THE CHAPMAN REPORT – Bonds Rally, Gold & US$ Rise, & More

This week

• Stock markets made new highs then reversed and closed lower with the down days seeing high volume. Could this be the start of a bear market? A reminder that the markets are around in time important highs seen in late April 1930 and early May 1940. The ‘unexpected event” triggered a mini crash in 1940. Another “unexpected event” 20 years ago in July/August 1990 triggered another crash. The highs in July 1990 came following a short squeeze.

• Bonds rallied strongly this past week on the debt woes in Europe as Greece, Spain and Portugal saw downgrades to their debt. The rally in bonds came against the backdrop of a record $129 billion US Treasury debt financing. The issue sold as a result.

• Gold rose this past week even as the US$ rose demonstrating that gold may finally be becoming the currency of choice. New highs for gold were seen in Euros, Swiss Francs, Japanese Yen and British Pounds. Gold also rose in Cdn$ terms.

• The rise in the US$ was triggered by the so called “flight to safety “ of US Treasury bonds.

• Oil prices and oil and gas stocks were weak in the early part of the week along with the broader stock market. But oil prices rebound sharply as the scope of the environmental disaster in the Gulf of Mexico became clearer. A moratorium on offshore drilling will put a deep chill on the market and lead to higher oil prices as supply comes off the market and the search for new resources is stalled.

D.C.