Chart of The Week – Dow Theory
Stock of The Week – the “Crackberry” – RIM.

D.C.

This week

• The S&P 500 breaks out over a head and shoulders bottom. Targets are 1250 with first resistance at 1165-1175. Could it be a false breakout? A break below 1120 would be the first sign of problems and under 1100 the market could go into a swift decline. Stocks are being buoyed by the thoughts of QE2.

• Bonds also rose this past week but faltered at week’s end when stronger than expected economic numbers came out.

• Gold and silver broke to new highs. The uptrend is strong both technically and fundamentally as QE, competitive currency devaluations (Japan intervention), and potential trade wars are driving the US$ lower and gold higher.

• Oil prices rose but the market remains stuck in a downtrend. No sign that this will end any time soon.

• The TSX was up but with weakness in energy and financial stocks the rise was anaemic.

D.C.

Chart of the Week – 70 year Dow Jones Industrials.
The long 70 year channel chart of the Dow Jones Industrials shows the cycles that exist in the markets
quite well. Four cycles are clear each lasting roughly 16 to 20 years…

Stock of the Week – Junior gold miners the GDXJ ETF.
With gold prices hitting new all-time highs and silver prices challenging their highs of March 2008 it
should be no surprise that there is a renewed interest in gold stocks…

D.C.

This week

• Stocks rose for the 3rd week in a row despite some weaker economic numbers. Triple witching options expiration may have played a role along with a short squeeze. The record shows that historically the week following the 3rd quarter options expiration results in a fall 14 times in the last 18 years. The S&P 500 is at the critical 1120/1130 zone once again. A failure to break through could potentially be devastating. A breakthrough could target new highs.

• Bonds were steady this past week while Treasury notes fell in yield as weaker economic numbers shifted some investment to bonds and notes again.

• Gold rose on the back of a weak US Dollar. Gold hit a new record high and silver is very close to its March 2008 highs. Japan intervened in the currency markets to push down the Yen. Could this set off a round of competitive currency devaluations? Former Fed chairman Alan Greenspan mused that “fiat money has no place to go but gold”.

• Oil prices failed again at the $76/$77 pivot but natural gas rose for the third week.

• The TSX was up but is at a critical juncture just like the S&P 500.

D.C.

Chart of the Week – Gold leaps to new highs.

Stock of the Week – The BMG BullionFund – A bit of self interest but it is a bullish chart. Also attached separately a 5 year comparison chart of the BMG BullionFund with other indices.

D.C.

This week

• Once again the markets are at the cross roads. For the S&P 500 the key breakout point at 1120/1130 is just above. A breakout could target up as high as 1250. A failure here and breakdown under 1080 once again and especially under 1040 could set off a panic and quick drop to 980. QE2 could still be the catalyst that takes the market over 1130. That and an appetite for risk once again given that the expectations of the Fed maintaining low interest rates.

• Bond yields rose (prices fell) for the third week in a row as improving economic numbers suggested that the bond rally is over the safe haven of bonds are not needed any more and investors can buy stocks.

• Gold fell with the reason oddly being cited that gold as a safe haven is not needed given that the risk appetite is higher. That flies in the face of the previous week’s good up move for gold along with the broader market. Repeated attempts at breaking $1265 should see the number fall soon as pullbacks of late have been shallow. The US$ had a small gain on the week but is now at resistance once again.

• Oil prices rose Friday on the Enbridge leak announcement but overall the energy markets remain weak.

• The S&P TSX Composite eked out a small gain and 10 of 14 sub indices rose on the week. But the big winner was Health Care a small component of the TSX. If the market is go up the TSX needs Financials and Energy to rise and there Energy fell while Financials eked out a small gain.

D.C.

Chart of the Week – comparison of this decade’s bear market with the Great Depression and War and the Japanese Nikkei Dow.

Stock of the Week – New. This feature will focus on a stock in the news or a stock that catches our attention. This week Potash. A stock in the news.

D.C.

This week

• The stock market gains on the back of better than expected economic numbers especially the non-farm payrolls. That these numbers can in no way make up for the huge job losses over the past few years does not seem to be a concern for the market. As well quantitative easing (QE) is sparking a shift to risk assets (stocks) at the expense of safe assets (bonds). Speculation is being chosen over good sense. A rising stock market is not a panacea for a sound economy.

• If stocks rose bonds fell for the same reasons. Canadian bonds made a possible key reversal (new highs for the move followed by a reversal and close below the lows of the previous week). Bonds are giving sell signals although officially the bond trends remain long.

• Gold rose and silver broke out. Silver is now potentially targeting up to $27 with the breakout. Gold is still struggling at these levels as the previous highs remain elusive. However with the US$ weakening it is probably a matter of when not if that gold too will see new highs targeting next $1300 to $1350. The US$ Index is vulnerable to a fall to 80. Below 80 the US$ Index breaks down.

• Oil prices were decidedly mixed and remain below its key pivot at $76/$77 but above the breakdown level at $70. Stocks are struggling to rebound once again rebounding at key support levels.

• The TSX had a strong up week and a number of sub indices saw new highs. But two key sub indices financials and energy remain weak even as both rebounded this past week. The TSX Venture Exchange enjoyed a strong up week as junior mining exploration stocks are showing signs of life.

D.C.

Chart of the Week – the Gold/Oil Ratio.