This week

• The S&P 500 falls 0.7% this week but following comments from Fed Chairman Ben Bernanke on Friday the market reverses and closes up a strong 1.66%. Quantitative easing (QE) remains a catalyst for the market and could spark an irregular rally that lasts until the mid-term elections in November. Key level remains at 1120 and above that level higher prices are suggested. The market held 1040 this past week but must overcome some resistance overhead to test 1120.

• The Fed Chairman’s comments had the opposite effect on bonds as new highs in Treasury bonds this past week reversed and closed slightly lower on the week.

• Gold and silver broke out as QE is positive for the precious metals. The precious metals stocks had a good up week and the TSX Gold Index is within 50 bp of new highs.

• Oil prices rebounded as well on the good news of the Fed Chairman’s comments. The energy stocks also rallied but the AMEX Oil and Gas Index (XOI) still closed lower. Natural gas prices plunged to new lows as a lack of hurricanes in the Gulf of Mexico and good supplies weighed on the market.

D.C.

Chart of the Week – US housing prices in terms of gold and silver

D.C.

This week

• Stocks as represented by the S&P 500 fall again following through on the previous week’s sharp decline. The economy continues to show signs of weakening. But perversely the stock market could rally if quantitative easing allowed the financial institutions to be flush with cash and they perceive the risk to be low. Key area remains 1120/1130 and for 1060 area (or at least down to 1040) to hold.

• Bonds rose again for the 4th consecutive week. But Friday saw a down day after the announcement of another $102 billion Treasury auction.

• Gold rose again but with next week options expiration there could be some softness seen. Any pullback is expected to be shallow but worst case could see another decline towards $1170 major support.

• Energy prices declined and took the energy stocks with them. This sector appears to be increasingly bearish as the weakening economy is slowing demand.

D.C.

StockPicks – The current portfolio has been closed. This is the wrap up and performance measurement against the indices. A new portfolio will be created in September. As well a new feature – Stock of the Week. It could be someone in the news or just an interesting chart. They may or may not be part of any portfolio.

Chart of the Week – Gold/Bonds – surprise gold has been outperforming bonds over the past decade.

D.C.

This week

• The US stock market fell as a weakening economy and a fleeing of risk assets took hold. The market failed the key 1120-1130 resistance zone. Now it is up to the 1040-1060 support zone to hold if the bulls are to remain alive.

• Bonds are the risk free asset in every way. Borrow cheap lend long pick up a spread. Why lend to high risk consumers when you can earn 2-3% just buying US Treasury notes and bonds. Bonds hit new highs.

• Gold continues to struggle even as the US$ was pummelled in the past few weeks. Could another swift downdraft be in the offing for gold? As long as $1150 holds no. But first it must break above $1220 and $1250.

• A weakening economy is not good for oil prices that fell below the key pivot of $77 this past week. Energy stocks were shunned and are looking increasingly bearish. If oil prices bust through $70 again targets as low as $48 are possible.

• The TSX also fell as Metals & Mining, Energy and Financials led it lower. If these sectors can’t go up then the TSX can’t go up.

A final version of the current Stock Picks will be made next week. The portfolio will officially be closed on the open August 17, 2010 which is one year from its start.

Chart of the week – Dow Jones Industrials 2007-present compared to 1937-1942. Charts do repeat themselves.

• The markets took a big tumble on August 11, 2010 because of fears of double dip recession

• This has set the stage for the potential long grind to the bottom that may take upwards of two years to complete.

D.C.

The full version of the Technical Commentary returns and should be good until the long September weekend.

This week

• The markets are at the crossorads. The S&P 500 has reached the 1120/1130 zone where either it will breakout or it will fail. Good earnings are helping the rise. Signs that the economy is weakening again will cause it to fall.

• Bonds rose again this past week and the two year note fell to a record low. The Fed meets this week and rates will be left unchanged. Talk of quantitative easing is again prevelent. But lenders are not lending and borrowers are not borrowing as the deleveraging process continues, a process that is expected to last years.

• Gold rose but the rise has been aneamic compared to the recent sharp fall in the US$. But gold’s seasonally positive period is barely geting underway. The gold stocks led all stocks to the upside this past week.

• Oil prices faltered at the key $82.50 breakout zone. Downside breakdown is seen at $77 and even $79. A border clash between Lebanon and Israel this past week could be the prelude to an attack on Iran if the border disoute were to escalate although at week’s end it was quiet once again. The worst of the hurricane season is approaching although the BP Deepwater oil spill is beginning to fade into memory.

Update only.

Note: In two weeks time the current version of Stock Picks will close the portfolio’s. Stock Picks will start new portfolio’s after that.

A new feature will be Stock of the Week. The format for the Stock of the Week will be similar to the Chart of the Week. It could be a comment on a stock in the news or a pick that has attracted our attention. It will not necessarily be a stock in the sample stock portfolios.

Have a great weekend.

D.C.

Chart of the Week – Gold in inflation adjusted terms.

This week

• Equities leap on Aug 2 following the release of some better than expected economic numbers. That coupled with good numbers late last week have offset weaker numbers seen earlier in the weak.

• Bonds sold off on Aug 2 as the economic numbers were stronger than expected. Key is this Friday when the non-farm payroll for Jul is out.

• Gold is better but just, as it tested lower last week briefly breaking under $1175 before rebounding. Gold has been weak despite a weak US$. The US$ has been falling as the risk factor dampens and there is less need to hold safe haven currencies.

• Oil prices were strong on Aug 2. The Chairman of the Joint Chiefs of Staff opened his mouth at NBC’s “Meet the Press”. A tropical depression is forming in the mid Atlantic.

D.C.