S&P 500 STRATEGY: LONG HOLD(for definitions of terms, see end of report)

• Last week we noted that despite a few weeks of down movement we did not favour a cycle inversion for our potential turn period into July 21. As if hearing our cue the S&P 500 jumped 61 points or 7% putting our potential targets of 1000/1100 back in play.
• The market did not make new highs so resistance remains at 950/955 but once through that zone we should easily attain our 1000 target.
• We could still see a temporary top into our July 21 date (Tuesday) then after a few days pullback we could rise into the end of the month.
• Remember on our 19 year cycle, 19 years ago was 1990 and on August 2, 1990 Iraq invaded Kuwait. That year the top was on July 17 (following a February 23 low). There was a minor top made on August 1 before an all out collapse got under way.
• Could we be in for an invasion (or attack) surprise in 2009? Israel/Iran?
• We have broken out of our downtrend line from the May 2008 highs.
• The downtrend line from the October 2007 highs comes in around 1150.
• Our 70 year cycle saw a bottom in April and a top in September with the market beginning a new downtrend following the outbreak of war in September 1939.

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• Markets rebound. S&P 500 in short squeeze (and spurred by huge profits at Goldman Sachs?) and challenges recent highs.
• We are moving into our key turn period that goes until August 1.
• We still expect a top of some significance.
• A cycle of wars and invasions (but also peace) in years ending in 9.
• Bonds collapsed as inflation picks up and M1 soars.
• Gold and metals all up on the week as the US$ weakened. But the commercial COT for the currencies remain weak. Cdn$ soars.
• Oil and gas up on the week and the energy stocks soar. But could they top with the broad market?

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S&P 500 STRATEGY: LONG HOLD – CAUTION

• The S&P 500 fell for the 4th consecutive week and we are now down 5 weeks from the highs. The S&P 500 lost 1.9%.
• The short term trend has turned down and the intermediate trend has turned neutral. As a result we are issuing an extreme caution on the stock market.
• We rolled over at major resistance of the downtrend line from the October 2007 highs.
• We are currently testing the 200 day MA near 880 and major support is visible down to 850 and the 100 day MA.
• Below 850 the major bear market would resume.
• Only above 900 and especially above 920 will we resume the recent bull market rise.
• Weekly indicators remain in an uptrend and there are no negative divergences present. Negative divergences at significant tops are usually seen before we begin the real bear market. This suggests to us that once this current down phase completes we will resume the uptrend and see new highs.
• We have stated that we believed that our highs would be seen centered around July 20 based on previous cycles.

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• Stock markets continue their recent downtrend.
• Our July 20 date (or thereabouts) is now appearing as a potential cycle inversion meaning we will see a low rather than a high.
• Bonds continue their recent rebound as demand at recent auctions remains very firm and bonds are responding to weakness in the stock market.
• Gold continues to falter even as the US$ index is going nowhere. Gold continues to trace out a possible head and shoulders bottoming pattern.
• The Energy Index continues its recent downtrend and the Amex Oil Index (XOI) has issued an intermediate sell signal.
• It was a dismal week for the TSX Composite as all sub indices fell except for the depressed Healthcare sector.

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This week

• Stock markets falter. The S&P falls for the 3rd consecutive week.
• Cycles point to a rebound that should start this week and topping later in the month. But we acknowledge that other cycles remain bullish into September/October.
• July tends to be a positive month.
• Bonds are at resistance spurred upwards the past couple of weeks by weaker economic numbers (unexpected decline of 467 thousand jobs for the non-farm payroll.
• The US$ exhibited strength and as a result gold faltered.
• But gold and silver are entering their potential best season although silver can remain weak until August.
• Gold is also exhibiting a potential huge head and shoulders bottom reversal pattern. Very bullish if realized.
• Oil prices faltered and Natural Gas broke downward. Still NG appears to be making a larger bottoming pattern.

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