This week…

• With the turmoil in the Mid-East the markets fell sharply on Friday. This could be portending a temporary top. February’s tend to be the “weak link” in the good six months November to May. Years ending in one that are in turmoil also tend to be poor years and could overwhelm the normally positive results in pre-election years. A sharp decline on Monday could take January negative. Key level on the S&P 500 is 1170 and as long as any pullback holds above that level the market could regroup and make new highs again.

• Bonds rebounded as they were sought as safe haven from the turmoil in the Mid-East. But a weakening US Dollar and quantitative easing are having a negative impact on bonds and foreign buyers of US debt are beginning to go on strike. Japan was downgraded this week. Could the US follow with catastrophic effects?

• After falling earlier in week gold rebounded on the Mid-East turmoil and closed higher on the week constituting a reversal week. Silver and the precious metals stocks also put in reversal weeks. After falling the past few weeks gold quickly be poised to rise once again against the backdrop of a weak US$. Gold, silver and the PM stocks still need to follow through following what was a steeper than expected correction. The commercial COT for gold points to higher prices.

• Energy prices rebound sharply on the Mid-East turmoil although natural gas prices fell putting the recent rebound into question. The Suez Canal one the world’s key oil transit chokepoints is in Egypt. But resistance above at $91/$92 must be broken if targets of $100/$101 are to be seen.

• The S&P TSX Composite rose on the week spurred on by the gains in energy, golds and metals.

D.C.

Chart of the Week – The Baltic Dry Index
Stock of the Week – A shipping stock

D.C.

This week…

• The S&P 500 declined for the first time in 8 weeks. The market also made a new high and a lower close constituting a reversal week. This sets up the possibility of at least a short term decline. The expectations are that the decline could be similar to declines seen last January 2010 and November 2010 and not a more significant decline as seen from April to July 2010. A decline of that nature is not expected to get underway until sometime after May 2011.

• Bonds fell again but are clinging to the 4 year MA line. Given there has been 4 weeks holding in there odds begin to favour at least a short term bounce. A breakdown under the 4 year MA could set up a decline to longer term support some $6 lower and the zone of the lows seen through much of 2009 and 2010.

• Gold, silver and the precious metals stocks continued their recent decline. This was despite a drop in the US Dollar this past week. The improving debt woes of Europe helped push the US$ lower. Given the steep decline of gold, silver and the PM stocks and the oversold levels a rebound could be possible this coming week. A continued decline of the US$ would also shift focus back to the gold and the PM stocks. Gold appears to be trying to find a cycle low that in a worst case scenario could be as late as the third week of February. That does not necessarily mean it would be lower low. Given the break under $1350 targets down to $1320 and even $1300 are possible. Above $1380 the bulls regain control.

• Oil prices fell this past week on increased supply and a perception that demand could fall with interest rate hikes in China. Natural gas broke out and appears to be headed to $5.

• The S&P TSX Composite fell this past week as weakness was experienced in gold, metals, materials and financials.

Note: This week’s technical commentary download is in word .doc format.

D.C.

Chart of the Week – Silver
Stock of the Week – A mid-tier silver producer

D.C.

This Week…

• The S&P once again soared to new highs for the current move. This rise has now suggested that the next targets of 1320 could well be seen. There remains the risk of a blow off as low interest rates and overly stimulative monetary policy could well take the S&P 500 back to the highs of 2007 near 1575.

• With the stock market rising and the economy continuing to display growth bonds once again fell in price. Bonds are facing numerous risks going forward including the risk of a downgrade as the US could lose its vaunted AAA rating. As well China has pullback on its buying and the stimulative monetary policy has bonds worried about inflation.

• Gold pulled back again and the gold stocks in particular were hit hard again. This appears to be nothing more than a regular 5 to 7 month cycle low playing itself out (last low was in August 2010) and once it is out of the way gold could soar again. However the next peak could be followed by a steeper sell off as some longer 34 month cycles play themselves out.

• Oil prices continue to display bullishness and the cycles for both oil and gas are positive into June 2011. The energy stocks have broken out and appear poised to move higher.

• The S&P TSX Composite would given a positive market in energy, base metals and gold once again be set to move higher as well. Despite gold’s weakness this past week the TSX was up.

D.C.

Chart of the Week – Municipal bonds
Stock of the Week – Rare Earth Metals

D.C.