This week…

• A week of turmoil in the Mid-East/North Africa. The western economies have shown little support for their former autocratic and even despotic allies quickly throwing them overboard for whatever may come. This is a sharp change from 1979 when the overthrow of the Shah in Iran brought forward years of attacking the new regime in Iran that has lasted until today. The turmoil in the Mid-East/North Africa leaves March uncertain. Although March has a history of some volatility but has generally been positive for the market. First key level is 1280 for the S&P 500.

• Bonds rose in price this past week as there was a flight to safety against the back drop of the unrest. A buy signal was seen in the bond model for Canadian bonds and the short term trend for bonds turned up.

• Gold rose and silver soared to new highs this past week against the backdrop of the unrest. The HUI rose but the TSX Gold Index was mixed to down following a sharp decline on Thursday when it appeared that Saudi Arabia would make up some of the lost Libyan oil production. There are rumours of a pending shortage of silver which could spur prices even higher. The precious metals stocks and gold still need to make new highs in order to end the divergence with silver.

• It was no surprise to see energy prices soar this past week. Oil prices hit a high of $103 achieving in one fell swoop long held targets of $100/$101. The world can manage prices around these levels but any further sustained rise in oil prices to $150 or higher would be destabilizing to the western economies where the recovery has remained feeble. While all eyes are on Libya there is another country that may be more important to watch. Details in the commentary.

• The S&P TSX Composite fell this week as well as 13 of 14 sub indices declined. Only Energy bucked the trend. The TSX Transportation to no one’s surprise fell.

D.C.

Technical Scoop – The End of the US Dollar?

• US dollar is a declining currency

• In the last 100 years it has lost over 96 per cent of its purchasing power

• Fiat currencies have a long history, mostly of failure.

• The US dollar is also the world’s reserve currency.

Stock of the Week – Barrick Gold

No Chart of the Week as the recent Scoop had quite a number of charts.

D.C.

This week…

• Markets are closed on Monday for Family Day in Canada and Presidents Day in the US.

• The S&P 500 continues its upward march ignoring the unrest in the mid-east and benefiting from inflows and improving economic numbers. If the unrest in the mid-east were to turn really ugly and threaten oil supplies then the situation could change in a hurry. Cycles are supportive through March and into April so far.

• Bonds bounced back as they benefitted from safe haven status due to the unrest in the mid-east. But the bounce back has been feeble. Huge Treasury demands an improving economy and a potential looming debt battle are all threatening to bonds.

• Gold, silver and the precious metals stocks enjoyed a strong up week. Silver made new highs. But gold did not nor did the stocks. This is a divergence that needs resolving. Gold closed over the crucial $1380 level so that is positive and suggestive of more gains to come. Gold is benefitting from the unrest in the mid-east.

• Oil prices were surprisingly weak despite the unrest in the mid-east and natural gas prices are becoming dormant once again. But it hasn’t stopped the energy stocks from moving to new highs. Maybe they are anticipating that the unrest in the mid-east will eventually prove more than beneficial for oil prices.

• The S&P TSX Composite rose once again thanks to the gains in energy and precious metals stocks. The index is now within 6% of its all time highs seen in 2008 before the financial meltdown.

D.C.

Chart of the Week – an interesting chart of US$ purchasing power, GDP, money supply and US debt.
Stock of the Week – A stock in the news.

D.C.

Chart of the Week – Oil
Stock of the Week – An oil stock naturally (well a services company).

Update..

Since there will be no technical commentary this weekend as we are away here is a brief update.

The S&P 500 has reached the next targets at 1320. A close over that level this week would suggest that the next level over 1400 could be seen into March. The key breakdown zone remains at 1180 on the weekly charts. On the daily charts a break under 1275 would suggest a test of the 1180 zone is possible. There are no signs of a top forming and despite the steady rise there is not as yet any frothiness that might suggest a top.

Bonds have bounced back a bit this week but that shouldn’t be surprising given the sharp drop the previous week. Bonds still look dangerous and could prove to be a serious danger to the stock market. But not yet. There is evidence that the Chinese are not only laying off on new purchases but are selling slowly some of their current holdings.

Gold has held above $1350 but the recent advance has been somewhat laboured. The market still needs to take out $1380 and close over there to suggest that the highs would be taken out. Until then a test of the recent lows near $1310 could be seen. A drop to $1270/$1280 is also possible. That would be a solid test for a market that is still rising. The US$ remains weak. The weak US$ combined with a lethargic gold market has the conspiracy theorists in a flutter that gold once again is being suppressed. Certainly the selling is coming in the paper market and not in the physical market. However, gold is trying to find a cycle low and once that low has been made the market should resume its upward course. The pattern forming is somewhat similar to a pattern that formed in February 2010 and even back in 2008 but of lower intensity and drop in prices.

D.C.

This week…

• Stocks as measured by the S&P 500 jumped to new highs last week. The next set of targets are now within reach possibly this coming week. Higher targets are now in focus as well as the Fed continues its stimulative monetary policies even as the economy improves (albeit not as quickly as the Fed would like). That is what is driving the market higher. Cycles are also positive although February is traditionally a weak month.

• Bonds broke down this past week crashing through the 4 year MA as what drove stocks higher is driving bond prices lower (yields higher). Expect this to continue even though a counter rally and a test of the recent breakdown from a descending triangle could occur any time. Targets are at least $3 lower. Canadian bonds also fell as the economic numbers continued to be better than expected.

• Gold prices had a feeble gain and the US$ that fell earlier in the week rallied at the end of the week as it was buoyed by the economic numbers. Gold could continue to form some sort of meaningful bottom over the next couple of weeks. While targets down to $1270 remain possible that potential is weakening. The market still needs to regain back above $1380 to allow the bulls to fully regain control. Silver remained strong and is approaching $30 once again. Copper soared to new highs.

• Oil prices rose then faltered depending on the whims of the Egyptian crisis. A threat to the Suez Canada raised oil prices but an abating of the crisis pushed oil prices lower. Market still needs to break past $92/$93 to project up to $100/$101 oil.

• The TSX and its sub indices enjoyed a sold up week as higher commodity prices and an improving economy pushed them higher. Expect this to continue as well as the TSX broke out to new highs.

D.C.

Chart of the Week – Uranium

Stock of the Week – An uranium stock naturally

D.C.