S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)
After the advance of the previous week, this past week was more or less a wash as the S&P 500 ended with a small loss. Sharp gains seen on Tuesday and Wednesday were wiped out on Thursday. Friday the market had a small up day as a response to the durable goods numbers.
We believe that the counter-trend rally that started from the lows on July 15 is still in place.
Wednesday’s high probably completed the “a” wave up; we are now seeing the b wave unfolding. The current drop is generally holding the 20-day MA zone so we may be seeing the lows of the bwave here or slightly lower. The following c wave could take us to the down trendline resistance near 1,300 to 1,310.[read more…]
TSX INDICES
The TSX Composite lost another 1 per cent this past week half the sectors down and the other half up. Gold, Energy and Materials sectors remain in longer term bull markets despite the drop this past week. Others that were up including Financials, Health Care, Utilities, Real Estate, Info Tech and Industrials remain in longer term bear markets despite the positive week. The CDNX Venture exchange continued its recent sharp fall hitting new lows but we continue to rate the sector as accumulate as there are numerous positive divergences in the weekly indicators despite the new lows. The volume on this decline has been down as well. A possible descending wedge triangle is also forming (bullish).
Our prognosis going forward on the TSX is similar to other thoughts. Most groups should be avoided but the counter rally that started with lows about a week ago could continue into mid or even early August for a top. Other sectors such as gold, energy and materials remain in long term bull markets but are experiencing some near term corrective pressures that may have more to run. Investors can maintain exposure to these sectors but cash balances and bullion holdings should rise on rallies. Except for those sectors the remaining sectors should generally be avoided.[read more…]
S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)
It was a wild and woolly week for the S&P 500. We plunged to new lows for the move, getting to our next major level of support at 1,200, then staged a dramatic rebound on what was probably massive short covering and closed up on the week at 1,260. The reversal was dramatic but it was not an outside reversal week.
The rebound occurred when it became clear that the US government would bail out Fannie and Freddie. The two mortgage giants were clearly “too big to fail”. With the US now in effect
assuming their combined $5.6 trillion in debt, there is some concern about the health of US debt
and whether there could be a downgrade from AAA. That would be earth-shattering. But when
one considers the massive size of the US debt, the massive and growing trade deficit and current account deficit, plus the huge under-funding of Medicare and Social Security, you have a looming crisis not just for the financial system but for the entire US. [read more…]
TSX INDICES
Another bad week for the TSX Composite as it fell for the 6th week in a row. If 7 is lucky we may get an up week this coming week. Still we lost 1.4 per cent and the decline was led by energy, golds and materials.
The Energy sector dominates the TSX. Many other sub indices put in new lows for the move (Financials, Real Estate, Consumer Discretionary, Healthcare and Info Tech) then closed up on the week making it a reversal week. SO is this the end of the bear move for these markets and the start of a bear move for the energy, golds and materials? We doubt it but it may signal a temporary low for the beat up sectors. We certainly wouldn’t be chasing those sectors except for a trading position. Just be wary that the moves could be fast and swift and then quickly return to new lows. So it will be important to be nimble. [read more…]
S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)
Our earlier thoughts that we might be in the area of a low last week has thus far proven premature. We are now in panic mode and we do know that panic modes always bring us “panic reversals” even if they are temporary. Think of the extremes seen around September 11, 2001 or October 19,1987 or most recently March 17, 2008. That we have yet to see a sign of that does not mean it is about to occur. But the collapse of Bear Stearns in March brought us a temporary respite and this time we have another collapse in the making with big news in the background.
This time it is Fannie Mae (FNM-NYSE) and Freddie Mac (FRE-NYSE) the world’s largest
mortgage behemoths with $5.6 trillion in debt and holding over half of the mortgages in the USA.
The entire airline industry is also in the throes of going under. Huge bankruptcies are nothing new. Think Chrysler, Penn West, and more recently Enron. [read more…]
TSX INDICES
It was a very bad week for the TSX (down 2.1 per cent). Except for Gold and Materials everything else was down. Consumer Discretionary and Healthcare hit new lows for the move down. Metals and Mining continue in a topping pattern as does the TSX 60. But here once again Materials and Gold are holding the Index up.
While the temptation is to say as we did in our broader report we may be hitting a temporary “panic” low. But that doesn’t mean one rushes out to buy everything. Instead you stick with the area that are rising and that is the Gold and Materials sector. In the Materials sector it includes the agriculture picks such as Potash and Agrium. You want to be long these stocks. No need to chase the falling zones. The TSX Energy once again had problems but still remains a hold even if we have out the caution sign. We see no sign of a long term topping pattern unlike the mining and metals sector which we don’t mind owning but there are more
distribution patterns there. [read more…]
