Chart of the Week – the decade’s performance

Stock of the Week – Market rolling over? The banks look toppy.

D.C.

This week

• The S&P 500 rose for the 7th time in the past 8 weeks. The market is being spurred on by the thoughts of quantitative easing (QE). However, a Japanese candlestick hanging man pattern was see this past week and that often signals at least a pause. 1120 remains key long term support.

• US Treasury bonds rebound slightly following the previous week’s sharp drop. But QE is not a panacea for bonds especially if the US$ falls.

• Gold and silver had their biggest weekly decline since October as the US$ corrected upward. But while there was a long of talk at the G20 finance minister meetings in Seoul, Korea there was not a lot of substance. The major problems were left possibly for the major G20 talks in November. Gold could fall to $1260/$1280 area while silver could correct as steep at $20.50 and both remain in a major uptrend.

• The US$ rebounded this past week. The G20 meetings are discussed in more detail.

• Energy prices faltered this past week as oil slipped and natural gas (NG) fell to new lows. Oil prices remain positive but NG looks even lower. The stocks are mixed but if oil recovers again they should go higher.

D.C.

Chart of the Week – The gold and silver bull channels.

Stock of the Week – A conservative pick that pays a nice dividend.

D.C.

This week

• Stocks rise again. Minimum targets of 1165 have been achieved by the S&P 500. Targets are now the old highs at 1220 and new highs up to 1250 and even 1300. The midterm elections are usually bullish going into them and for a few days after. This year is not expected to be different. QE2 is driving the market higher.

• Bonds rose again on the weak nonfarm payrolls and the other weak economic numbers released on the week. QE2 is also driving bond prices higher. Two year Treasury notes hit another record low. Bond prices could continue to rise but the pace of the rise is waning.

• Gold and silver rose to new record highs again. Targets near $1350 were hit this week. Further targets up to $1460 and over $1500 are within sight. Silver crossed $23. The conditions are great for gold and silver given a falling US$, QE2, competitive currency devaluations in the western economies, the G20 sniping at each other and the threat of trade wars. Expect this theme to continue and especially if the stock market is rising it will only spur gold and silver and the gold stocks higher as well. The Cdn$ is also rising but it is against the US$ and is faltering against other currencies.

• Oil prices may have broken out and are targeting now up to $100. This has put the energy stocks on the cusp of possibly breaking out as well.

• The TSX continues its rise but the strength is in the Metals & Mining and Gold and Materials. Energy is improving but the Financials are lagging and that is not a good sign longer term.

D.C.

Inside Technical Scoop:

• Midterm elections

• The US sinking dollar

D.C.

This Week

• S&P 500 falters after rising for 4 consecutive weeks. The market appears to have hit another resistance zone between 1140 to 1150. Above 1150 the rally should continue but a breakdown under 1120 would suggest that fall could take place with under 1000 pointing to a larger loss. October is both a month of crashes and “bear killer” ender. Tops also occur in October as seen with the major top in October 2007.

• Bonds rose again as quantitative easing helped. The economic numbers are mixed but nonfarm payrolls and the unemployment numbers are out this Friday.

• Gold rose again to new record highs. Everyone says it is overbought or in a bubble but overbought is a state of mind. And bubbles (assuming it is which it is not – at least not yet) can run for months as was witnessed by the big move by the NASDAQ in 1999/2000. Silver has taken out its 2008 highs and is targeted higher to $27. Gold projects up to $1500 a target expected to be hit by year end.

• The US$ continued its recent collapse. Further declines could trigger a panic. QE is a driver behind the collapsing US Dollar but so is the looming trade wars with China and competitive currency devaluations by the major G8 countries.

• Oil prices rose and may be poised to break out. A falling US$ is also positive for oil prices which in turn will drive the energy stocks higher. Energy stocks had one of their best weeks in months.

D.C.