This week…

• Fed Chairman Bernanke spoke and the markets swooned but only after they had already had a very good up week. The markets swooned because Bernanke did not specifically announce that QE3 would get underway. However, reading between the lines……

• Bonds finally faltered this past week. Higher inflation and a very overbought market suggested at least a pause should get underway.

• Gold had a rollicking week as speculators bailed because once again they raised margin requirements. Remember it was paper selling only. The gold and silver stocks were up on the week. A possible leading indicator?

• Oil prices rose on some expectations that the economy might improve and a rising stock market didn’t hurt.

• The TSX Composite rose and every sub index gained on the week. However, given the previous week an oversold bounce could be expected.

D.C.

Chart of the Week – Silver seasonals

Stock of the Week – An emerging silver producer with huge resources.

D.C.

This week…

• The stock markets are getting closer to returning to an official bear market. The S&P 500 fell sharply on the week and the NASDAQ fell even more. The stocks markets are now down on the year. But it is a global phenomena not one limited to North America. The markets plunged this past week and are poised for possible new lows. Objectives for the S&P 500 could be down toward 1000 and even down towards 940. Any rebounds appear limited on the upside as the global economic situation shows signs of weakness. As well with hostilities breaking out between Israel/Gaza there is a potential for war to spread and engulf more.

• US bond prices have soared to just short of record levels seen at the height of the 2008 financial crisis. A failure here though could set the picture for a multi-year double top and a collapse into the 6 year cycle low due sometime in 2013. US Treasury bonds (and Canada’s bonds as well) have been viewed as a safe haven against the backdrop of global economic and financial turmoil. However, that play could be ending as the US reported substantially higher than expected inflation this past week. Offsetting that is the knowledge that the US won’t be raising interest rates any time soon.

• Gold soared to record highs this past week and silver appears to be breaking out. The US$ Index appears to be on the cusp of breaking down although given the weakness of the Euro both have been taking turns declining. The rush into gold (and silver) is due to the loss of confidence in the major western currencies. It is a flight to safety and gold with no liability is seen as the ultimate store of value. Gold stocks appear to be on the cusp of breaking out and are going counter to the decline in the broader market.

• Oil prices fell this past week on global economic weakness. The wild card for oil prices is the Mid-East if hostilities spread and threaten oil supplies and oil lanes.

• The TSX followed the global markets lower and only the gold sub index provided any relief for investors.

D.C.

Chart of the Week – The 40th anniversary of the end of the gold standard

Stock of the Week – an emerging junior gold producer

D.C.

Chart of the Week – Gold stocks appear to be leading the way

Stock of the Week – The leader of the gold stocks?

D.C.

This week…

• The news of the week was the Friday after hours announcement by S&P downgrading US debt from AAA to AA+. This overtook the earlier agreement between the White House, Congress and the Senate to raise the US debt ceiling to avoid a potential US debt default. There is a short special section outlining TC’s take on the news.

• Despite the agreement to increase the debt ceiling the market seemed to prove the axiom “buy the rumour” – in this case that an agreement will come to raise the US debt ceiling and “sell the news” – they did raise the US debt ceiling. The market crashed through 1290 S&P 500 and swiftly achieved most objectives. A small bounce back occurred on Friday following new lows and possibly aided by the better than expected US job numbers.

• Bonds soared as the market crashed, the turmoil continued in Europe and signs continued that the US economy is faltering.

• Gold soared to record highs but silver and other metals faltered as signs that the global economy is slowing. Gold stood out as the only asset class that was going up. In financial and economic turmoil gold is money.

• Oil prices collapsed (and so did the energy stocks) because of signs that the US and global economy are slowing.

• The TSX Composite had a mini crash and every sub index was down on the week. The Gold sub index was the best performer along with Telecommunications.

NOTE: Next weekend we have to go to Montreal to bring our daughter back to Toronto. Following 4 years of schooling in Montreal she has secured an entry level job here in Toronto and is moving home – well at least temporarily. A short report or email report will be prepared.

D.C.

Chart of the Week – Is US GDP really what it says it is?

Stock of the Week – Plunging markets and now which way the gold stocks

D.C.

We just got back from Newfoundland. Spent the time on the Western Peninsula – Gros Morne, Anse Aux Meadows and into Labrador. Gorgeous country. Definitely worth the visit.

• With all eyes focused on the confrontation in Washington as each debt deal seems to hit the shoals the question this time will this one stick? As the politicians feuded and dithered the market collapsed to its key breakdown point at 1290 (S&P 500). The question now is will it crash through. A deal and the market rallies. No deal and it collapses. The market is now oversold sufficiently enough to get the proverbial bounce that could be a few days or a week or so. But there is now a lot of overhead resistance (1325-1340) and even if the debt deal somehow passes there are signs of a slowing economy. This Friday the nonfarm payroll and unemployment numbers are out. Market is looking for 90 thousand jobs. That is pretty aneamic and the unemployment rate to tick up to 9.3%. Three years after the financial panic and recession of 2008-2009 that number has to be quite disconcerting. 1290 remains the key breakdown zone. Still appears to be a large topping pattern forming that appears as a possible head and shoulders top. Minimum objectives are 1160 once 1290 is firmly broken to the downside.

• Bonds – Debt deal passses and US bonds rally. Debt deal fails and US bonds fall. The market rallied last week as signs persisted that the US economy is slowing and that somehow the debt deal will be worked out. But this could turn quickly if the debt deal fails again.

• Gold rallied to new all time highs this past week. Silver has run into some resistance at the $41 level but once through that level odds favour new highs above $49.50. The only disconcerting noise for gold has been the commercial COT which fell to 26% this past week the lowest level in a few weeks. Not unusual to have some hesitation in gold during August so the market may have another pull back here. The encouraging news is that copper continues to do well. Copper like gold and silver does have currency attributions. New highs are suggested for copper once through 4.64. But if gold hesitates then copper will also hesitate. The US debt deal (or lack of it) is also driving gold. A weakening US$ is also helping gold. The US$ Index is testing 74 but once under 73.50 odds favour a decline to 70. The US$ Index chart suggests lower as it rolls over. As for gold driven by the financial problems of the US and Europe objectives at $1650 and $1750 are a matter of when not if. Backing and filling action by gold prices is a positive. Even during the recent weak period for gold the drops were limited. This action should persist.

• Oil prices failed once again near $100. The turmoil in the Mid East/North Africa remains key but right now it is in a holding pattern. And so are oil prices. $95 and $90 provide support. $100 is now resistance but once through that level $105 could come quickly. Under $90 would be a concern and suggest a drop to $85. Natural Gas continues to trade in a lethargic manner. The pattern may look bearish but then again this lethargic trading just continue for some time. But like a tightly coiled spring it could suggest a sharp move once points are broken. To the upside $4.80 and to the downside $4 and especially under $3.80.

NOTE: A full report will be out this coming weekend.

D.C.