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

Unlike the [tag]NASDAQ[/tag], the [tag]S&P 500[/tag] fell on the week. But as with the NASDAQ, there are signs that we could be in the process of making a bottom. The previous week we had a huge outside reversal (we won’t call it a key reversal because we were not making any major new lows although we made a new low for the move down). Big reversal weeks are often a sign of a bottom. Indicators are turning up from oversold levels. Overall we don’t have any major positive divergences on the [tag]weekly charts[/tag] although we have clear ones on the [tag]daily charts[/tag].

Our best argument for the possibility of at least a good intermediate bottom is our cycles. The cycle that we appear to be following this decade is the 1930s. There was a major top in March 1937, a secondary top in August, then a [tag]financial panic[/tag]. The first good low was made the first week of April 1938. We had a top in July 2007 (and interestingly a lower temporary top in late February 2007), a secondary higher top in October 2007, then our financial panic.[read more…]

TSX INDICES

The [tag]TSX Composite[/tag] gained 3.6% this past week and all [tag]sub indices[/tag] rose. Still we did not generate any new buy signals so officially we are still for the most part in a stand aside mode. [tag]Traders[/tag] may wish to look selectively for bargains. The golds were beat up thoroughly the previous week so their short term has turned down. Most of the sub indices that were up on the week have seen their short term indicators go form down to up or at least neutral.

While we are seeing some signs of a possible bottom we can not come right out and say buy this market as we will require some more backing and filling and to actually form a bottom before we could say buy this market. [read more…]

ROUGH TIMES

One of the dangers of being a contrarian writer is when suddenly what you have been writing about for some time becomes the headlines. We expected a financial panic in 2007 and said so, and while it took time to materialize and while we didn’t know precisely what might cause it, the
fact is that it happened when many (we say the vast majority) were either blithely unaware or mocked the doomsayers.

So now what do we do? Write about how we were right? Or write about the headlines?

Writing about how we were right makes no sense because predicting disaster is no fun, even if it was obvious in coming. Writing about the headlines is difficult as well, because now what you were writing about is fodder for the six o’clock news. [read more…]

Why Spitzer was [tag]Bushwhacked[/tag]
By F William Engdahl

http://www.atimes.com/atimes/Global_Economy/JC20Dj04.html

Disgraced [tag]New York State governor[/tag] [tag]Eliot Spitzer[/tag] had cause to feel frisky when he visited [tag]Washington[/tag] in February. As he was paying off a call girl, the press was preparing to run a [tag]Spitzer[/tag] broadside against the world’s biggest [tag]financial powers[/tag] and President George W Bush, whom he described as a [tag]fugitive[/tag[ from justice and a partner in crime with predator lenders. It was a politically fatal coincidence.

Emirs take pity on dollar for now
Fabrice Taylor, Globe & Mail

http://www.reportonbusiness.com/servlet/story/RTGAM.20080321.wtakingstock0322/BNStory/

Business/home

[read more…]

THE “D” WORD!

The “D” word – [tag]depression[/tag] – has popped up a number of times in interviews on [tag]BNN TV[/tag] this past week. Of course, each time the response is “You’re kidding” or “Unbelievable” or “Impossible” or “You don’t really think so”. It has been mentioned many times in writing as well, and more of it is being seen of late even from [tag]respected media writers[/tag]. Much of the “depression” writing continues to come from the crowd that often writes about these pending [tag]economic disasters[/tag]. For years the doom and gloom writers have been dismissed, ignored, laughed at or treated as a sad joke as people who had no grounding in any reality of the “new economy”. Well, they may not be laughing much any more.

The events of the past week have hammered home the fragility of the [tag]banking system[tag]. If one thought that the $200 billion 28-day repo exchanging [tag]prime mortgage-backed securities[/tag] for more liquid [tag]US Government treasuries[/tag] was desperate, the unprecedented move to bail out the floundering [tag]Bear Stearns[/tag], the US’s fifth-largest [tag]investment dealer[/tag], was really desperate. That was the first time since the Great Depression that the Fed bailed out a [tag]financial institution[/tag]. Bear Stearns may have survived the Great Depression, WW2 and many other ups and downs in the [tag]investment business[/tag], but this may be its last hurrah. [read more…]

TSX INDICES

The [tag]TSX Composite[/tag] was down a mere .04% this past week. Keeping it up was energy, gold and materials while dragging it down was the financials, info tech and health care. Getting a lot of mixed signals here. A number of the sub indices were essentially flat – either up a little or down a little including the TSX 60 (up), [tag]Consumer Discretionary[/tag] (up), Consumer Staples (down), [tag]Real Estate[/tag] (up), Industrials (down).

We are beginning to wonder whether our 11,000 to 11,300 targets are in trouble. Oh it is still possible don’t get us wrong. These were measured targets from the double top on the TSX Composite. But since [tag]energy[tag], gold and materials essentially makes up about 48% of the TSX these strong sectors are keeping the TSX stronger then it might be. The MACD on the TSX Composite is trying to turn up but it hasn’t crossed over to the upside and we failed at resistance of the 40 week MA. [read more…]

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

It was a wild and woolly week. The Fed came in to save the day with the $200 billion repo, taking back prime mortgage-backed securities for US Treasuries, and the market rallied like crazy. Then they were disappointed that it wasn’t enough so it sold off. Then, just as it looked like it might collapse again, S&P (the rating agency) predicated that we were nearing the end of the credit crisis so the market once again came back from a potential big down day. Then Friday’s bailout of Bear Stearns sunk the market and put it back in the red for the week. All in all, a range of 61 points on the week. Despite the volatility we made no new lows below 1,270.

In fact the only index to make new lows on the week was the NASDAQ. But we did get a [tag]new low[/tag] close for the S&P; the DJI actually eked out a small gain on the week. The Transportation index also had a small gain on the week and is nowhere near its recent lows – a possible interesting divergence to keep an eye on. Even the [tag]Russell 2000 [/tag]gained slightly but did see new lows for the move. [read more…]

BANKRUPTCY, DEBT COLLAPSE, THE CREDIT CRUNCH, and CARLYLE CORP. ECONOMIC INDICATORS

The crisis gripping America is the worst since the [tag]Great Depression[/tag]. We are witnessing the unraveling of debt at an unprecedented pace. Trillions of dollars – not billions, but trillions – are at risk. That only a small portion of this debt has been acknowledged is not surprising, because if the [tag]monetary authorities[/tag], the bankers, the corporations and the talking heads on [tag]CNBC[/tag] and [tag]BNN[/tag] actually came out and acknowledged the fact, there would be a financial panic of unprecedented proportions. So instead of one great big financial gulp, this will take many years to work out and the stock market will unfold in waves both up and down.

An article in the March 1 issue of [tag]The Economist[/tag] entitled “Searching for Plan B” notes how repossessions are up 90 per cent from a year ago, that house prices according to Case-Schiller fell nine per cent in 2007 (and we note that in areas such as Florida, Arizona, California and Nevada it is closer to 25 per cent), and that the pace of the decline is accelerating. They note that 8.8 million mortgage holders, or 17 per cent of the total, have home loans greater than the value of their homes. If prices were to fall another 10 per cent, that would rise to 14 million homeowners,or 27 per cent. [read more…]

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

Our 5th wave down is underway. We have no doubt about that now as we made a [tag]new low[/tag] close for the move down and we are very near to seeing new intra-day lows. The odds say these lows will be taken out. The [tag]Dow Jones Industrials[/tag] also made a new low close (under 12,000, for the first time since October 2006). We also closed below the intra-day high of January 14, 2000 so we are now back into the topping zone of early 2000. This is not a good sign.

With what we believe was the 4th wave completing with the lower high of February 27, we now focus on where this move or 5th wave could take us. First we need confirmation with a break of the intraday lows near 1,270 (Friday’s low was 1,282). Minimum target appears to be 1,140, which is the top and bottom of zones seen back in 2004 and 2005. We noted before that we thought we should see at least 1,200. The DJI has targets down at 11,300 and could have targets down as low as 10,250. Both the S&P 500 and the DJI are clinging just above their four-year MAs; we note below that the NASDAQ did break and close under its four-year MA and also made new lows for the move down.
[read more…]

TSX INDICES

The [tag]TSX Composite[/tag] fell 2.39% this past week signaling to us that the down trend may be resuming. We failed right at resistance of the 40 week MA and this week we broke back down under the 13 week MA. Four sub indices posted new lows including Information Technology, the Consumers – Staples and Discretionary as well Health Care. We see little signs that the market should be bought.

The [tag]Energy Index[/tag] has failed once again to break through the huge two year trading/triangular pattern and that remains a concern particularly since this week left a possible small topping pattern on the charts. Means we could pull back once again. Golds and Materials, the latter who made new highs, also left bearish candlesticks on the charts opening higher and closing lower. Both were down on the week. So they may be signaling at least another pause.
[read more…]

FED IN A BOX – INFLATION OR DEFLATION?

Last week we talked about how the Fed is in a box over what to do: fight inflation or fight [tag]deflation[/tag]. Clearly deflation is winning, because the odds are high that they will cut interest rates again (and probably again, and then again and again).

You imagine either [tag]President Bush[/tag] or Prime Minister Harper or Ben Bernanke (Federal Reserve) or Mark Carney (Bank of Canada) saying we are going to fall into a recession? They cannot say so because the market would panic, even though for once they were telling us the truth. The signs are everywhere, particularly in the US and to a lesser extent here in Canada that weare indeed sliding into recession. [read more...]

TSX INDICES

The TSX Composite was basically flat on the week (down .02%) as [tag]Gold[/tag], Energy, Materials, Metals &Mining, and [tag]Income Trusts[/tag] offset everyone else being down. Setting new highs were Materials as they were pushed up by both Metals & Mining and Gold. Seeing new lows were the consumer stocks – Discretionary and Staples. Many of them also continue at resistance and we suspect that they will fail here. We are seeing few if any signs of bottoming patterns forming although [tag]Health Care[/tag] for one with another week we might be able to change its status to stand aside – bottoming. Utilities continue to top out but we have yet to receive a stand aside signal.

The first week of a month is often positive so we will see how this coming week plays out. [read more...]

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

In the early part of the week the [tag]stock market[/tag] attempted to stay up, and indeed we went as high as 1,388. But as the economic numbers came out and hopes of a plan to save the monocline [tag]bond insurers[/tag] faded, the [tag]market collapsed[/tag] once again. Friday was an ugly day with the S&P 500 down 37 points and the Dow Jones Industrials down 315. These losses wiped any weekly gains that remained on Thursday night.

So have we now made our C wave of this recent correction? Possibly, but we need to bust under 1,312 first to tell us we might test or take out the lows of 1,270. At this time we can’t tell whether that will happen. Even if we were to try to go back up this coming week, the resistance at the 1,380/1,400 level is becoming formidable. [read more...]

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