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

The S&P 500 put in another up week, reaching the key downtrend line from the September 2007 highs. Either we bust through this level now, targeting up to 1,425-1,450, or we will fail and turn back down. Even if we do bust through false breakouts are common and we need to get a series of closes over 1430 to confirm that we will advance further. We expect the market to mark time until the FOMC policy statement due out on Wednesday, unless something happens to spur it higher. GDP numbers and the Chicago PMI also due Wednesday morning could cause higher or lower prices.

There are a number of interpretations that one can make of the current patterns. One of course is that we have made a double bottom on the charts (the March low was slightly below the January low although with the DJI it was a slightly higher low). Targets could easily take us back to the highs of 1575. That is why a sustained move above 1430 would be so important as that is the vicinity of the 200 day MA. [read more…]

TSX INDICES

The TSX Composite actually fell almost 1% on the week with Energy, Golds and metals & mining leading the way down. It was actually a pretty mixed week with some up and some down. In the down category along with Energy, Golds and Metals & Mining were of course materials and consumer staples. Materials made new highs before turning lower. While the remainder were up most were barely up on the week especially Telecommunications and Utilities.

Still none of the energy, golds or metals or materials gave us signs that we should stand aside. Gold is at support of the 40 week MA (just closed below it) so it is important that it hold this level and we don’t see successive closes under this key MA.

At the other end some such as Info Technology are now at resistance of the 40 week MA. This is often an ideal spot to turn down again in a bear market just as testing it in a bull market is also quite normal. One sector that is strong is the income trusts but it has been largely led by the energy income trusts which is why we say buy selectively.. [read more…]

GOLD BUBBLE! WHAT BUBBLE?

We keep hearing that gold has been in a bubble and the bubble may have burst. A quick Google punch with “gold” and “bubble” revealed a number of articles dating back to 2005 that talked about Gold in a bubble. We saw and read numerous blogs and an article telling us that the bubble is bursting for gold and oil is about to follow and “everyone will lose their shirts”. We have been reading dire forecasts for gold (and by extension, silver and platinum) for several months. Since then gold has gone up at least $200.

A well-known popular market guru also very noisily announced recently that he is abandoning his long-held bullish outlook on gold. Seems that the fact that gold appears recently to have abandoned its link with both the US dollar and oil prices has spooked some people. And of course the big $28 down day seen last Friday April 18 worried a lot of people. The comment was that gold doesn’t do that in a bull market. In the very short term he is looking very smart. But then only a few days have passed. [read more…]

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

How do you know when you are in a bear market rally? Easy – when you ignore all the bad news and cheer all the good news. Case in point: the market ignores the $5.1 billion quarterly loss reported by [tag]Citigroup [/tag]and the slashing of 9,000 more jobs and cheers the higher revenue. It also ignored [tag]record oil prices[/tag] and cheered the better than expected earnings of Intel, [tag]Google[/tag] and [tag]JP Morgan Chase[/tag].

Lurking behind the scenes to fuel the bullishness is [tag]unprecedented monetary growth[/tag]. The latest monetary report from the Fed shows M2 growing at an astounding 12.6 per cent rate over the last three months. Even the six-month and one-year growth rates are above seven per cent. The unreported M3 is now estimated to be approaching 17 per cent. While this is not quite [tag]Weimar Republic[/tag] stuff, it is starting to be. Remember that all this money, most (if not all) of it held by large institutions, has to go somewhere. Right now a big chunk of it is finding its way into the stock market. [read more…]

TSX INDICES

[tag]TSX Composite[/tag] put in a stellar 4.0 per cent up week, with all sectors up except Consumer is cretionary. Maybe we should heed the warning of the [tag]Consumer Discretionary stocks[/tag], because if that group can’t rally in this environment then maybe we should treat this rally with a grain of salt.

The TSX 60 also saw new highs, but we note that [tag]Potash Corp[/tag] (POT-TSX) is a major contributor to that record and of course the [tag]energy stocks[/tag] have been soaring to new highs as well. Even the TSX Composite is not far from its all-time highs but again it is POT and the energy stocks that are taking the index close to record territory.

Most of the remaining sectors, despite some positive moves on the dailies and the weeklies, remain moribund and are not giving us any buy signals. The Materials group also gave us new highs this past week but both Gold and Metals & Mining remain below their all-time highs. [read more…]

DOW IN A BULL MARKET?
ARE BANK STOCKS A BUY? WE DON’T THINK SO!

We are reviving the [tag]Technical Scoop[/tag] series. This will replace the WeekEnd Commentary. It will free up a bit of extra time on weekends, which we found were being given over almost entirely to writing and editing.

We will still be offering some commentary on global economic and geopolitical events and their impact on investments and the markets. But we will be returning a bit to our roots with this resurrection of the Technical Scoop, where we used to comment on companies, their charts, and their relationship to what was being said in the markets or the news. So this will be more chartoriented than was the WeekEnd Commentary. We hope to publish at least two issues a month. [read more…]

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

How things can change in a week. Last week the market was getting increasingly bullish with all the Fed’s manoeuvrings to save the world. This week reality came back into the market. GE failed to come anywhere near their profit picture, the same-store sales for March were generally abysmal and [tag]consumer confidence[/tag] slipped badly. The market said “Oops, I did it again,” and promptly sank.

We outlined last week how we expected a top this past week and then how the market was going to be choppy for the next couple of months. We were basing this off our observations of the 1938 cycle (70 years) which showed a very choppy market through May, a final low in May, then up and more chopping around into July followed by a final burst of a rally from August to October or so for a top. While nothing is a given thus far we are following the script. Given the [tag]elections[/tag] this November and the fact that the [tag]markets[/tag] tend to be somewhat strong going into an election, that outlook may hold. We have not seen enough yet to dissuade us from this scenario. [read more…]

TSX INDICES

The [tag]TSX Composite[/tag] was up on the week but barely. We broke above the 40 week MA but we were left with a negative sign with the week close at the end of week and closing below the opening levels for the week well off the highs. This is actually a negative going forward. There was a similar pattern on the [tag]TSX 60[/tag] but it gave us a better indication to at least buy the group or buy within the group selectively.

It was a mixed bag week with energy being one of the best gainers and an area definitely to buy as we broke out to new highs. Other strong areas were materials and metals and mining. We will look at the metals and mining group for buys for next week. Utilities were barely up as were the [tag]income trusts[/tag]. The energy trusts are the best buys in that sector. All other sectors were down on the week reflecting a return to the downtrends that have been in place. No buy signals were ever seen for those sectors. [read more…]

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

The [tag]S&P 500[/tag] enjoyed a big up week this past week, thanks to the huge 48-point gain on Tuesday. It was an interesting day and we suddenly learned and read about “9 to 1” days. We admit we don’t know everything so learning about this one was interesting.

So what is the 9 to 1 indicator? It was developed by [tag]Martin Zweig[/tag], a market guru. (He lives in a $70 million house. I don’t. Nor do I know anyone who does.) How does it work? You take all the volume of all the [tag]NYSE[/tag] listed stocks and figure out what percentage of that volume came from stocks that rose that day. When that volume hits 90 per cent, it is a 9 to 1 day and is very bullish.[read more…]

TSX INDICES

The [tag]TSX Composite[/tag] jumped 3.3% this past week and is now at or approaching the 40 week MA resistance. As long as the TSX or any of the [tag]sub indices[/tag] are below their 40 week MA we do not wish to buy them. All sub indices were up this past week except for [tag]Gold[/tag] and Health Care and both were only off small.

The [tag]Income Trust[/tag] sector is flashing some buy signals and can be purchased selectively. We have a number of income trusts in our picks below and more are in the list of TSX Composite [tag]stocks[/tag] below as well. Many of the sub indices are coming off very oversold levels but as we note they remain well below their 40 week MA so buying them is purely speculative. But we do have a number of buys below in stocks but examine them carefully before plunging in. [read more…]