This week…

• Jitters over the Euro zone debt woes and the tensions in the Korean peninsula helped push the market lower this past week. The NASDAQ bucked the trend eking out a small gain. If the bear is returning the key level is at 1140. A drop below that level could signal the beginning of the next phase of the bear market that got underway originally in October 2007.

• Bonds rallied for the same reason that stocks fell. Euro zone debt problems and tensions in the Korean peninsula. The tensions in the Korean peninsula are the most pressing right now largely because of vows of revenge by the South Korean military and the instability of the North Korean dictatorship. The unknown is China who no matter will need to back North Korea.

• Gold had a small gain but silver and the gold stocks fell. This appears to be another normal correction. Gold’s cycles are discussed.

• Oil and gas prices rose on the week but the stocks fell. A divergence signalling that the rise in oil and gas prices are not sustainable? Or a head fake by the stocks?

• It was a pretty quiet week for the TSX Composite. But for the most part it followed the market lower albeit the loss was small. The TSX Venture exchange enjoyed a strong up week bucking the trend.

D.C.

Chart of the Week – the Dow/Gold ratio a reminder of the outperformance of gold this past decade.

Stock of the Week – the Financials may be topping.

D.C.

This week

• The S&P 500 shakes off concerns over China and focuses on QE2 instead and then ekes out a tiny gain. This week is Thanksgiving and the market traditionally is positive into Thanksgiving and the Santa Claus effect starts after and goes into at least mid December. Key breakdown level remains at 1180.

• Bonds fell again but did see some support at week’s end as technical support came in and bonds responded positively to an early round of QE2. But QE2 is ultimately inflationary and M1 has been rising sharply.

• Gold was weak early in the week on Euro debt woes and a rising US$. But as the Euro debt woes appeared to be under control the US$ fell again (although was still up on the week)and gold rebounded. Silver had a strong up week and looks a lot higher. Gold and silver held support zones and the commercial COT is becoming more positive indicating that further gains are clearly possible for both gold and silver.

• Oil prices fell on the weakening US$ and the potential for a slowing Chinese economy. But natural gas prices rose on colder weather and the energy stocks eked out gains.

D.C.

Chart of the Week – the sinking Euro.

Stock of the Week – Info Tech rising.

D.C.

This week

• The G20 is over and while there were a lot of smiles they were forced as they did not come to any agreements as to how to resolve the globes imbalances.

• Trouble in Euro land once again as Ireland sits on the cusp of default. The S&P 500 fell but unlike some other indices it did not see new highs this past week and the week was an inside week suggesting it is a hesitation not a potential top. Targets of 1270 remain intact.

• Bonds fell sharply on Euro land debt woes and China hiking interest rates. The bond model has given a stand aside signal, however, the trend following system remains long but weakening.

• Gold and silver saw new highs this past week then reversed and closed lower. Generally gold and silver achieved some long held targets. But the stock while closing off their highs did not close lower. A positive divergence? The US$ surged on the Euro land woes.

• Oil and gas fell this past week the US$ rise, fears in Euro land and China hiking rates as lower demand becomes a possibility. Gas had gapped up recently but if that gap is filled then a return to lows is possible. Warm weather is also hurting gas.

• The S&P TSX Composite also closed lower this past week. Three sub indices Financials, Real Estate and Income Trusts saw an outside key reversal week. Is the top in for those sectors?

D.C.

Chart of the Week – Global Gold Production, Demand and the Deficit.
Stock of the Week – An emerging gold producer.

Have a great weekend!

D.C.

This week

• The stock market once again eked out a gain. But the rise is faltering as the S&P 500 closed below its opening levels and finished the week on a down note. With the midterms this coming week the market could tailspin after if the houses are split and there is a split with the President. As well the FOMC meets this week and the expectation is for quantitative easing (QE) to be announced. But if it is lower than expected it may result in a market selloff.

• US Treasuries faltered this week and are breaking under their uptrend line. But two year Treasury notes fell to record lows highlighting the growing disconnect between longer rates (rising) and short rates (still falling).

• Both gold and silver rose on the week but silver made new highs while gold did not – a divergence. If QE disappoints (meaning it is lower than expected) then the US$ could rise and gold and silver could continue the correction that started a week or so ago. It is not, however, the end of the bull market for gold even if it did pull back as QE is the only remaining tool for the Fed. On the other hand QE higher than expected would cause the US$ to fall further and gold and silver would react positively.

• Oil prices continued their recent hesitation. But the correction appears to be a bull flag or pennant forming. Potential targets remain up to $100.

Note: Next weekend we are in Montreal. We will attempt to put out a short commentary either before we leave or upon our return. Given the FOMC and the midterms this week the former is favoured.

D.C.