Chart of the Week – A longer term perspective on the stock markets

Stock of the Week – An oil and gas company not in the tumultuous Mid-East/North Africa

D.C.

This week…

• Risk has returned to the markets as the S&P 500 shook off Japan and the war in Libya. The market also shook off the weak housing numbers but were buoyed by the stronger than expected Q4 GDP and above expectations profits.

• For similar reasons it knocked bond prices down. Cdn bonds fell as well. Both Cdn bonds and the Cdn$ fell on Friday in conjunction with the fall of the government on contempt charges (historic). But then US bonds fell sharply on Friday as well and the US$ was up. Another large US bond Treasury auction this week.

• Gold rose but faltered late in the week on US$ strength. The US$ appeared to be buoyed by the stronger than expected GDP and Fed member comments about the end of QE2. Both gold and silver made new highs with silver closing near its highs. Further highs are likely.

• Oil prices rose on ongoing unrest in the Mid-East/North Africa. Despite the continued unrest that is now prevalent in Syria, Iraq, Bahrain, Yemen, Libya, Algeria and Jordan the stock markets shrugged it off. But oil didn’t and rose. Unrest is also gathering in Israel/Palestine. Natural gas prices also jumped on colder weather in the US East and Canada.

• The TSX was up thanks to strong energy and gold and silver. As well generally commodity prices were higher as well and that helps push Canada higher.

D.C.

Chart of the Week – Gold/Bonds

Stock of the Week – A rising gold/silver play

D.C.

This week…

• The nuclear crisis in Japan continued as the search for bodies also continues. Japan is a long way from rebuilding. First they have to get the nuclear problem under control. The crisis in Japan is negative for Canada’s nuclear industry but positive for Canada’s energy sector, commodity sector and lumber.

• A US/Britain/France led attack on Libya got underway over the weekend. Libya holds Africa’s largest reserves of oil some 50 billion barrels. Meanwhile unrest continues in Bahrain and Yemen where government forces are also killing civilians and foreign troops (Saudi) have moved into Bahrain. Oil prices had fallen on the perception that Japan’s crisis could cause a global slowdown and that they would import less oil. But the ongoing unrest in the Bahrain and Yemen together with the attack on Libya has raised oil fears once again.

• The S&P 500 fell this past week against the backdrop of the nuclear disaster in Japan and the attack on Libya. Support at 1280 broke but support at 1260 held.

• Bond prices rose as there was another flight to safety following the imposition of the no-fly zone against Libya.

• Gold prices gyrated and bounced back but not enough to stop a small decline on the week. Gold prices were once again being seen as a safe haven against the backdrop of the Japanese disaster, the attack on Libya and gyrating currencies. The G7 central banks intervened to push down the soaring Japanese Yen.

• Oil prices fell then rose as the calls for the attack on Libya grew. Still they look mixed and may be just in a consolidation mode following the breakaway gap that took prices to US$105.

• The TSX benefited and was the only index up on the week as energy and metals did well.

D.C.

Chart of the Week – Japan’s Tokyo Nikkei Dow

Stock of the Week – A hedge for a bear market

D.C.

This week…

IMPORTANT:  Our condolences to all of those impacted by the devastating earthquake in Japan. A picture and story of how puny man is in the face of nature.

• Markets were roiled this past week by continued unrest in the Mid-East/North Africa and the devastating earthquake in Japan. It is difficult to assess the potential economic impact of the earthquake on the global economy but it shouldn’t necessarily be positive except for the rebuilding effort. The S&P 500 failed the recent highs and have turned down bearishly. A 10 to 15% correction could now occur. Risks abound in the Mid-East/North Africa as well where there remains risk to oil prices if clashes break out in Saudi Arabia. There are even protests in the US following the actions of the Wisconsin legislature in tearing apart the public unions.

• Bond prices initially rallied on a flight to safety but faltered on Friday as the market realized that the Japanese government and Japanese Insurers may have to sell billions of dollars of US Treasuries to pay for the rebuilding effort in Japan. Bill Gross of PIMCO declared that they were existing the US bond market another potential blow to the bond market.

• Gold prices faltered in the early part of the week as the US Dollar rose but when the US Dollar reversed course on Friday gold and silver rallied. Silver actually closed higher. But the precious metals stocks are faltering along with the broader market. Could they detach? Yes although currently the gold stocks are in an area of strong support and Friday’s action was positive.

• Oil prices also faltered earlier in the week as the crisis in Libya seemed to ease as the government forces seemed to be regaining the upper hand. They also faltered following the Japanese earthquake as 20% of the countries refineries were knocked possibly for a considerable time. That in turn would lower the demand for oil from Japan who import almost 100% of their needs.

• The TSX Composite faltered and all 14 sub indices fell on the week. Numerous short term trends have turned to neutral or have turned down. The market is now in a cautious mode.

D.C.

Chart of the Week – gold seasonals.

Stock of the Week – Food prices are rising so here is an agricultural stock.

D.C.

This week…

• Markets eked out a tiny gain this past week bucking the unrest in the Mid-East/North Africa and rising oil prices as they responded positively to good economic numbers. But the good news could be short lived. A failure to regain above 1335 for the S&P 500 suggests that the focus could shift to the downside. A break of 1300 would be the first sign of trouble. Market cycles tend to top in these first few months but few cycles survive past May. After that most cycles point down into 2012.

• Bonds also failed to add to the previous week’s gains as they were bounced back and forth with good economic numbers and the continued unrest in the Mid-East/North Africa. Rising inflation pushed by food and energy prices is also a concern.

• Gold broke out to new highs and the backwardation on the silver futures contract pushed silver prices to the best levels since 1980. Silver prices are showing signs of going parabolic. Gold is struggling at current levels but the US$ appears poised to break down as it is failing to hold above 76/77 on the US$ Index. The precious metals stocks are lagging but the patterns still appear bullish.

• Oil prices broke through $100 and closed at the week’s high against the back drop of the unrest in the Mid-East/North Africa. Again while the focus is on Libya (and don’t underestimate the problems in Libya and its negative impact on the global market) but the real focus should shift to Bahrain. Saudi Arabia has promised to crack down severely but it appears that forces there are gathering that may soon erupt. If Saudi Arabia explodes than $150 or higher is quite possible for oil. Natural gas prices continue to flounder. Energy stocks are at their highs and appear poised to go higher.

• If gold and energy can continue to go up then the S&P TSX Composite could go higher as well. Other areas are faltering. The TSX Venture Exchange also appears poised to move higher.

D.C.

Chart of the Week – Comex warehouse Silver supply

Stock of the Week – A Canadian company in Libya

D.C.