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…]

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

The S&P 500 fell this past week, thanks particularly the reporting of record first-quarter losses at AIG and the announcement by [tag]Citigroup[/tag] that they wish to divest themselves of some $400 billion of loans – an incredible amount. We have more to say about that in our bond commentary.

The S&P 500 hit our ideal topping zone near 1,400/1,425 (the high was 1,422) and the 40-week MA. This drop took us near our first major area of support near 1,375/1,380 (low was 1,384) and the 13-week MA. It is possible that we will just trade around these two points for at least the next week before deciding which way to break.

The lows came right down to our trendline up from the March lows, so it is possible to go right back up. At the other end there is considerable resistance in that 1,420/1,430 zone. If we were to break through it we would then go straight up to 1,500 and possibly the October 2007 highs near 1,575. A clean breakdown through 1,375/1,380 would next target us to 1,350. Below 1,350, and especially under 1,320, we would target the March lows and our possible outstanding target of 1,185/1,200.[read more…]

TSX INDICES

Propelled by [tag]Energy[/tag], [tag]Gold[/tag], [tag]Metals[/tag] and Materials the [tag]TSX Composite[/tag] gained 1.7 per cent on the week and is within hailing distance of new highs. Energy gained over 7 per cent and the Golds were up over 5 per cent constituting a big part of this gain. The TSX Composite we believe now should put in new highs. Triple tops are very rare so we would be surprised that the index failed here even as some sectors may fail. Indeed we have a two tiered market where the places to be are the aforementioned Energy, Gold, Metals and Materials and the places to avoid are Financials, Real Estate and the consumer stocks even as there may be individual ones worth looking at.

Targets on the TSX Composite could be as high as 17,300 but we emphasize just as we saw with our double top scenario that failed we could fail this one as well. We need to have our key sectors keep propelling this one higher but have at least some ongoing participation from the other groups. It is then very possible to see those levels this summer if our rally into the summer months develops as we continue to suspect.. [read more…]

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

The S&P 500 has now run right up into our ideal topping zone of 1,425-1,435. The high this past week was at 1,422. There is an outside chance that we will still make it to the 200-day MA near 1,433 but the reality is that this bear market rally is getting long in the tooth. Many stocks are approaching major resistance zones and former breakdown zones that are often tested in bear markets.

Of course the bulls will get excited at breaking the down trend from the October highs, but last week we pointed out that that was possible. We are now at “sell in May and go away” time, and typically if we are to see a top it comes in the first week of May. We have also cited the 1938 and 1946 cycles that saw similar double-bottoming patterns in the first quarter, then after a strong rally collapsed right back to the lows and even lower. As well, if we are to continue this rally then we must go right through 1,430 and except for small pauses keep rising to 1,500 and higher. [read more…]

TSX INDICES

The TSX Composite gained 1.25% in the past week with 10 of 14 sub indices up on the week. The losers were all the cyclicals gold, energy, materials and metals and mining. Indeed the gold sub index gave us a sell signal closing under the 40 week MA for the second consecutive week. Neither of Materials or the Metals did the same.

At the other end the Information Technology sub index closed over the 40 week MA giving us a buy signal. The reality is elsewhere though all we have done is crawl back to classic resistance zones where in bear market moves we typically fail. The same could occur with the golds as well who have fallen to a huge support zone and if the bull market is still valid that could quickly reverse as well.

The TSX did not make new highs this week despite closing higher. Indeed we remain below the July and early November highs. Unless those highs are taken out the next drop could be quite problematic. We would be continuing a pattern of lower highs which is the definition of a downtrend. This occurs even as we make these highs very close to the two previous highs. The 13 week MA has still not crossed over the 40 week MA. [read more…]