came in at a negative 11.7 per cent. This was far below the expected positive reading of five per cent. Then the Michigan Sentiment Indicator plummeted to 69.6, well below the expected 78. Other numbers during the week were a bit more mixed. Retail sales were up 0.3 per cent when they expected them to be flat. Ex-auto, they were again up 0.3 per cent, which was [ read more... ]

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THE FRUSTRATION WITH GOLD STOCKS
HOW DID WE GET INTO THIS MESS? – SUB-PRIME AND BEYOND
THE KOSOVO QUESTION – AGAIN
ECONOMIC INDICATORS

THE FRUSTRATION WITH GOLD STOCKS

Since the most recent rally got underway from the August lows, gold is up 39 per cent, silver is up about 49 per cent and the Gold Bugs Index (HUI) is up 42 per cent. Sounds good, but in reality the huge leverage that is supposed to come with owning [tag]gold stocks[/tag] just has not kicked in at all. Some HUI components such as Harmony Gold (HMY-NY) have barely budged. But the real frustration lies with the junior producers not included in the HUI and the junior exploration plays, which in many instances have actually fallen even as gold and [tag]silver prices[/tag] have shot up.

There is a malaise in the entire market. Many of the juniors – seen as high risk at the best of times – seem to have attracted a much higher than normal risk premium. Until that perception changes these stocks will remain depressed, although in many instances it is difficult to fathom how much further they [ read more... ]

If there was any doubt that the bear market began with the top at 1,576 in October, this past week should be a sharp reminder that it “ain’t over until it is over”. The [tag]S&P 500[/tag] was hammered back some 64 points, or 4.6 per cent, and the Dow Jones Industrials fell 560 points. But no [tag]new lows[/tag] were seen, so in theory at least our corrective rebound that began two weeks ago is still in play.

Still, the resistance we thought would materialize at around 1,400 proved to be formidable. Will we now start a rapid collapse back to the lows at 1,270, or does this rebound stay alive? This week is option expiration week and our betting is that the rebound will resume.

This week saw evidence that the [tag]economy[/tag] continues to slow (the ISM Services number fell below 50 – a sign that the economy is moving into recession). Fear of defaults remains high, particularly from the monocline bond insurers. The banks and the brokerages led the [tag]decline[/tag] this past week yet we saw [tag]respected analysts[/tag] coming out with buy recommendations, saying that many of these banks were now very undervalued. Well, they can get a [ read more... ]

Up, down, up, down. This past week it was down, as the TSX Composite lost 2.5 per cent. With the exception of [tag]healthcare[/tag], all [tag]sub-indices[/tag] were down, including gold. Gold being down was a surprise considering the [tag]metals[/tag] closed higher on the week.

Gold and materials remain the only places to be. [tag]Utilities[/tag] are continuing to roll over but we don’t as yet have a stand aside signal.

Many are still calling this a bottom. But we have little evidence that we have made a bottom. Still we did not see new lows, so the small rebound that started a couple of weeks ago is still in play despite the drop this week.

The TSX Composite closed up 3.3 per cent this past week and 12 of the 14 sub-sectors were up. The only two that fell were [tag]Consumer Staples[/tag] and [tag]Gold[/tag]. Despite the gains no buy signals were seen, and of course no new lows were seen. But how much further this rally has to go is questionable. The sub-indices and the TSX Composite were merely rallying to test breakdown lines or key moving averages, such as the 50-day MA on the dailies and the 13-week MA on the weeklies. It brought some fast-moving indicators off their bottoms, but others such as the slower-moving MACD indicator barely budged.

With the rally into key MAs we expect the market to fail at least this first attempt at breaking higher. We suspect the market is in the throes of making some sort of ABC correction and we may have completed the A wave up this past week. There will be a pull back and then we rally one more time, putting in slightly higher or slightly lower highs before we resume our downtrend to the lows we continue to look for in March or no later than April. Possible dates for lows are around March 21, April 6 and April 21.

We continue to believe that the [tag]TSX Composite[/tag] will test the four-year MA near 11,000 in the next wave down. That remains a minimum target from the double top pattern. Upside resistance on the TSX is near 13,525 and 13,625. That should be the max for any rally here. To the downside the [ read more... ]